While taking a “PLOP” (Partial Lump Sum Option Payment) will reduce your monthly pension income, it allows STRS members to take a lump sum portion of your pension and place it into a self-directed IRA without triggering tax penalties. STRS can give you a breakdown of your pension payments based on a wide variety of PLOP payouts.
It might be wise to evaluate your PLOP because of three potential benefits. First, you are allowed to take a lump sum portion of your pension from 6 to 36 times the monthly benefit and place it into a self-directed or professionally managed IRA without triggering tax penalties. It’s that easy. Secondly, if your IRA money is invested wisely, you should be able to generate an income that exceeds the plan’s cost of living adjustments. With the COLA now being lowered from 3% to 2%, this can make a significant impact on your retirement planning.
Thirdly, unlike pension funds which revert back to the State when you and your spouse pass, you can structure PLOP funds so the remaining assets go to your family. Absolutely nothing goes back to the State! The way we look at it, why spend a lifetime saving, and then return it to a dispassionate third-party?