State Pension into Roth IRA

I worked for 11 years and I am vested in a crappy state pension that contains $30K in contributions that earns 4%. I will collect $400/month for life in 20 years when I turn 55. With a 80 year life expectancy (I hope) I think I can do better.

I will have virtually no taxable income this year so I am thinking I want to flip it this year into my existing 2040 Lifecycle Roth IRA. I will have to show it as income but I think the income tax bill will be easy to manage.

I will not look at touching the money until I am at least 60 so that will give me 25 years of growth.

I am the kind of person who likes a sure thing but I think I am short changing myself leaving the state with the money to invest. Any thoughts on this plan?

A few thoughts:

1. Check to see if being vested in the state plan entitles you to any retiree healthcare benefits. Many governments provide these benefits to pension recipients - even deferred pensioners. The healthcare benefit may be worth more than the pension! If you take your money out, you'll likely forfeit any health benefit.

2. $400/month (guaranteed) at 55 is nothing to sneeze at...even 20 years out. Neither is 4% risk-free return in this market. Most people would love to have a defined pension benefit. Think long and hard before you give it up. I would ask an insurance specialist what a lifetime annuity paying $400/mo starting at 55 would cost you in today's dollars. This will give you a basis for comparison.

3. Are you sure you'll never go back to work for the state? Or another government employer that would accept you state service time credit for vesting purposes? Taking the funds out could cost you with a new DB employer.

Bottomline: I'd take my time and consider everything. Your earning 4% in the meantime which isn't too bad.