Indiana627

We are looking to remodel our kitchen with a budget of $15,000. We were planning on getting either a HELOC or a home equity loan to pay for it. But then we remembered that when we moved last summer and my wife left her employer of 10 years, she converted her company pension plan to a Portable Pension Account (PPA). We got a statement the other day that says her current lump sum payment would be $13,807 - just about enough to pay for our kitchen. So we got to thinking: would it be smarter to cash this in rather than get a loan?

Some background:
She no longer works for that company, so they are not adding anymore compensation credits to the account.
She does get interest credits quarterly, which according to the statement "will be the lesser of (a) and (b), but not less than (c), where:
(a) is the greater of (i) 1 percent (1/4 of 4 percent) or (ii) one-fourth of the One-Year Treasury Constant Maturities rate, plus 0.25 percent;
(b) is the rate which, when compounded quarterly, produces an annual rate equal to the 30-year Treasury rate (or, if larger, such other rate as may be specified by the Treasury for purposes of carrying out the calculation required by Section 417(e) of the Code); and
(c) is .765% (one-fourth of 3.06%).
In no event will the quarterly interest credit rate, when compounded quarterly, produce an annual rate greater than the average 30-year Treasury rate."

I have no idea what any of that means.

The statement shows she got $135 interest for the June-August 2008 quarter and $136 interest for the Sept - November 2008 quarter, and that the current quarterly interest credit is 1.00%.

My main questions are:
1) Are we stupid to even consider taking the lump sum instead of a loan for our kitchen remodel?
2) What kind of growth potential does this PPA have with its current balance? We are 33 years old now.
3) What kind of tax consequences would there be if we took the lump sum now?

Any and all advice is appreciated. Let me know if any more information is needed. Thanks in advance.

Mark