I plan to retire in 20 years. My annual salary is $200k and my skills are up to date so I’m competing in the workplace.
Okay, so I’m going to assume that since your retirement date is 20 years off, you’re under 59 1/2
Cash out the $130k Pension:
Pay off $20,000 in loans
Put $30,000 toward college savings.
Put $40,000 into much needed home repairs
Pay my taxes on the cash out.
Put whatever is left into Apple, Microsoft, Amazon, and Bitcoin
Well, you have those in the wrong order. Your first item should be “Pay my taxes on the cash out.” Because those taxes are likely to be significantly more than you expect. Since it’s the cash out of an employer pension plan, 20% will be withheld off the top, but that’s not going to be enough to pay the taxes that are due.
Assuming MFJ (since you mentioned kids), even assuming no other income (like stock options/grants vesting or a spouse’s income), your $200k in salary income puts you at the tip-top of the Federal 22% bracket. That means most, if not all, of the $130k in pension will be taxed at 24%, and because you’re under 59 1/2, you will also pay a 10% penalty. So that means that the Federal taxes on the pension will be $44,200. (If you’re filing HOH or Single, the taxes owed will be even higher.) That doesn’t include any state taxes or penalties. So this is what your pension payout will look like after taxes:
Withholding $ 26,000
Additional taxes owed $ 18,200
Left after taxes $ 85,800
And if you live someplace like CA, you’ll probably be paying another 8% - 10% in income taxes, plus any penalties that are levied for cashing out the pension early. So that could drop the income after taxes down to around $70k.
Clearly, even if you live in a state that doesn’t charge income taxes, that doesn’t cover the $90k in planned expenses, much less having additional for investments.
My suggestion would be to roll the pension over into an IRA, and start living below your means. (The $20k in loans and $40k in much needed home repairs indicate that you haven’t been living below your means.)