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CNBC readers: Put 401(k) cash in pensions? No way!

The news that the Pension Benefit Guaranty Corp. will guarantee assets that savers roll over from 401(k) accounts to certain pension plans met with a resounding thud in a CNBC Digital reader poll.

Essentially, If you are enrolled in a pension plan, you now can roll over money from your employer's 401(k) plan into the pension plan, increasing the amount of money in your monthly check during retirement. If the pension goes broke, the PBGC jumps in and pays the benefits.

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While these rule changes on guaranteed pension payments seem promising, just how willing employees will be to add their 401(k) proceeds to their pensions is up for debate. To that point, 92 percent of the 3,500-plus readers who had taken our survey as of Dec. 4 said they would not roll over their 401(k) funds into a company pension plan. (For the record, our poll is not a scientific survey.)

Ric Edelman, founder and CEO of Edelman Financial Services, was not surprised that so many CNBC Digital readers said they would skip the rollover plan.

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"The government spent taxpayer money developing a rule few investors seem to want," he said. "While this new opportunity is pretty good, investors can do even better."

For instance, most pension plans provide monthly incomes that don't increase with inflation, Edelman said. Additionally, placing that 401(k) balance into the pension plan means you'll forever give up access to the principal and when you die, the monthly checks stop—and the principal is gone forever.

Asked what message he thinks investors are sending with their response to the CNBC poll, Tim Maurer, a certified financial planner and director of personal finance at the BAM Alliance, said: "Investors don't particularly trust the government. This would seem to resonate with the increasingly high disapproval rating of all branches of government."

According to certified financial planner Barry Glassman, "401(k) plan investors are from Mars and pensioners are from Venus."

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Glassman, founder and president of Glassman Wealth Services, said that "the two have been trained very differently over the past decades. 401(k) plan investors have only read about or seen pensions in museums.

"It's very unlikely that 401(k) investors would want to give up control, performance and flexibility to lock in lifetime income," he added. "That doesn't mean it's not for some people."

Advisors prep clients for 2015
Advisors prep clients for 2015

This new rule is also coming at a time when 401(k) plan investors are about to see all-time highs in their portfolios when fourth quarter statements come out in early January, Glassman said.

The flexibility of being able to withdraw monthly income from a 401(k) plan or another qualified retirement plan, and then have additional principal available if needed, may far outweigh guaranteed lifetime income, he explained.

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"I'm not surprised with the general sentiment that is being conveyed [in the CNBC poll], but 92 percent is quite high," said Maurer of the BAM Alliance.

Certified financial planner Ed Gjertsen, vice president of Mack Investment Securities, agreed.

"I am not really surprised by the poll numbers," he said. "Individuals may feel a loss of control of one of their largest assets.

"If they are interested in receiving a 'pension,' there are alternative options available, like private immediate annuities," he said.

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"Another issue may be that the PBGC is probably not as widely known as the FDIC, so people may be responding just through the lack of understanding of what the PBGC is," Gjertsen added. "There is also a trust issue.

"In general, corporate America may not have a high reputation when it comes to taking care of their employees."

The government has changed the rules on Social Security, for example, so what's to stop them from diluting the benefits of this plan in the future?
Tim Maurer
director of personal finance at the BAM Alliance

BAM Alliance's Maurer echoed that sentiment.

"No one knows exactly what this new program is going to look like in the future," he said. "The government has changed the rules on Social Security, for example, so what's to stop them from diluting the benefits of this plan in the future? Why would I trade something I have in my possession for an unknown in the future?"

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Maurer said none of his clients have inquired about the new rule.

"That said, it's our job as planners to weigh all the options and that means that this new proposal should not be rejected without consideration," he added.

"Financial planners have an economic bias to encourage investors to take or keep lump sums as opposed to choosing pensions—because we can charge fees on the former, not the latter," Maurer added. "As fiduciaries, however, we have an obligation to our clients to review all of our clients' options, weigh the risks and benefits, and advise them accordingly."

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