Pension--Taking Monthly Payment v. Lump Sum (federal, state, retired, separate)
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Location: Miami (prev. NY, Atlanta, SF, OC and San Diego)
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assuming I work to 60, lump sum of $900K or $4100 monthly payments for rest of my life....guy at Fidelity has no vested interest in my plan, other than a complimentary retirement analysis...he claimed the percent payout I was getting from my company was a good percentage point better than I could get on the open market on my through a NY Life or other annuity companies....no union--fortune 150 semiconductor company doing well at the moment and fully funded pension. He made mention of PBGC--not sure if that is the company that administers the pension plan or if that is a company that guarantees/insures the pension...Per advisor, conservatively I have enough, with the 401K and SS (has me taking out of 401K until age 66 when I put in for SS), to maintain current lifestyle/monthly expenditures to age 94--longer and with money left over if I'm not as conservative with my money as I am now.
Also, most likely moving to Miami Beach within next year.....more so for the lifestyle and fact Miami/Miami Beach is far more sophisticated than San Diego than the state income tax (none) factor, but that's an additional benefit that I'll take.
Thx for your advice.
Last edited by elchevere; 08-28-2016 at 08:22 PM..
I would take the monthly check. $4100 per month plus I would assume close to max Social Security, $3000 per month. So that's $7100 per month for a single person. You can live great on that!
assuming I work to 60, lump sum of $900K or $4100 monthly payments for rest of my life....guy at Fidelity has no vested interest in my plan, other than a complimentary retirement analysis...he claimed the percent payout I was getting from my company was a good percentage point better than I could get on the open market on my through a NY Life or other annuity companies....no union--fortune 150 semiconductor company doing well at the moment and fully funded pension. He made mention of PBGC--not sure if that is the company that administers the pension plan or if that is a company that guarantees/insures the pension...Per advisor, conservatively I have enough, with the 401K and SS (has me taking out of 401K until age 66 when I put in for SS), to maintain current lifestyle/monthly expenditures to age 94--longer and with money left over if I'm not as conservative with my money as I am now.
Also, most likely moving to Miami Beach within next year.....more so for the lifestyle and fact Miami/Miami Beach is far more sophisticated than San Diego than the state income tax (none) factor, but that's an additional benefit that I'll take.
Thx for your advice.
Wow, lucky you! Are you sure you're not looking for a mate? I am also an only child looking to move to Southern CA, LOL. Oh, darn, you're moving to Miami. OK, I am kidding, but that did surprise me that you'd be moving FROM San Diego TO Florida, especially when money is not an issue. Can't imagine leaving that fantastic climate for this heat/humidity here. Anyway, I was being serious that you are very fortunate....I sure wish I had thought more about that stuff when I was younger, though my employer of 30 years didn't offer a pension. Good luck!
assuming I work to 60, lump sum of $900K or $4100 monthly payments for rest of my life....
He made mention of PBGC--not sure if that is the company that administers the pension plan or if that is a company that guarantees/insures the pension...
Also, most likely moving to Miami Beach within next year.....more so for the lifestyle and fact Miami/Miami Beach is far more sophisticated than San Diego than the state income tax (none) factor, but that's an additional benefit that I'll take.
That's a nice chunk of change. Because I have heirs, I think I'd be taking the $900k, buying an annuity with part of it, and invest the remainder into moderately conservative funds like Vanguard (VWINX/VWELX) - and others - earn about 7-8%. Of course, then you've got all kinds of tax issues b/c of RMDs withdrawals, so your financial/tax picture would be more complicated for sure. If you're not concerned about leaving an estate and to keep things simple, then the guaranteed annuity might be more appropriate.
PBGC govt guarantee of the pension up to $60k/yr for single employer plans.
Location: Miami (prev. NY, Atlanta, SF, OC and San Diego)
7,409 posts, read 6,550,878 times
Reputation: 6685
thanks everyone...yeah some have questioned why move from San Diego to Miami Beach?...people....I'm originally from NY and still have my East Coast work ethic and attitude (not "laid back"), in spite of having lived my entire adult working life in CA....San Diego is nice but Miami Beach is a much more cosmopolitan and sophisticated city with better restaurants, better nightlife, better ocean (can go in 365 days/year without a wetsuit vs. 120 days in SoCal), has 4 professional sports teams vs only 2, maybe 1 in SD (MLB, NFL, NBA, and NHL), humidity helps the people age better, no income tax, and closer to where I vacation (Europe and Latin America)....wasn't really THAT crazy about FL until I started calling on a customer there and staying in SoBe and Brickel these past few yearsl....Miami/Miami Beach is turning into a subtropical Manhattan.....and people are a little thicker skinned and not so easily offended in Miami Beach, which means I will get along much better. San Diego is more of a collection of Delray Beach's--something I would outgrow relatively quickly (small town mentality, whereas I'm a city guy).
Last edited by elchevere; 08-29-2016 at 11:39 AM..
assuming I work to 60, lump sum of $900K or $4100 monthly payments for rest of my life....guy at Fidelity has no vested interest in my plan, other than a complimentary retirement analysis...he claimed the percent payout I was getting from my company was a good percentage point better than I could get on the open market on my through a NY Life or other annuity companies....no union--fortune 150 semiconductor company doing well at the moment and fully funded pension. He made mention of PBGC--not sure if that is the company that administers the pension plan or if that is a company that guarantees/insures the pension...Per advisor, conservatively I have enough, with the 401K and SS (has me taking out of 401K until age 66 when I put in for SS), to maintain current lifestyle/monthly expenditures to age 94--longer and with money left over if I'm not as conservative with my money as I am now.
Also, most likely moving to Miami Beach within next year.....more so for the lifestyle and fact Miami/Miami Beach is far more sophisticated than San Diego than the state income tax (none) factor, but that's an additional benefit that I'll take.
Thx for your advice.
That is a withdrawal rate of about 5.5% If you invested the money the safe withdrawal rate could be in the 3% range.
If your company goes bankrupt that should not affect your pension since your are fully funded.
If you hire a financial adviser you will probably pay about 1% of your asset value. About $9,000 the first year.
Another thing I would give some thought is about getting a mortgage if you take the lump sum. This was discussed in another thread about how some people have trouble obtaining mortgages without a monthly income such as a pension or annuity, despite having considerable invested assets. We have pensions and had zero trouble getting a mortgage because we had a pension letter stating that we would be receiving XXX dollars monthly for the rest of our lives. We didn't have the option of a lump sum, but if we had we would not have taken it. Markets can do crazy things and we saw my FIL's investments go in the toilet in the market and it has caused his widow (MIL) some issues with affording long term care that she requires.
Generally speaking, you are almost always better if you elect the monthly pension rather than the Lump Sum.
That being said, there are exceptions and I elected to take the Lump Sum when I 'retired' at age 56. My reasons were:
1) My pension plan had just been cancelled with existing funds frozen. Whether I left at 56 or 65 my Lump Sum amount would be the same (unless affected by interest rate fluctuations, more later on this).
2) I was confident I could quickly secure an identical job paying identical wages with identical benefits. I was correct, I had a new identical job within 6 weeks.
3) The monthly payment option became an annuity rather than a pension. No PBGC security, and I would have no voice in selecting the annuity. Since my pension plan had just been cancelled I felt no guarantee that the annuity could not be re-negotiated by my former employer in the future to the company's benefit and my detriment.
4) Interest rates were at all time lows in 2012/2013 (still haven't moved much, if any) which generated a large Lump Sum amount via the Net Present Value calculation. The interest rate used in these calculations is set by the PBGC and not your employer.
5) We already had a financial Advisor with whom we had worked for 15+ years, and whom we trusted with investment choices regarding the Lump Sum amount.
My plan was to take the lump sum, have my Financial Advisor manage the money for the 9 years until I turned age 65, work at a new job during those nine years, and then retire with a nest egg of around double the original Lump Sum amount. I am not 100% confident of the 2X part of my plan but the funds are growing. I now plan to 'retire' again, maybe as many as three additional times, before I stop working completely. None of these current & future jobs have a pension, and only the current one has a 401(k). The others, if they occur, will be paycheck only positions.
In this economy myself I would take the lump and get it in my hands. I also wouldn't put too much at risk as it's long term money not to play with. Sit back gather information and make an educated decision. Just remember in 2008 time frame many people thought retirement was in eye sight but the market told them not yet and devalued equities.
That is a withdrawal rate of about 5.5% If you invested the money the safe withdrawal rate could be in the 3% range.
If your company goes bankrupt that should not affect your pension since your are fully funded.
If you hire a financial adviser you will probably pay about 1% of your asset value. About $9,000 the first year.
So far one of the more interesting replies and worth thought. Also more real figures whereas other posters are more their own experiences, many of which may not fit the OP
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I am also an only child looking to move to Southern CA, LOL. Oh, darn, you're moving to Miami. OK, I am kidding, but that did surprise me that you'd be moving FROM San Diego TO Florida, especially when money is not an issue. Can't imagine leaving that fantastic climate for this heat/humidity here. Anyway, I was being serious that you are very fortunate....I sure wish I had thought more about that stuff when I was younger, though my employer of 30 years didn't offer a pension. Good luck!
