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Old 11-09-2016, 02:52 AM
3,460 posts, read 2,204,127 times
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There seems to be a trend where the big company that offered a pension is now coming back and offering either you take a one-time only offered lump-sum, a lower paying company annuity or leave it alone hoping they don't mess with the pension later on by cornering you into taking the lower paying annuity or something else worse.

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Old 11-09-2016, 04:19 AM
Location: Ypsilanti, MI
2,452 posts, read 3,672,028 times
Reputation: 4835
I have posted this before, but generally the Lump Sum is not your best choice.

I opted to take the Lump Sum because:
  • I already had a trusted Financial Advisor
  • I wasn't planning to actually retire for another 9 years, ample time for the Lump Sum to grow significantly by retiring from my current employer and securing a new identical position elsewhere.
  • The PBGC interest rate for calculating Lump Sums had dropped to an all-time low in late 2012, thereby increasing my Lump Sum amount.

The best decision will be based on your personal situation and risk tolerance, not on the opinion of a web stranger like myself.
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Old 11-09-2016, 07:16 AM
Location: Charleston, SC
1,369 posts, read 769,637 times
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My MegaCorp offered a Lump Sum to all recent retirees. But they used the older Actuarial Tables to their advantage. They also used a cheapo interest rate factor. Just about 30% of the retirees accepted the offer, it appears that only the highest paid execs and those desperate for cash took it.

There's an "immediate annuites" website, where you can plug in an amount and get an idea of what kind of monthly payment you would receive under various policies. The Lump Number they offered me wouldn't come close to replacing the monthly check that I get now. Also, when I divided my Lump by the check I receive now.....it would cover about 12 years.

Our MegaCorp's pension fund puts out an annual statement. They are over-funded to the tune of 117% of Liability. By law that fund us off limits as my old company is bought out by other corporations. That fund is safe. I plan on living a long time and the check I get now covers most of our fixed expenses.

And that's just the way I like it.
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Old 11-09-2016, 07:31 AM
Location: Florida
4,375 posts, read 3,710,800 times
Reputation: 4116
I think you will find that a company offers the payout as a way to control future costs. In most case it will probably be better to wait, but you might want to hire someone to evaluate the offer if you are not sure what to do.
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Old 11-09-2016, 08:04 AM
Location: East of Seattle since 1992, originally from SF Bay Area
29,842 posts, read 54,538,129 times
Reputation: 31199
A brother in law took the lump sum, and while most of it is in secure, low interest instruments, he spends much of the day day trading with some of it, and has done very well so far. Well, at least until yesterday. We don't offer that but I wouldn't take it, I prefer being able to depend on the monthly check.
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Old 11-09-2016, 08:06 AM
Location: Charleston, SC
1,369 posts, read 769,637 times
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Day Trading is a good way to make a small fortune......out of a large one.
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Old 11-09-2016, 12:01 PM
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Get the best guarantee you can. If that means taking a lump sum then do it.
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Old 11-09-2016, 01:45 PM
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I know someone who worked for a a huge company and he took the lump sum.I think he may wish that he took the monthly pension payments.
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Old 11-09-2016, 02:26 PM
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I just went through this, and it was a difficult decision. I had always planned to start my pension at age 60, which would be slightly reduced because of taking it early. My concerns were because the company was merging with another and dividing at the same time, would my pension be there if I waited?

I discovered that if the pension couldn't be paid, it would be covered by the Pension Benefit Guaranty Corporation, a national government program. Considering the national debt, that's not completely reassuring. From what I read, there are times when the PBGC doesn't pay full pensions. I believe that if you have a very high pension payment, it may be cut back.

Your company can go the route of having an insurance company take over the pension and pay you an annuity. If that happens, the worry would be what happens if the insurance company goes bust. Once your pension goes to an insurance company, the PBGC no longer covers it. If the insurance company goes up, your State Guaranty Association would take over your payments. They also have limits on what they will pay which varies by state.

Because I was under 59 1/2, I would have had to roll over a lump sum to an IRA to avoid an early penalty and tax. The lump sum offered me was decent but not near what I would have received with a normal life expectancy. I would have had to invest it wisely and safely, but that type of investment would not have yielded me a high enough return to make taking the lump sum worthwhile.

I was also offered the opportunity to take the pension now at a reduced rate. There would be no age-related penalty if I did so. So that's what I did. I am taking the pension so I will always have a monthly check, and for now, it is all going into investments. When I ran the numbers, doing it this way gives me just about the same amount of money as waiting to age 60 using a conservative rate of return. I didn't want to give up a monthly check and was pleased there were backup payers even if they weren't perfect. I also like having a little freedom with the monthly checks to invest as I want. It's the best of both worlds. Plus, this little voice in my head said that maybe if I start the pension now, it would be more difficult for the company to get rid of me completely. This compromise was the best for my situation but everyone has different factors to consider.
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Old 11-09-2016, 03:00 PM
Location: Somewhere in deep in Maine
3,665 posts, read 2,815,751 times
Reputation: 4441
Very very few people can get the return that a large pension fund can get with its billions of dollar buying power.

My wife has an IRA from her father that has what I call serious money in it. She tried to get an appointment at Vanguard to talk with them about it but they claimed they had no where to meet with her and she would need to do it over the phone.

I suspect that if the fund had $10,000,000 in it, they would have had no problem finding a nice place to meet with her. and if it had $10,000,000,000 in it, they would have rented out a suite of offices to meet with her.
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