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I worked at a large company for 10 years before they had a RIF and I was let go. They had a pension plan that I was 100% vested in after 5 years of service.
After I was let go, they sent me a letter trying to get me to cash out the pension. I called, and found out what the project amount per month would be when I retired. I thought if I retire at 65 and live to 85 that would be over 200k paid and then if my wife was still alive, she would get 50% of the monthly amount...
They tried to get me to part with it for 20k. I said no way.
There is also a provision that if I die before I reach retirement that my wife can still receive the 50% monthly payment when she retires...
Well, its been a few years since then and they just sent me a letter that said that if I don't waive this option that my pension will be reduced by a certain percentage every year until i retire.
I'm only 40 years old... I have at least 25 years before I retire...that could end up hurting my pension a good bit and I don't want to roll the dice and potentially leave my wife (who is a stay at home mom right now) without any that part of a safety net.
This doesn't make any sense, I worked hard for that money, wasn't terminated for anything I did wrong, they should just leave it alone.
DH accepted a reduced pension in order to have me receive 75% should he pass before I do. It seems to be a common policy from what I've heard. Other pensioners we know have done the same thing.
DH accepted a reduced pension in order to have me receive 75% should he pass before I do. It seems to be a common policy from what I've heard. Other pensioners we know have done the same thing.
Yes, the amount am talking about is the reduced amount for my wife as well. What they are saying is if I don't waive the ability for her to get a reduced amount if I die before I retire then they will reduce the pension amount every year until i do retire.
DH accepted a reduced pension in order to have me receive 75% should he pass before I do. It seems to be a common policy from what I've heard. Other pensioners we know have done the same thing.
While what you say is true (I agreed to a 10% pension payment cut to benefit my wife) reading what the OP is saying, he is being pressured by the company to cash out. They are changing the rules of his pension to force him to do so.
Lump sums Cash-outs MUST be calculated as the Net Present Value of the future stream of pension payments, discounted using the interest rate specified by the Pension Benefit Guarantee Board. This interest rate varies quarterly (maybe even monthly) but can be found on the PBGB web site.
Did your former employer provide you with an Exit Document which identified what your future monthly pension amount would be based upon your 10 years of employment?
The reduced Survivor's Benefit Election may need to be singed by your wife and Notarized.
OP, I'll admit I'm a bit biased, but I would take the buyout. You can roll it over into an IRA you control yourself. MI-Roger is correct that the cash out must be calculated as the net present value. I would be very nervous about allowing the pension to keep my funds if they're already pushing for you to sign up for the reduction now. I can understand WHY they would do it, but it's not a good sign that they ARE doing it IMHO.
OP, I'll admit I'm a bit biased, but I would take the buyout. You can roll it over into an IRA you control yourself. MI-Roger is correct that the cash out must be calculated as the net present value. I would be very nervous about allowing the pension to keep my funds if they're already pushing for you to sign up for the reduction now. I can understand WHY they would do it, but it's not a good sign that they ARE doing it IMHO.
You're right, I used the Roth IRA calculator at bankrate.com and if I just place 20k in one for 25 years at 7% (I read this is a good average to go by) return and dont add to it, then at 65 I would have 108k. If i waited until 70 I would have 152k.
Not bad... If I managed to add 1k a year to it then at 65 I would have 250k.
So maybe it would be better to cash it out, though there is the risk that goes with it.
Either way, they may not offer it as an option any more....
Either way, they may not offer it as an option any more....
I am not certain what they are doing is completely legal. Telling you that you must approve a Survivor's Pension Reduction is obviously not correct, this agreement must be signed by the spouse as they are the person who will be affected.
I agree with numsgal to get your pension balance out now.
Lump sum protects you against the pension fund disappearing. Move it to a big brokerage and let them invest it for you for 25 years. Don’t take any money out. Then turn it into an annuity when you retire. Same or better benefit and it won’t disappear due to bad management.
I worked at a large company for 10 years before they had a RIF and I was let go. They had a pension plan that I was 100% vested in after 5 years of service.
After I was let go, they sent me a letter trying to get me to cash out the pension. I called, and found out what the project amount per month would be when I retired. I thought if I retire at 65 and live to 85 that would be over 200k paid and then if my wife was still alive, she would get 50% of the monthly amount...
They tried to get me to part with it for 20k. I said no way.
There is also a provision that if I die before I reach retirement that my wife can still receive the 50% monthly payment when she retires...
Well, its been a few years since then and they just sent me a letter that said that if I don't waive this option that my pension will be reduced by a certain percentage every year until i retire.
I'm only 40 years old... I have at least 25 years before I retire...that could end up hurting my pension a good bit and I don't want to roll the dice and potentially leave my wife (who is a stay at home mom right now) without any that part of a safety net.
This doesn't make any sense, I worked hard for that money, wasn't terminated for anything I did wrong, they should just leave it alone.
Any of you dealt with this before?
I assume the pension will be about $10K a year at age 65 but is that adjusted for inflation? If not, you might want to explore how much $10K a year today would be worth in 25 years assuming 2-3% a year inflation. I prefer the pension over lump sum but the difference between losing 2-3% a year versus gaining 7% (actually more like 5% accounting for inflation) might make the $20K not look as bad. It sounds like nothing.
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