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Old 09-30-2014, 01:22 PM   #21
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This is an offer, they aren't converting everyone.
If it anything like mine from a different employer, they are converting everyone. It is probably a choice to accept the lump sum payout; to accept the same defined benefits at retirement age but now paid by and guaranteed by an insurance co; or to accept earlier (lower) monthly benefits paid by that same insurance co.

There was no choice to let things ride with the company's plan. If I took no action, it would be converted for me.

The limited time offer most likely coincides with their approved conversion timeframe.
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Old 09-30-2014, 01:33 PM   #22
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Originally Posted by CRLLS View Post
If it anything like mine from a different employer, they are converting everyone. It is probably a choice to accept the lump sum payout; to accept the same defined benefits at retirement age but now paid by and guaranteed by an insurance co; or to accept earlier (lower) monthly benefits paid by that same insurance co.

There was no choice to let things ride with the company's plan. If I took no action, it would be converted for me.

The limited time offer most likely coincides with their approved conversion timeframe.
They may be moving everyone to Prudential (I'm not sure), but the lump-sum offer is a limited-time offer, from what I understand. Retirees moved to Prudential must be provided the same pension as before, if they do not accept the lump-sum offer.

Here's my guess as to motivations:


1) No corp likes uncertainty. When someone accepts the lump-sum, it becomes certain, $X this year, no future obligation for the corp.

2) Repeating my earlier statement, even a low-ball offer will be attractive to some people. The corp will save money and gain certainty. A win for the corp, and and assumed win for the retiree (or they would have rejected the offer).

I'll further assume that this was part of the negotiations with Prudential (if they are moving everyone to Prudential) - trade some uncertainty for a below-par offer.

-ERD50
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Old 10-01-2014, 12:23 AM   #23
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I ran the $120K lump sum offer for a female, age 65 through a few online calculators - they all came back in the low $600/month range - $605 - $640.

Since the previous employer's plan will provide $1500/month, staying with the pension seems like the better deal.

The downside risk is the declining value of the non-cola adjusted pension,
but a pension does diversify my overall portfolio.

At the end of the day, I suppose compelling arguments could be made in either direction.

Tres
This is from 'Income Solutions' that I accessed through Vanguard's site. I ran it two different ways, the first:

Female, age 65, $1,500 monthly income

Cost of annuity was $278,543.20- Single Life

Female, age 65 $120,000 lump sum

Monthly income was $645.91- Single Life

Looks like keeping the pension is a better deal
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Old 10-01-2014, 09:57 AM   #24
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I was comparing payout from an annuity purchased with the lump sum to the annuity option. The lump sum purchased annuity only paid 64%. Both used joint survivorship.

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Old 10-01-2014, 09:58 AM   #25
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Originally Posted by Lancelot View Post
This is from 'Income Solutions' that I accessed through Vanguard's site. I ran it two different ways, the first:

Female, age 65, $1,500 monthly income

Cost of annuity was $278,543.20- Single Life

Female, age 65 $120,000 lump sum

Monthly income was $645.91- Single Life

Looks like keeping the pension is a better deal
Are survivor benefits being considered (if there is a spouse or heirs)?

Lump sum provides 100% survivor/heir benefits, pensions provide nothing to heirs, and are reduced for a beneficiary (typically ~ .75x for 100% to surviving spouse?). That might make these numbers much closer.

-ERD50
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Old 10-01-2014, 11:49 AM   #26
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Thank you for the additional feedback - that's what I was thinking - also maybe they'll come back with better offers down the road.

I do have heirs, but they are already more than well provided for elsewhere, so I am more concerned about my own longevity and livelihood.

I am reminded of my mother's cousin who has a dark sense of humor. She says "when I die, I am leaving my homes, vehicles and belongings to my children. If there is a dollar leftover, I miscalculated."

I'm not that dark lol.

Thanks again, Tres
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Old 10-03-2014, 03:26 PM   #27
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Update on my situation - I got the mailed package today.

It looks like this only affects my older, smaller, traditional pension. Previous to this offer you could start an annuity at age 55 or older. No lump sum offer. Now they are offering the option to
1) take a lump sum now (with caveats)
2) start annuity now (I'm 53, so it would be starting it before age 55).
3) start it sometime in the future - same as before.

It's not a huge pension or lump sum. The lump sum is worth $22015, the annuity started now would pay $115/month. Neither is life changing. (Nor did I expect them to be.)
For comparison - the lump sum would buy an annuity that pays $91/month. (80% of the one I could get through the pension program if I started it now. Comparing apples to apples - both are based on my age, my husbands age, and 100% joint survivorship)

I think I'm going to let it ride - along with my other pension from the parent corporation that acquired the original company (and it's pension). The lump sums aren't big enough to entice me to take on the risk - when I can have a small portion of my retirement stream annuitized at better rates than I can purchase.
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