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Old 10-20-2016, 07:49 AM   #41
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Originally Posted by pb4uski View Post
My plan says that it provides a death benefit equal to the value of vested accrued plan benefits. For marrieds, the spouse is automatically the beneficiary but my spouse and I can agree to name another beneficiary. Unmarried plan participants can name a beneficiary. If the plan participant dies without a named beneficiary then the benefit is paid to the spouse or the estate if there is no spouse.

The PBGC has a similar structure, though I'm sure the amounts differ:
cash balance or traditional db?
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Old 10-20-2016, 08:27 AM   #42
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Quote:
Originally Posted by pb4uski View Post
My plan says that it provides a death benefit equal to the value of vested accrued plan benefits. For marrieds, the spouse is automatically the beneficiary but my spouse and I can agree to name another beneficiary. Unmarried plan participants can name a beneficiary. If the plan participant dies without a named beneficiary then the benefit is paid to the spouse or the estate if there is no spouse.

The PBGC has a similar structure, though I'm sure the amounts differ:
Typically in this the “death benefit equal to value of vested accrued plan benefits” if the pension has not been claimed is the spouse receives 50% of the original pension if 50% survival is an option in claiming the benefit. Each plan of course is different but there is one option that is considered default. With multiple claiming strategies for pensions one is almost always the default in case of death of the worker for whom the pension applies.
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Old 10-20-2016, 09:08 AM   #43
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cash balance or traditional db?
Traditional DB plan
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Old 10-21-2016, 11:02 AM   #44
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My experience with a large private company is that you are given choices such as:

- Benefit for your life only
- Benefit for your life and your spouse (100%, 75%, 50% - meaning how much the benefit your spouse receives if you die first)
- Same as above, but add 5 year or 10 year guarantee period

Of course, the monthly amount changes with each option. Oh, and if you exclude your spouse, they have to provide a notarized signature that they understand this.

My pension worked out to somewhere between 6.0 and 6.5%. This really gave me pause, as that's a decent annuitized benefit. Advice from CFP and my gut said - take the lump sum. That's what I did.
I was in the same situation. At the same time I was given the lump-sum option, I was diagnosed with cancer. I took the lump sum.

I may survive this diagnosis and live a long life (42-75% chance of 5 year survival), but who knows? I decided to take the money and run.
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Old 10-25-2016, 08:53 AM   #45
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The problem here, is that if interest rates go up I expect the payout to DECREASE. The guarantee is $1414/mo; the current payout is back-calculated from that using 'some' interest rate, it looks as though they're using about 5% right now. If interest rates go up, the payout will be recalculated from $1414 - and the present value of that fixed amount is LOWER if the interest rate is higher. So, any way you look at it, rising interest rates (coupled with inflation) will erode the value of this pension - whether I take it as a future annuity or a future cashout.
You might consider that within the next 14 months the mortality tables for lump sums must be updated which will increase the amount of the lump sum calculation by about eight percent.
https://markleyactuarial.com/2016-mo...les-announced/
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Old 10-25-2016, 10:10 AM   #46
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Mega offered me a lump sum option which I thought looked attractive vs the non-cola'd annuity option (with DW as 50% survivor beneficiary).

Assuming modest investment returns and a moderate rate of inflation (with investment return being 1% greater than inflation post tax), the breakeven point was at about 15 years bringing me close to my life expectancy. If I died prematurely and DW began collecting at 50%, the breakeven point moved to far beyond her life expectancy, so the lump sum offered her considerably more protection.

This was a one time offer where Mega had set aside X dollars to buy out vested retirees who had not started their pensions yet. The lowest packages were paid first and the highest last. As it turned out, by the time they got to me (somewhere in the middle I'm guessing), they depleted the stash and I did not get the lump sum. So, I started the non-cola'd annuity at 68 yo. I've been collecting for about a year. I'd still try for the lump sum if given a do-over. Non-cola'd annuities just don't seem like very good longevity insurance........ at least not to me.
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Old 10-25-2016, 10:28 AM   #47
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Originally Posted by Turn_the_Page View Post
My experience with a large private company is that you are given choices such as:

- Benefit for your life only
- Benefit for your life and your spouse (100%, 75%, 50% - meaning how much the benefit your spouse receives if you die first)
- Same as above, but add 5 year or 10 year guarantee period

Of course, the monthly amount changes with each option. Oh, and if you exclude your spouse, they have to provide a notarized signature that they understand this.

My pension worked out to somewhere between 6.0 and 6.5%. This really gave me pause, as that's a decent annuitized benefit. Advice from CFP and my gut said - take the lump sum. That's what I did.
Yes, that was the case for mine AFTER you start the pension. I did determine based on a timely suggestion from my friend that, as a couple of other people noted above, there would be NO transfer of the pension benefit if i were to kick the bucket BEFORE starting the pension benefit.

Apparently not as unusual as some think.
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Old 10-25-2016, 11:00 AM   #48
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Originally Posted by youbet View Post
Mega offered me a lump sum option which I thought looked attractive vs the non-cola'd annuity option (with DW as 50% survivor beneficiary).

Assuming modest investment returns and a moderate rate of inflation (with investment return being 1% greater than inflation post tax), the breakeven point was at about 15 years bringing me close to my life expectancy. If I died prematurely and DW began collecting at 50%, the breakeven point moved to far beyond her life expectancy, so the lump sum offered her considerably more protection.

This was a one time offer where Mega had set aside X dollars to buy out vested retirees who had not started their pensions yet. The lowest packages were paid first and the highest last. As it turned out, by the time they got to me (somewhere in the middle I'm guessing), they depleted the stash and I did not get the lump sum. So, I started the non-cola'd annuity at 68 yo. I've been collecting for about a year. I'd still try for the lump sum if given a do-over. Non-cola'd annuities just don't seem like very good longevity insurance........ at least not to me.
If you took what the lump sum had offered and used that lump sump to start with 4% withdrawals, how much lower than your pension would that have been? If you then took the difference between your pension and the lump sum 4% how long would you last before the lump sum would pass the pension.

I calculate that if you assume 1) inflation of 3% per year 2) investment returns of 5 % per year 3) a pension that pays $6,000 per year and offers $100,000 lump sum in lieu of that, would be able to pay $4,000 of withdrawals adjusted for inflation for 34 years one year longer than the lump sum with 4% withdrawals.

If you change the inflation to 5% and returns to 7% the pension last for 20 years of inflation adjusted returns while the lump sum still lasts 32 years. At 2 percent inflation and 4 percent returns the pension plan last 62 years while the lump sum still lasts 32.
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Old 10-27-2016, 05:28 PM   #49
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I have a similar situation to the OP. I have a small DB pension with a former employer I left 15 years ago of $800/month starting at age 65, non-COLA. I am being offered a one time lump sum opportunity that expires Nov 15. The offer:

Current Age: 58
Non-COLA payout starting at age 65 = $801/month
or
Present lump sum of $91,200

I have been researching this for a couple weeks. Some things I've found:

The lump sum offer is less than the retail value of an identical annuity I could buy by at least 20%. Current best price for the annuity is $117,00 with most results $122K~$127K

When pension funds make these offers, they are required to at least comply with PPA 2006, which is what my offer is. The calculator at https://www.pensionbenefits.com/calc...06_lumpsum_cal is handy for seeing if what you are being offered is the minimum. I had mistakenly thought I would be offered somewhere close to the retail value of the annuity. This apparently is not how it typically works.

I have several conflicting thoughts I am mulling over on the best choice for me. This involves a lot of speculation over future returns and interest rates. The following seems reasonable to me.

Interest rates are not going lower, most likely higher in the next decade. The increase is likely to be slow to very slow.

The central banks really want to foster some higher inflation. This goes hand in hand with raising interest rates. The surprising thing to me is how much trouble they have had bumping up inflation. The old adage of "Don't fight the Fed" seems to apply here though, with my belief that eventually the Fed will succeed (or perhaps over succeed) in ramping up inflation and then raising rates.

Higher inflation and higher interest rates in the future both favor taking a lump sum now and investing it in my 70-30 overall portfolio. An annuity, if desired, can be purchased more cheaply in a future higher inflation, higher interest rate environment. Balancing against that is the fact the lump sum offer I currently have is ~20% less than the retail value of the pension as an annuity. Still don't know what I should do, but I have to make up my mind in the next 2 weeks.
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