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Defined Pension--Help me decide When
Old 10-09-2008, 06:45 PM   #1
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Defined Pension--Help me decide When

Looking for dialog on timing for starting my non-cola defined pension. The funds come from my nearly 19 yrs of service(tude) at mega corp--long long ago.
Starting Jan 1, 2009, payments are: $1160/mon
2011: 1406/mon
On a simple payment basis, no reinvestment, there is about a 7 year breakeven of taking it now versus at 65.
I do not really think we will need the cash flow but on the other hand, the turmoil in the markets and the fact there is no cola, suggest having the income in hand as a preferred path. However it grates me then we will making tax payments at our margin rates which I expect will be in the 25% bracket for at least 2009
Thoughts, trade-offs, etc.

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Old 10-10-2008, 12:43 AM   #2
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Can you take a lump sum instead ?

If so, take the money and run.

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Old 10-10-2008, 05:06 AM   #3
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No answers, just some thoughts...

How stable is megacorp? So many companies seem to be going under. I guess the PBGC guarantees pensions but I am not certain that they provide 100%. If I were in your shoes, I would be checking into that aspect of things. Then, if there is any doubt I would take the pension in 2009.

Notice that the increase from 2009-2010 is only 5.7%, scarcely more than inflation. But, the increase from 2010-2011 is a substantial 14.7%. That's interesting, and for me would tend to eliminate taking it in 2010. I would choose either 2009 or 2011.

Many different authors point out that the first ten years of retirement are critical, and that if a retiree can make it through those first ten years then investments will have compounded and grown, ensuring greater financial stability. Since your pension is not inflation adjusted, I would tend to think of it as a tool to ease you into retirement and get you past those critical first ten years (though I am not certain when you plan to retire, or if you are already retired). After 20 years, at 3.5% inflation your buying power will only be half of what it is now.
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Old 10-10-2008, 05:29 AM   #4
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Originally Posted by Helena View Post
Can you take a lump sum instead ?

If so, take the money and run.
Concur with this approach - you can alway purchase an annuity on the open market later if you are so inclined.
Random Reinforcement is Highly Addictive.
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Old 10-10-2008, 09:45 AM   #5
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Thanks for the thoughts. No lump sum available since I bailed before way normal retirement.
The big bump 2010-2011 is probably more due to not having the same strart month from the data I got from the Megacorp pension folks. When I get start months the same, I am getting an annual increase of about 7-8%/year from deal. Of course this is non-cola money.
My simplistic approach is now versus later is
Inflation is taking a bite every month
Longer I defer tax advantage status on other funds the better
Reinvestment of proceeds at least gives some hope of beating the inflation beast.
Thanks again for your thoughts
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