Join Early Retirement Today
Thread Tools Search this Thread Display Modes
Interest Rates, Lump Sums and leaving Mega Corp
Old 05-10-2013, 01:07 PM   #1
Recycles dryer sheets
Join Date: Nov 2006
Posts: 295
Interest Rates, Lump Sums and leaving Mega Corp

As I pondered the exit from Mega Corp I was struck by the advantages of leaving early and taking the lump sum at today's low interest rates. I was tempted to stay for the money but the sobering realization is that I could toil for a couple of more years and not show any lump sum benefit if (when) interest rates rise. The math is complicated by a lot of assumptions but this one example is that a ~25% increase in rates would lead to a 20% reduction in the lump sum.

I could see rates rising 50% at the drop of a hat. A bird in the hand.....

Resources for Plan Sponsors - Commentary by Mike Barry

My last day is 5/31. Then I start teaching at the local university.

Tekward is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 05-10-2013, 01:56 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Midpack's Avatar
Join Date: Jan 2008
Location: NC
Posts: 14,218
My former Megacorp used 6-month periods so lump sums did not fluctuate as wildly, but it's probably an important question for each of us to ask our "retirement department" well in advance (and follow up in case of a plan change. I didn't realize other companies might use spot rates, so a good heads up for us all, thanks.
Sponsors may use a stability period of: (1) one calendar month; (2) one plan quarter; (3) one calendar quarter; (4) one plan year; (5) or one calendar year. Many sponsors use a plan year/calendar year stability period, so that the lump sum interest rate is "stable" (i.e., the same) for an entire year.

No one agrees with other people's opinions; they merely agree with their own opinions -- expressed by somebody else. Sydney Tremayne
Retired Jun 2011 at age 57

Target AA: 45% equity funds / 30% bond funds / 25% cash - radically changed Nov 2018
Target WR: Approx 2.5% Approx 20% SI (secure income, SS only)
Midpack is offline   Reply With Quote
Old 05-10-2013, 02:30 PM   #3
Thinks s/he gets paid by the post
heeyy_joe's Avatar
Join Date: Nov 2012
Location: Madeira Beach Fl
Posts: 1,403
It pays to keep your eyes on the ball.
"A man is a success if he gets up in the morning and goes to bed at night and in between does what he wants to do" --Bob Dylan.
heeyy_joe is offline   Reply With Quote

Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off

» Quick Links

All times are GMT -6. The time now is 06:57 AM.
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2019, vBulletin Solutions, Inc.