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Offered lump sum payout of pension
Old 11-12-2019, 09:04 PM   #1
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Offered lump sum payout of pension

I was notified last week of a one time offer to take a lump sum payout of my defined benefit, non-cola pension in lieu of lifetime monthly payments. We retirees have until Dec 6, 2019 to make this election. I took all of about 10 seconds to decide on that. I will have the money rolled over to a traditional IRA with Vanguard. I did attend an informational meeting, but there really was nothing added to what was available to read in the several page packet that had been sent.

One of my friends told me that she planned to just keep the monthly pension payments. Shes single but has adult children & grandchildren. I asked her if she understood that if she dies next month those thousands of $s just disappear, no one gets it. I urged her to explore her options before she decided.

Another couple of friends are going take the lump sum, & plan to talk to someone at the local Edward Jones office. I suspect EJ is going to see a big influx of money into their coffers.

I feel grateful that I found this forum ~ 13 years ago For those who had little knowledge, expertise, nor interest in the topic it would be difficult to now get up to speed in this short time frame to make an informed decision about what to do & where to put the money. I dont feel like Im any sort of an expert, but it seems I have a leg up on several who are wrestling with this.
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Old 11-12-2019, 10:16 PM   #2
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Quote:
Originally Posted by Bram View Post
I was notified last week of a one time offer to take a lump sum payout of my defined benefit, non-cola pension in lieu of lifetime monthly payments. We retirees have until Dec 6, 2019 to make this election. I took all of about 10 seconds to decide on that. I will have the money rolled over to a traditional IRA with Vanguard. I did attend an informational meeting, but there really was nothing added to what was available to read in the several page packet that had been sent.

One of my friends told me that she planned to just keep the monthly pension payments. Shes single but has adult children & grandchildren. I asked her if she understood that if she dies next month those thousands of $s just disappear, no one gets it. I urged her to explore her options before she decided.

Another couple of friends are going take the lump sum, & plan to talk to someone at the local Edward Jones office. I suspect EJ is going to see a big influx of money into their coffers.

I feel grateful that I found this forum ~ 13 years ago For those who had little knowledge, expertise, nor interest in the topic it would be difficult to now get up to speed in this short time frame to make an informed decision about what to do & where to put the money. I dont feel like Im any sort of an expert, but it seems I have a leg up on several who are wrestling with this.
Im 53 got the offer 4 years ago and again this year (roughly 10%more), took a pass. Ran the numbers and the offer was a joke. Not talking about real money in either scenario, but just the same, was an insult. Lol
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Old 11-12-2019, 11:06 PM   #3
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Im 53 got the offer 4 years ago and again this year (roughly 10%more), took a pass. Ran the numbers and the offer was a joke. Not talking about real money in either scenario, but just the same, was an insult. Lol

Just curious how much of a joke. I've been offered lump sums on non-COLA'd pensions from two different Megacorps. Both times the offer was 60-70% of the estimated value of the equivalent annuity and both times I declined.
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Old 11-13-2019, 01:15 AM   #4
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I had that option when I retired early. I took the lump sum because I preferred to have control over my money and whatever is leftover to go to my heirs. A decade later, it continues to grow.
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Old 11-13-2019, 02:07 AM   #5
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Originally Posted by Bram View Post
I was notified last week of a one time offer to take a lump sum payout of my defined benefit, non-cola pension in lieu of lifetime monthly payments. We retirees have until Dec 6, 2019 to make this election. I took all of about 10 seconds to decide on that. I will have the money rolled over to a traditional IRA with Vanguard.
Excellent decision.

Congrats!
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Old 11-13-2019, 02:13 AM   #6
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Just curious how much of a joke. I've been offered lump sums on non-COLA'd pensions from two different Megacorps. Both times the offer was 60-70% of the estimated value of the equivalent annuity and both times I declined.
We've just gone through this with DW and rolling over her pension.

I have the paperwork right here in front of me and am quoting:

Quote:
Lump Sum Payment

I elect to receive the present value of my accrued benefit equal to $XX,XXXX.XX in one lump sum payment. No further payments will be due and payable to me from the Plan. If I am married, my spouse has consented to this election by completing Section G. The relative value of this benefit to the Single Life Annuity is 100%.
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Old 11-13-2019, 07:23 AM   #7
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What do you all consider to be an acceptable % percentage of the equivalent annuity, to accept a lump sum payout from a non-cola pension, rather than taking the monthly payments ?

I understand the desire to invest it yourself for more control, and have a secure (not disappearing upon death) investment, but if the percentage is too low, it's not a good deal.

I had planned on taking a full survivorship for a reduced amount when I was eligible, and may change my mind if a lump sum is available.
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Old 11-13-2019, 07:32 AM   #8
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Always an interesting topic. To me there is more positives then negatives when taking lump sum. You have control of that money and the options in case of death (you or spouse) don't favor you.
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Old 11-13-2019, 08:12 AM   #9
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My offer, 10 years ago, had different options for the pension. My lifetime, mine + spouse survivorship, mine + spouse + portion left to kids. Or the lump sum which I chose.
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Old 11-13-2019, 08:13 AM   #10
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Always an interesting topic. To me there is more positives then negatives when taking lump sum. You have control of that money and the options in case of death (you or spouse) don't favor you.
^+1

For married couples, compare this against the pension with a 100% survivors benefit, which is usually quoted as the higher, single life payout rate. This is how I compared the lump sum vs pension.

Historically, if one rolls the money into an IRA, then , turn it into monthly payments at an annual rate of say 4%, that monthly benefit can grow with the cost of living. At some time, it will meet and exceed the fixed, non-cola'd pension.
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Old 11-13-2019, 08:16 AM   #11
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My first mega corp offered me a buyout when I was in my mid 50's and ~20 years after I had quit working for them. It wasn't much (~45k) but my main concerned was the long term viability of the company and it's pension fund. The company that owned my pension "at that time" had been spun off from the parent company some years before and was later merged with another company and was now based in a foreign country. It wast clear to me who owned my pension and what "protections" I may or may not have. Anyway I decided it was better to take the bird in the hand rather than the two that "may be" in the bush in the future.
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Old 11-13-2019, 08:25 AM   #12
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I was just in a similar situation. Offered a lump sum from Megacorp. When I went to Immediateannuities and compared is was about 11.5% lower than if I took the pension.

I took the lump sum anyways for a number of reasons. In addition to wanting control I have a low confidence Megacorp will be around in 20 years to honor the pension and I am also not real confident in the PBGC being able to support all these bankrupt pensions they will have to fund without a bailout. With my wife's current age and taking the 100% survivor option I estimate that we need it to be funded for at least the next 40 - 50 years.

Planning so far out is certainly fraught with unknown risks but you make the best decisions with the informaiton you have today.
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Old 11-13-2019, 08:32 AM   #13
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Always an interesting topic. To me there is more positives then negatives when taking lump sum. You have control of that money and the options in case of death (you or spouse) don't favor you.
what if the lump sum is only worth half of your monthly pension?
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Old 11-13-2019, 08:34 AM   #14
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So just curious. I have not been in this situation so this is just a matter of curiosity. It's a given that we've been in an extended period of time with great returns. Let's say you take that lump sum and do your rollover. Then about a year in you have a market contraction of let's say 35% or so that runs about a 2-3 year cycle. Now I'm a market believer so really just looking at the emotional aspect of potentially second guessing your choice.
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Old 11-13-2019, 08:35 AM   #15
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"
Lump Sum Payment

I elect to receive the present value of my accrued benefit equal to $XX,XXXX.XX in one lump sum payment. No further payments will be due and payable to me from the Plan. If I am married, my spouse has consented to this election by completing Section G. The relative value of this benefit to the Single Life Annuity is 100%"

PSA - relative values only compare options at the annuity starting date, not at a date in the future.
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Old 11-13-2019, 08:35 AM   #16
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So just curious. I have not been in this situation so this is just a matter of curiosity. It's a given that we've been in an extended period of time with great returns. Let's say you take that lump sum and do your rollover. Then about a year in you have a market contraction of let's say 35% or so that runs about a 2-3 year cycle. Now I'm a market believer so really just looking at the emotional aspect of potentially second guessing your choice.
yes sequence of return risk is huge, especially if that's all you have for retirement
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Old 11-13-2019, 08:37 AM   #17
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Originally Posted by Bram View Post
I was notified last week of a one time offer to take a lump sum payout of my defined benefit, non-cola pension in lieu of lifetime monthly payments. We retirees have until Dec 6, 2019 to make this election. I took all of about 10 seconds to decide on that.
what interest rates were used for that lump sum calculation?
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Old 11-13-2019, 08:39 AM   #18
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Always an interesting topic. To me there is more positives then negatives when taking lump sum. You have control of that money and the options in case of death (you or spouse) don't favor you.
it's really difficult to outlive an annuity though
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Old 11-13-2019, 08:43 AM   #19
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what if the lump sum is only worth half of your monthly pension?
Good question, I still would take the lump sum for a few reasons.

1) I can't predict when I will die (or spouse) it could be today in an accident.
2) I don't need the money to live on, so investing the sum is more beneficial in my case.
3) I want total control of that money even if only half to give back to heir/charity.
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Old 11-13-2019, 08:46 AM   #20
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it's really difficult to outlive an annuity though
If me I would take the lump then go buy an annuity if that works in your case. I just not in love with annuities, they cost money and the insurer in most cases come out ahead at end of life.
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