Pension Benefits - Options

[Midpack]

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Originally Posted by sailfish The rates now are so low it doesn't pay. Came to almost a 7% rate, comparing it to my lump sum. I am getting around 5 to 6% dividends and interest on stocks and bonds I bought with the lump which has also increased in value, so I can live with that.

Good reason, I wholeheartedly agree now is a historically bad time to buy and annuity if you can avoid it (not everyone can, or wants to, and that's fine).

Again, I guess I was fortunate that my MegaCorp calculated the lump sum they offered based on prevailing rates at the time, Jun 2011 when rates were horrible, so it was technically a wash in terms of value to me at the time. In fact that's another reason I chose to take the lump sum then, annuities will get relatively cheaper when rates increase (they will, the question if only when) and also as I age (simply fewer payout years for the provider).

[Running_Man]

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Originally Posted by ziggy29 And it's no coincidence why many, as Verizon did in the quote above, are taking a big one-time hit and offloading pension liabilities to insurance companies. They can't escape the music any more and yet they are desperate to free themselves from the uncertainty of DB pension plans and their future liabilities. In any event, more and more people are realizing that their pensions are only as strong and solvent as the companies and governments which are backing them.

I do not believe the reason Verizon or any company are dumping pension because they were try to avoid future pension liabilities. It is the fact that fluctuating returns on the pension assets end up affecting the bottom line of the company. So paying the price of fully funding the pension and terminating the pension, and a terminated pension is pretty much the best pension to be in, gets the company out of the situation and avoids future liabilities for future employees by not offering a pension. For the employees in the plan, this is great, new employees not so great to me.

And one of the ways the companies can get the most money back is by offering the choice of a calculated annuity or a lump sum. If you offer both there is no requirement to offer market value for the lump sum and the company, if many choose the lump sum, has to actually to pay less to fully fund the plan if the plan has not yet reach the terminated and transferred state.

The plans that are somewhat more suspect are plans that are woefully underfunded and not yet terminated. If the company declares bankruptcy and the pension falls to government guarantees, the participants in the plan may very well see a cut in their pension, you need to figure out which group you are in and how the funding of the plan rates, which is the most important criteria to me.

[Rowdy]

Quote:

Originally Posted by Running_Man ...The plans that are somewhat more suspect are plans that are woefully underfunded and not yet terminated. If the company declares bankruptcy and the pension falls to government guarantees, the participants in the plan may very well see a cut in their pension, you need to figure out which group you are in and how the funding of the plan rates, which is the most important criteria to me.

I have a similar situation with a pension buyout; I'm opting to wait for my previous (not very healthy) employer to provide the pension later in life. Why? Because PGBC is there to back it up. I'm below the PBGC monthly guarantee amount for my age, so I really see little risk in sticking with the pension. Do forum members believe that if you are below the monthly PBGC guarantees, that the PBGC won't pay your vested pension amount on covered plans? Does anyone have FIRST hand experience of being shorted under a PBGC takeover scenario (assuming you are under the minimums)? I have heard all sorts of stories of back room deals between companies and PBGC, however, I suspect these are just stories.

Many companies are jumping on the buyout bandwagon because of recent changes that allow companies to offer lower buyout amounts than they could have previously. Here's an article from Kiplinger detailing the change: Pensions: Take a Lump Sum or Not?

[obgyn65]

This is what I would do also.

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Originally Posted by pb4uski I suggest that you go to immediateannuities.com and other sites and price out a SPIA with a $341 monthly benefit (I assume that the $341 would begin immediately). If the premium exceeds $51,430 per month then I would lean towards the annuity.