Pension Plan Lump Sum Payout

[msrhoda]

Hi...

Does anyone have any experience with their company offering a Pension Lump Sum Payout or taking a lifetime single annuity (fixed). I do not have children so that is one factor I take into consideration when making this decision.

Appreciate any input.

Thanks.

 

[golfnut]

There are alot of posts regarding pensions. Please utilize the "search" function above.

Some of the things that matter iro pensions.

Are you married?

Monthly payout versus lump sum. Check out the immediateannuities.com site to compare what you monthly paypout is versus what you might get in the open market.

Most people on this forum elect the annuity rather the lump sum.
I took the lump sum instead but my pension was very small.

 

[wanaberetiree]

Hi...



Does anyone have any experience with their company offering a Pension Lump Sum Payout or taking a lifetime single annuity (fixed). I do not have children so that is one factor I take into consideration when making this decision.



Appreciate any input.



Thanks.

Maybe try something like this ? https://www.calcxml.com/calculators/lump-sum-or-payments


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[pb4uski]

Hi...

Does anyone have any experience with their company offering a Pension Lump Sum Payout or taking a lifetime single annuity (fixed). I do not have children so that is one factor I take into consideration when making this decision.

Appreciate any input.

Thanks.

Yes. I was recently offered a lump sum. The lump sum was a raw deal and woefully short of the value of the pension benefits based on annuity pricing. Be careful.

 

[youbet]

Hi..

Appreciate any input.

Give a lot of thought and consideration to the time value of money.

Getting a lump sum now, assuming we have reasonable investment returns on a prudent, diversified portfolio, can be a lot more in "real" terms than it first appears.

If your pension is not cola'd, the eroding effects of inflation can be substantial within a decade or so.

Your health, your other financial resources, your comfort with investing the money, the details of the lump sum offer, etc., will all come into play.

 

[Turn_the_Page]

As others have pointed out, this has been discussed here a LOT already.

I took the lump sum. Doing the math on the annuitized benefit, it worked out to ~6% payout, which is significantly more than the 3.5 - 4% that most believe is a safe WD amount. Since the annuity shares the risk across many, many people, they can payout that amount. The problem for me with the annuity is the risk if the comapny fares poorly in the future and the lost benefit if we die unexpectedly. There are some who really should use the annuity. I know retirees who 'went crazy' and WAY overspent when they got their hands on this money.

 

[pb4uski]

Comparing the 6% payout to a 3.5-4% SWR is not an appropriate comparison in most cases since in most cases a 6% payout is a fixed benefit and the 3.5-4% SWR benefit increase each year with inflation. If the pension benefit was COLAed then comparing the payout rate with a SWR would be appropriate.

 

[Big_Hitter]

Maybe try something like this ? https://www.calcxml.com/calculators/lump-sum-or-payments


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that's just a simple discounting tool, I don't see mortality being used

lump sums are a mathematical expectation calculated using an interest rate and a mortality table based on an annuity payout

 

[Danmar]

My personal view is that most people should probably take the pension (annuity) contingent on a fair price, legacy desires, health, company strength. Pensions are great to have in retirement and greatly reduce your chances of running out of money. In retirement, less risk is better. Obviously, there may be other important factors to consider, but for me it's "for the pension to lose" so to speak.

I took the pension when I retired and very happy I did.

 

[Backdraft57]

I took part of my pension in a lump sum and asked this same question 6 months ago here. Should find some good info searching lump sum. It was going to take 15 years just to pay back the lump sum amount via the monthly annuity payments. I figured very conservative return (think it was 3%) on the lump and it boosted to break even at 25 years if I recall correctly. I found a lump sum vs annuity calculator somewhere on the net. For me the best option was some in a lump and some monthly. The old adage all eggs in same basket was a driving force for me.

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[bob boag]

In 2011 at 55 I took the "lump sum" payout (actually 60 months payout) of $2.1M instead of a COLAed $60k/year pension. Put it in IRAs along with 401k dough.

Sequence of returns is an huge factor in how this plays out, and I was fortunate. I've make $600K on my port since retirement.

My wife will have a teacher's pension and I will get SS so I felt we were already comfortably annuitized. I will be happy to will my kids a few million.

 

[rodi]

I did the calculations one last time a few months ago - I started my annuity this October 1st.

My lump sum was, as pb4uski said, a raw deal... the annuity was a much better deal.

I'm also a fan of a 3 legged stool approach to retirement income... SS, Pension, and savings. My savings portion was solid, SS was pretty solid... but without my small pension - I had no pension, nor did DH. It's not a lot - $460/month... but that, combined with DH's SS, our rental income, and small withdrawals from savings, give us enough to live on.