Pension Question

[Beststash]

53 male - will retire next month (lost job and pension eligible). I would like to retire and not return to full time work. Does anyone have experience dealing with the pension survivor benefit options?? My choices are myself, Joint + 50, Joint +100, and 10 year certain. I need to be sure and provide for my dream girl. We are the same age and although I am debt free, my pension is not large enough to maintain my lifestyle. If I can withdraw 3-4% out of savings (which this forum has convinced me is OK) I will be fine. *
Question is - For the joint + 100% - I will receive about $200 a month decrease - I wonder if a life insurance policy at that rate would be a better alternative?? Or am I complicating things and should just go for the $200 deduction??
Any suggestions??

Beststach,

I do not understand...what is a "pension"?

I would think about buying a 10-year term life insurance policy, myself. That would cover her up to 62 when she could get Social Security. You are young enough yet to get a good rate.

Warning: Please educate your dream girl about how to handle her financial affairs after you fall off the perch.

Cheers,

Ed The Gypsy

[Bob_Smith]

Beststash, I'd probably approach it this way:

1. Determine a lump sum sufficient to replace whatever portion of the pension she will need. One way is to determine how much cash you would need to buy an annuity that would provide a lifetime income matching the pension. Here's one place to check:
http://www.immediateannuities.com/

2. Then I'd check term rates and run the numbers.

This would provide some ballpark figures. There are so many variables that it may be tough to get a good comparison, however. Some very rough numbers: $200 per month will buy roughly $200,000 term life - standard non-smoking rate with a level premium for 30 years.

[Beststash]

Thanks!!

Ed - I agree I definately need to do some work on the financial side with my wife. As far as the pension - how did we as a society let the idea of pensions just slip away without a public outcry from the voters. It seems to me that we should have the same amount of interest for our on well being as we seem to have for the rest of the world.........

Bob Smith - Thank you for the link - this made it very easy for me to make my decision based on dollars.

I find this website one of the best I've found. Is this a private forum??

Quote:

how did we as a society let the idea of pensions just slip away without a public outcry from the voters. It seems to me that we should have the same amount of interest for our on well being as we seem to have for the rest of the world.........

BestStash,

It's not just pensions, It's most all benefits. Unions have been driven out of the workplace, so basically it's every man for himself. Companies are always trying to make more money and getting rid of Pensions was just one vehicle to do this.

The only concern that business has for the rest of the world is providing a lot of jobs for India, because of the low wages.

Just what issue would you like a public outcry of voters on? Today 'Joe Six-Pack' thinks he's a republican. Whose side is the GOP on? The worker or Big Business?

We always get the government that 'Joe' is asking for. Today Joe is asking for Tax Cuts with no spending cuts. The government borrows the money to accomplish this passing the debt on to a future administration and generation to worry about.

Hi Cut Throat. I think every man for himself is a fine system. It used to be called
free enterprise.

John Galt

[Beststash]

Quote:

Just what issue would you like a public outcry of voters on?

Hoping not to start a political discussion (I've found that no one ever needs or appreciates political or religious advice) but when I say a public outcry by the voters.... I mean that I do not like the way my tax dollars are being spent.

I personally would prefer that issues such as health care, pension stability, national security..... are the beneficiaries of our tax dollars. I don't really think that anyone needs to convince us what these issues are or define defense.

One of the reasons that I raise Texas Longhorns is that they do not have "herd" mentality.

My .02 - now back to my wonderful retirement !

Quote:

I think every man for himself is a fine system. It used to be called free enterprise.

John Galt,

It just depends on how 'free' you want the enterprise to be.

Would you really like to go back to 100 years ago as you claim.

1. Free enterprise to freely exploit children without child labor laws.

2. Free enterprise to freely exploit the Health and Safety of workers without any OSHA laws. 'Send em' down to mine - who cares if they don't come out - we'll just round up 100 more!'

3.) Free Enterprise to freely exploit the environment without environmental laws. Pollute our Rivers, Pollute our Lakes and Clean Air.

4.) Free enterpise to freely have Monopolies to charge whatever they want for your home heating fuel.

There are places in this world where you could retire to escape all this government and have every man for himself. Plenty of unihabited Islands in the Pacific. What keeps you here in the U.S. when you can live like it was 100 years ago?

Quote:

how did we as a society let the idea of pensions just slip away without a public outcry from the voters.

Quote:

but when I say a public outcry by the voters.... I mean that I do not like the way my tax dollars are being spent.

Beststash,

Just wondering how spending your tax dollars has anything to do with Corporation 'A' from deciding workers will no longer get pensions.

In fact the Government is one of the few places that you can still get a pension. Military is a prime example.

Just trying to understand your position here.

[Beststash]

Cut-Throat,

My point about tax dollars as it relates to pensions....

Federal law governs pension funds as it relates to contains rules for reporting and disclosure, vesting, participation, funding, fiduciary conduct, and civil enforcement. Corporations that offer pensions (which is consider a benefit) get to deduct pension contributions from corporate income, and allow for the income of the pension fund's portfolio to accumulate tax free.

However, in the brave new world of chasing quarterly earnings, it is becoming more and more difficult for corporations to justify the priority of valuing employees as an asset and easier to view the labor market as a commodity.

I guess my point is if you get tax deductions for promises made - you should not be allowed to break your promise without consequences (because remember PBGC is responsible for making good on these promises - via tax dollars).

Which is better - make companies play by the rules or just change the rules when the going gets rough?? In my opinon corporate crime pays very well except for shareholders and employees - I am excluding executives from the employee category.

I don't think this is a political issue but rather a priority issue. It seems to be a priority for government workers (including the people that make the rules) but not a issue for those that sit at the trough (government) for tax relief.

Enough said on the topic.

Quote:

My point about tax dollars as it relates to pensions.... Federal law governs pension funds as it relates to contains rules for reporting and disclosure, vesting, participation, funding, fiduciary conduct, and civil enforcement. Corporations that offer pensions (which is consider a benefit) get to deduct pension contributions from corporate income, and allow for the income of the pension fund's portfolio to accumulate tax free. However, in the brave new world of chasing quarterly earnings, it is becoming more and more difficult for corporations to justify the priority of valuing employees as an asset and easier to view the labor market as a commodity. I guess my point is if you get tax deductions for promises made - you should not be allowed to break your promise without consequences (because remember PBGC is responsible for making good on these promises - via tax dollars). Which is better - make companies play by the rules or just change the rules when the going gets rough?? In my opinon corporate crime pays very well except for shareholders and employees - I am excluding executives from the employee category. I don't think this is a political issue but rather a priority issue. It seems to be a priority for government workers (including the people that make the rules) but not a issue for those that sit at the trough (government) for tax relief.

Whoa! - That's a mouthful. Maybe this is so confusing that voters don't know what issue to outcry on. What issue should we vote on and how do you recommend we vote?

[Michael]

Only you can make this decision, but here are a couple of additional things to think about. Getting a good price on private life insurance is heavily dependent upon your health at the time you apply. Make sure you meet insurance company standards for the best rates before you decline the survivor benefits on your pension. Another factor to consider is the health of your employer. If the PBGC takes over your pension plan, they have strict age cap limits on how much they will pay early retirees such as yourself. If they take over, you might wind up losing the extra $200 per month anyway, and losing the survivor benefit on top of it because you rejected it now. You should carefully review the strength of your pension plan, and the age cap limits on PBGC coverage when making your decision.

[AlanS]

Beststach,

Just curious if you have the option to take a lump sum rather than the monthly pension? This is the case with the company I work for although I guess it isn't always offered.

Alan

[Beststash]

Alans,

No, a lumpsum is not an option. I wish it were - I think
However, I have heard from some of ex-IBMer's that they were totally screwed on the lumpsum.

As a new member to this forum - this conversation doesn't seem appropriate for investment strategies - for general questions and OT issues - is there a more appropriate forum??

Another question - I have all of my investments in Fidelity. This includes Roth, IRA, 401K, and savings. I combine all together for asset allocation, is this appropriate? Also since I am 53 and will need to withdraw dollars to supplement pension income, I will need to draw dollars from savings until I reach 591/2. I figure no big deal since I am viewing it all as savings. Understanding that I will need to allocate the predetermined amount as I balance my investment.

I feel that I need to be pretty weighted in equities due to my age and the inflation factor. I am a little leary of jumping into the market now due to the great returns so far this year and was planning on buying on the dips (I need to define dips!!!). Does anyone have any suggestions??

[Bob_Smith]

Beststash, I too keep almost all of my investments under one roof - I use Vanguard. I am a Voyager client there - they provide some fee waivers for folks with over a quarter of a million invested. You're right, it is convenient to have everything in one place.

Money Market fund dividends are dismal at the moment, so I switched my short term cash to ING where I'm getting 2% instead of 0.76%. But I use a short bond fund for anything I can leave alone for 6-9 months.

Take a look at TIPS for some of the fixed income portion of your portfolio. TIPS provide a real return vs. the nominal returns other bonds pay. If you plug TIPS into FIRECalc, you'll see what they might have done for you in the past.

Are you thinking of increasing your allocation to stocks? What percent is in stocks now?

[dory36]

Quote:

As a new member to this forum - this conversation doesn't seem appropriate for investment strategies - for general questions and OT issues - is there a more appropriate forum??

Those who post in the wrong forum will forfeit their membership dues!

Dory36

Oops! I just noticed that I neglected to answer
Cut-Throat's query of Nov. 9 about my views on free
enterprise, then vs. now.

Yes, I truly prefer the way things were 100 years ago.
All those laws that Cut-Throat thinks are so wonderful
are hamstringing business activity and freedom. He
assumes that the big bad corporations are exploiting
the poor and helpless, polluting the environment, etc etc. Typical liberal horse poop. Eventually, socialists and collectivists will
kill free enterprise completely. Hope I'm not alive to see it.

As far as living on an island, alas I am too old now.
Anyway, I once owned 2 islands myself. Had to sell
them to pay my taxes so the government could
pass some more laws protecting us from various
nonexistent bogeymen.

John Galt

Quote:

As far as living on an island, alas I am too old now.

Johngalt,

Society = Government. *People = Government.

Without government the Corporations would be the government. They would take the power.

Yes everyone as an individual would like to do as they please, but if you want society's benefits, then you have to live with society.

And this is what you seek in your old age - protection. You can't have it both ways. If you were really practicing what you are preaching you'd move to that Island today and you'd be free.

But, you want society's benefits and when you get groups of people together, it's called government. Someone will be calling the shots.

Good morning Cut-Throat!

I have no problem with "some" government, as long as
it is small and stays that way. I could write an essay on
this (collective gasp!) but you have your view and I
have mine. That's what makes horse races.

John Galt

[wzd]

Yes, watch out for the lumpsum options - look closely at them and what you could or would do with the money.

Avaya offered a lumpsum buyout recently to many of their retired people. Their offer? For people around age 50 who took an early retirement program a couple of years ago they were offering $75k per $1k monthly pension. Now simply looking at annuities (immediateannuity and fidelity.com - I like fidelity's quote system) that lump sum could buy around $400 per month (440 in best case). Using the 4% guideline for withdrawals I get $250 but that is an inflation adjusted number, so it is an apples to oranges comparison.

The concensus among my friends is that it was a very bad deal unless you had a known lifetime of <10 years.

Wayne