Pension Question

[AllDone]

Hello! I'm a long time lurker, but I have a question that stumps me, so I was hoping someone could help me.

From 1982 to 1993 I worked for an engineering firm with a DB pension plan. Today I received an offer in the mail from them (how did they find me? Spooky!) to buy me out of the plan. I can take $17,000 as a rollover to my IRA, take $94/month as a lifetime annuity without survivor benefits, or wait until 65 and receive $203/month as a traditional pension with survivor benefits. I'm 54, DH is 55 and we are both retired and financially very comfortable. This is essentially just found money for us. I'm healthy as are my 76 and 83 year old parents. The company is also quite healthy and almost entirely involved in the defense industry.

When I say "financially comfortable" I mean no mortgage and we spend less than half of what Firecalc says we can afford despite the country club membership. Beyond the golf thing (his thing, not mine!) our wants are few.

Any thoughts about what the best option would be?

 

[arky]

Didn't do the math, but my gut says the $203/month (with survivor benefits) at 65 is the way to go.

 

[pb4uski]

The pension looks favorable to me.

If you took the $17,000 and used the proceeds to buy a single life SPIA on a 54 year old female, immediateannuities.com indicates a monthly benefit of $73, less than the $94 they are offering you so the pension is favorable compared to market SPIA rates.

A single life annuity on a 65 year old female has a 6.24% payout rate and you would need the $17k to grow to $39k by the time you are 65 to get the same $203/month benefit (assuming current SPIA rates remain constant), which means that the $17k would need to grow at 7.85% per annum to get $203 a month beginning at age 65.

I would prefer the pension at age 65, the pension at 54 and the lump sum, in that order.

 

[kyounge1956]

Just for the sake of completeness, what about a deferred annuity (if that's the correct terminology)? I mean, take the lump sum and buy an annuity now that doesn't start making payments until age 65. I am guessing since an immediate annuity is less than the immediate pension, the deferred annuity won't be as good as the deferred pension, but I haven't looked on any of the quote sites to see if my guess is correct.

 

[HighRoller]

A similar thing happen to me last year. A company I worked for back in the 70's and 80's offered me a pension buyout just last year. To be honest, I never thought I'd see a dime from them. I didn't really need the money but I took the lump sum and rolled it into an IRA. A "bird in the hand" kind of thing for me.

 

[pb4uski]

Just for the sake of completeness, what about a deferred annuity (if that's the correct terminology)? I mean, take the lump sum and buy an annuity now that doesn't start making payments until age 65. I am guessing since an immediate annuity is less than the immediate pension, the deferred annuity won't be as good as the deferred pension, but I haven't looked on any of the quote sites to see if my guess is correct.

I doubt that OP would find a deferred annuity that would allow the $17k to grow from ages 54 to 65 to the amount needed to provide $203/month ($39k at today's SPIA rates, but could be different in 9 years). That said, I don't know of any sites for deferred annuity quotes.

 

[Amethyst]

Nothing spooky about it. There is all sorts of personal data available on-line about everybody (look yourself up on Google or pipl.com sometime). This goes double if you ever owned a house. Plus, their HR dept. probably still has your SSN and birth date, which would allow the search engines to narrow it down to the right person.

Amethyst

From 1982 to 1993 I worked for an engineering firm with a DB pension plan. Today I received an offer in the mail from them (how did they find me? Spooky!) ?

 

[48Fire]

Usually companies stack the "quick nickel and slow dime" trade-off in their favor. I need to make a similar decision on $103 per month vs. a lump sum of $25,458. There are calculators out there to show you the trade-off

 

[AllDone]

Thank you

It's a profitable, well run company whose founder recently died. It didn't seem likely that they would be giving anything away especially now that the personal connection has been broken. As much as I would like to simplify things and take the roll over, I think the right decision is to just wait for the DB pension. It's kind of weird to think of myself as a pensioner.

 

[MRG]

Nothing spooky about it. There is all sorts of personal data available on-line about everybody (look yourself up on Google or pipl.com sometime). This goes double if you ever owned a house. Plus, their HR dept. probably still has your SSN and birth date, which would allow the search engines to narrow it down to the right person.

Amethyst

All that and more, while at Megacorp, worked on project researching incoming mail flow. Went to an information provider,
and we were given the standard dog and pony show on how they could help us.

If you've ever had any any credit, these guys knew everything. Had an address, they knew that too. They were not a credit agency, this Megacorp sold data, and if you paid for it you could get lots. Yes they could predict mail volume in advance.

 

[mickeyd]

If I got such a notification, I would probably roll the $17K into my IRA and be done with it. The monthly annuity payouts are pretty small. Would it have much impact on your retirement lifestyle?

It's a personal choice the way that I see it.