Unexpected Lump Sum (Pension) Offer

[googily]

I got one today, but a slightly different situation. It's a lump sum offer for DH's pension, which I started receiving when I was 50 (am now 53). It's a little over $10k a year, and they offered me $175k, which seems to be a terrible offer (seems like they made it as though I am older than 65).

I have no heirs, so don't really care about survivors losing out on it. And I have my own pension (from the same company) on tap when I turn 65.

I have looked at these two pensions, along with SS, starting with survivor benefits at 60 and my own at 70 as a nice safety net should my nest egg go south.

Am I thinking about it right? At the very least, I think I should wait and see if they ever sweeten the offer.

 

[CardsFan]

I got one today, but a slightly different situation. It's a lump sum offer for DH's pension, which I started receiving when I was 50 (am now 53). It's a little over $10k a year, and they offered me $175k, which seems to be a terrible offer (seems like they made it as though I am older than 65).

I have no heirs, so don't really care about survivors losing out on it. And I have my own pension (from the same company) on tap when I turn 65.

I have looked at these two pensions, along with SS, starting with survivor benefits at 60 and my own at 70 as a nice safety net should my nest egg go south.

Am I thinking about it right? At the very least, I think I should wait and see if they ever sweeten the offer.

Using immediateannuities.com it looks like something closer to $200k would be more appropriate.

Given that it is a sub-par offer, and you do not have heirs to think about, I would probably stay with the pension.

 

[ownyourfuture]

pretty sure you could take a check from the pension plan as long as you then deposit the funds in a qualified retirement account within 60-days. a direct rollover simplifies the process. i've done this in the past on several occasions when there was a fee to do a direct rollover.

Correct. I'm leaning towards the direct rollover, unless the fee is substantially more than I figure the convenience is worth.

 

[mckittri2000]

Since GE has frozen its retirement program, I have received an offer of 58K payout or $534/month starting when I turn 60 which is in 2022. If I can rollover the payout then I plan to take it. I'm not sure what the future has in store for GE but it's been a dog for the last number of years.

 

[pb4uski]

^^^^ Seems to me like you are cutting off your nose to spite your face.... a $58k lump sum is pretty low for a $534/month pension.... but if you want to make a $50k contribution to the GE pension plan by accepting $58k for a pension worth $108k then by all means go ahead.

 

[skipro33]

Take the lump sum, invest it in a market index fund that tracks the dow until you are 62, when it will have grown to $45,000. Then draw your $283 a month and take it then. It will last you until age 88 at 6% interest in a market index fund and if you expire anywhere along the route, you leave it to heirs.
That is what I would do with a windfall I didn't have need of.

 

[bschultz0]

I must be missing something here. Simple math tells me to do nothing here and wait until I'm 62 and take $283 a month.

($283 * 12) / $35,124.97 = 9.66% annual return
(191.92 * 12) / 35,124.97 = 6.55% annual return

If it take $35,124.97 cash and put into the market, will I get better than 9.66% guaranteed? I say no.

I'd do nothing and wait until 62 and take $283 a month myself. It's only 4 years away.
My second best option would be to take the $191.92 a month now.

 

[mckittri2000]

^^^^ Seems to me like you are cutting off your nose to spite your face.... a $58k lump sum is pretty low for a $534/month pension.... but if you want to make a $50k contribution to the GE pension plan by accepting $58k for a pension worth $108k then by all means go ahead.

Over 20 years at 4%, the 58K would be more than the pension would payout over that time. That's where my thinking came from.

 

[pb4uski]

Since GE has frozen its retirement program, I have received an offer of 58K payout or $534/month starting when I turn 60 which is in 2022. If I can rollover the payout then I plan to take it. I'm not sure what the future has in store for GE but it's been a dog for the last number of years.

^^^^ Seems to me like you are cutting off your nose to spite your face.... a $58k lump sum is pretty low for a $534/month pension.... but if you want to make a $50k contribution to the GE pension plan by accepting $58k for a pension worth $108k then by all means go ahead.

Over 20 years at 4%, the 58K would be more than the pension would payout over that time. That's where my thinking came from.

Not sure the relevance of 20 years.... you said that you can take $58k now or $534/month starting in 3 years (2022)... according to immediateannuities.com a 57 yo male would need to pay a $108k premium today to get $534k a month for life starting in 3 years.

Your math is messed up.... the present value of $534/month for 20 years discounted at 4% is $88k.... IOW, if you put $88k in an interest bearing account paying 4% today and withdrew $534/month at the end of 20 years your money would be gone.

Or alternatively, if you put $58k in an interest bearing account paying 4% today and withdrew $534/month at the end of 11 1/4 years your money would be gone. You would have to earn 9.38% in order to get 20 years worth of $534/month withdrawals on a $58k deposit.

In short, it would be foolish to accept $58k in lieu of $534/month for life starting in 3 years unless you can earn 9.38% or more.

 

[mckittri2000]

Not sure the relevance of 20 years.... you said that you can take $58k now or $534/month starting in 3 years (2022)... according to immediateannuities.com a 57 yo male would need to pay a $108k premium today to get $534k a month for life starting in 3 years.

Your math is messed up.... the present value of $534/month for 20 years discounted at 4% is $88k.... IOW, if you put $88k in an interest bearing account paying 4% today and withdrew $534/month at the end of 20 years your money would be gone.

Or alternatively, if you put $58k in an interest bearing account paying 4% today and withdrew $534/month at the end of 11 1/4 years your money would be gone. You would have to earn 9.38% in order to get 20 years worth of $534/month withdrawals on a $58k deposit.

In short, it would be foolish to accept $58k in lieu of $534/month for life starting in 3 years unless you can earn 9.38% or more.

Thanks for the info.

 

[RxMan]

I feel like I’m way ahead of the retirement learning curve by reading these forums years before I plan to retire. Thanks for another educational thread everyone!

 

[mckittri2000]

Really good pension worth calculator: https://docs.google.com/spreadsheet...SdDhnJ_ItxrFxYwkqhg_pTriI/edit#gid=2105382286

 

[pb4uski]

Since GE has frozen its retirement program, I have received an offer of 58K payout or $534/month starting when I turn 60 which is in 2022. If I can rollover the payout then I plan to take it. I'm not sure what the future has in store for GE but it's been a dog for the last number of years.

Thought that you might like this article. https://www.forbes.com/sites/baldwi...ng-lump-sums-use-our-calculator/#cc5a2f2691c1

.... One 55-year-old who has publicly asked for comments on his deal is entitled to $737 a month beginning at age 60. Should he take that, he asks, or grab the cash?

He can use our calculator to size this up. The monthly income stream, we figure, has a present value of $151,000, assuming this guy is in good health and the pension plan doesn’t go bust. GE is offering him $75,000. ....

$75,000/$737*$534 =$54,341 ~ the $58k being offered to mckittri2000
$151,000/$737*$534 = $109,408 ~ the $108k value of a similar immediate annuity in post#30

 

[ownyourfuture]

I decided to take the lump sum & roll it into an existing IRA.
A 'direct' rollover wasn't an option, so sometime in early December, I'll receive a check for 35K made out to fidelity investments.

At that time, I'll mail it to Fidelity with the following.
Include a note with the check, informing us that the money is to be ‘directly’ rolled over into my existing IRA, the IRA account number, & a signature.

Thanks for all the replies.

 

[ownyourfuture]

I received the check yesterday. This is probably a stupid question, but here it goes. Since the check is actually made out to Fidelity,
(although my name appears right below it) I assume that I don't endorse it on the back ?

 

[Backpacker]

If it's just your name underneath then you should endorse it. If it has a qualifier of FBO (for benefit of) then you can skip endorsement.

 

[ownyourfuture]

If it's just your name underneath then you should endorse it. If it has a qualifier of FBO (for benefit of) then you can skip endorsement.

It has my full name & address, but I don't see any qualifier/FBO
I'll call the Pension and/or Fidelity tomorrow & ask them.
Thanks for your input.