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United Technologies Pension Lump Sum Opportunity
Old 11-20-2014, 11:06 PM   #1
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United Technologies Pension Lump Sum Opportunity

So it never rains......as they say. I just decided to use my defined contribution retirement account from my most recent employer to buy back into their defined benefit pension as it has a COLA and an annuity discount rate of 7%.
I got back home today to find a letter from United Technologies Corporation (I worked for them a long time before my last employer) offering to give me a one time lump sum instead of the small company pension I will currently get from them at age 65....so the exact opposite of what I've just done with my most recent employer. I'll be interested to see the numbers, but using the benefit which would be $500/month in 12 years time and assuming an interest rate of 4% or 5% I predict the lump sum will be around $40k.

Is anyone else a UTC employee or ex-employee who has the same offer? It will be interesting to see the exact offer which should arrive in about a week.
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Old 11-21-2014, 08:04 AM   #2
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That's very interesting Nun. I have an upcoming pension with UT that I'm defering until age 65. I haven't recieved any letter yet, but will post if I do .

Thanks for the heads up.

_B
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Old 11-21-2014, 08:33 AM   #3
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Reading the fine print it looks like this might just be for small pension pots ie under $50k....they probably want to get small amounts off their books to reduce costs.
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Old 11-21-2014, 08:36 AM   #4
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I didn't work for them in the daze of DB pensions....
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Old 11-21-2014, 09:33 AM   #5
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I also worked UTC, but after they stopped their DB plans.

FWIW - I worked for another company (that has since been bought out) back in the days when they also offered a DB. I worked for them for just over 10 years (left in 1987). This was the minimum years to qualify for their DB plan at that time. Odd that no one ever attempted to contact me since 1987 about my retirement benefits . I kept in touch occasionally to make sure I was not lost in their system.....

I contacted the new company in 2006 @ 55, when I was thinking of retiring. Wanted to make sure I was still on their books and to inquire about collecting on my pension. They offered a lump sum option (which wasn't available from the old company), along with an update on the DB option. At full retirement they offered $375/mos. (this amount was what was given to me by the old company back in 1988). At my current age (55) they offered $140.52/mos. (+62% reduction = 1-0.6253). Both options were with 50% survivor included. The lump sum at 55 (2006) was an offer of $26,200. Guess they weren't expecting me (or my wife) to live too long after 65 back then .
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Old 11-21-2014, 11:03 AM   #6
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Hi Fritz,
My UTC pension is weird. I worked for a bit of UTC that they sold off and as part of the deal the employees were all immediately vested in the UTC pension, even if they had less that 10 years of service. So I only have 5 years of service. I always just thought if $500 a month as "pin money", but every little helps. I'll have to work out the interest rate when I see the lump sum offer, if it's low I might just roll the lump sum into my IRA.
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Old 11-21-2014, 07:25 PM   #7
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Quote:
Originally Posted by nun View Post
Hi Fritz,
My UTC pension is weird. I worked for a bit of UTC that they sold off and as part of the deal the employees were all immediately vested in the UTC pension, even if they had less that 10 years of service. So I only have 5 years of service. I always just thought if $500 a month as "pin money", but every little helps. I'll have to work out the interest rate when I see the lump sum offer, if it's low I might just roll the lump sum into my IRA.
Good luck with the process. If they are looking to eliminate the smaller pensions on their books due to expenses - maybe they'll make you a nice lump sum offer. I actually worked for UTC twice (different divisions), and both times were DC scenarios. Our current retirement income (retired 5 years now) comes from taxable and Roth investments due to the ACA. IRAs are on hold and (unfortunately) no pension income.
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Old 11-22-2014, 02:38 PM   #8
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Well the numbers are in on my pension options:

Here are the facts

I'm a 53 year old male.

1) I can take a lump sum now of $35k, or
2) take income now of $190/month, or
3) take income at 55 of $235/month, or
4) take income at 65 of $471/month.

what to choose?
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Old 11-22-2014, 04:17 PM   #9
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I just recently retired. My last job was with ADP (3 years). My pension amount was just over $5k, so I couldn't take as lump sum ( even though HR rep said I would be able to). Wasn't a factor in my decision as it was going to be play money for me. It will be interesting to see what it will be worth when they are ready to pay out. Maybe at some point they will offer lump sum to get it off the books. I can take my 401k since I left after turning 55, but only in a lump sum. Haven't decided whether to roll it into an IRA, cash out or let it ride. I was hoping to be able to access it in increments to minimize tax hit.


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Old 11-22-2014, 04:47 PM   #10
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Quote:
Originally Posted by Dog View Post
I just recently retired. My last job was with ADP (3 years). My pension amount was just over $5k, so I couldn't take as lump sum ( even though HR rep said I would be able to). Wasn't a factor in my decision as it was going to be play money for me.
Yeah this was always a side bar to my ER plans....I'm tempted to take the lump sum because I'll have enough pension and SS income to cover my expenses when I hit 65 without the small UTC pension, so do I really need more annuity type money. Of course having guaranteed income allows me to invest aggressively. A few quick calculations give a rate of return for the various options of 4.65%, 5.5% and 5.2%

Edit I used the SSA life expectancy numbers....
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Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
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Old 11-22-2014, 05:19 PM   #11
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Just a little simple math here - figure over 12 years (77) if you invested it @ 6% til age 65 to break even (not accounting for any other growth during the withdrawals - would be longer time frame). If you retired earlier/now (53) figure +15 years (68) just to get the $35K (level pension no cola).

Full pension @ 65 ($471) is about the equivalent of having $141K and withdrawing 4% annually (not adjusting annually for inflation). You'd most likely still have $141K to to pass to your heirs as long as the country doesn't go to h*ll, but then your pension would most likely go there with everything else. I'd guess +/- 24 years (77) to accumulate that figure @6% annually (but no spendable income during that time).

Then there's that dark side question - actuarial tables that predict the odds of your luck as you grow older.

How's that for a whole lot of nothing.....

I rolled mine over and it has doubled already - expect it to do that again in less than 10 years (will be +/-73). Didn't need it and figured it would be a nice long term nest egg for my wife (if needed to draw on, or for our heirs). It could start paying out more than the original pension amount @73 to me, and would be more than double my wife's expected survivor pension (entitled to only half mine). This also took the dark side question out of the scenario entirely for me.
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Old 11-22-2014, 05:36 PM   #12
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I'm in a strange situation. Doing one thing with one DB plan and the opposite with another.

I'm going to be buying into my state's defined benefit plan using $263k today to buy a $20k/year pension starting at 55, 70% of which currently gets a COLA, the growth rate is 7% assuming the usual life expectancy. Now I'm looking at taking a lump sum from my UTC pension of $35k because it would only pay me $2.8k/year at 55 and has no COLA.......are those two opposite things the right thing to do....I think so.
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