What the PLOP is going on?

[April Fool]

Hi. I'm a new poster in need of help. I hope I'm not double posting. I did something wrong and had to do it all over.

Okay, here goes. Two years ago my employer discontinued business with my 403b provider and I was told I had to select a new provider from the list they provided. I did not do so.

When I told my employer I would be retiring at the end of the year, I was reminded that I had not selected a new 403 provider and that I had to have one to roll my severance pay into. If not they would hold it until I did.

I have met with three companies on their list. They are not much interested in my severance pay. All they want to talk about is my existing 403B and convincing me to take a plop. No matter how much I said I only wanted to talk about the severance, they continually came back to the plop and other monies. When I went to my tax preparer this weekend, she even jumped on the plop band wagon. All I did was ask her a tax question about retirement. Comes to find out, she is in the same line of business as those other guys.

I had already made up my made that I would not take a plop as I felt it would reduce my check too much. Now I'm second guessing myself. Everyone seems so enthusiastic and so forceful in trying to convince me this is something that I should be doing.

The plop would be $94,500 but it will reduce my check by $1000 a month. The agents say that I would gain back the loss if I roll it into a fund paying 4%. (Yeah right, if I live to be 80).

Actually, I probably could live off what's left (I don't live that high) after the deduction but I fear I may be forced to start annuitizing sooner than I expected. I wanted to wait until I am 70.

My husband says, "Yeah, take it. Take it." I think his being greedy is going to really mess us up.

Any thought?

April

 

[Moemg]

What is PLOP ?

 

[GregLee]

I never heard of it, either. A search on "PLOP rollover" suggests it might mean "Partial Lump Sum Option Plan", as here: https://www.strsoh.org/active/2e06.html .

 

[pb4uski]

A tradeoff of $12,000 a year less income for the rest of your life in exchange for $94,500 of cash today doesn't make much sense to me. Am I understanding the trade-off correctly?

 

[Htown Harry]

I'm stumped on the acronym, too, but I did find this web page with a sample calculation and the pros and cons for an Ohio 403b annuity plan:

https://www.strsoh.org/active/2e06.html

Old advice here on the forum: if it involves annuities, you are wise to keep your guard up. It is overwhelming likely that each of the representatives giving you "advice" are salesman who are working to earn a commission.

I hope another member will come along and point you toward a source of objective information. If that fails, I'd get the offers in writing and head to a local CPA for some fee-based advice.

LOL, it looks like I have been out-Googled by Mr. Lee!

 

[Purron]

The Virginia Retirement System has a PLOP option (Partial lump-sum option payment). It allows participants who work past full retirement age to receive a cash payment and reduced monthly benefit. It was designed to encourage people to work past full retirement age.

The Virginia PLOP payment is subject to income taxes plus the 10% early withdrawal penalty if the recipient is under 55.

In your case, I wonder if those advising you really think it's your best option or if they want you to invest a larger amount through their companies. Did your tax preparer mention the tax consequences of the PLOP?

Be careful of taking advice from those who would gain from your decision. You've worked at the same place for a long time, so talk to someone you know and trust and ask them if they plan to take the PLOP and how they made their decision. Also, I would consider finding a financial professional who you’re sure will provide unbiased advice.

I would not be inclined to take such a large reduction in a pension for the PLOP payment unless I had a dire need for the cash. Plus, in order to make up the loss, you would need to take on some risk in how the funds are invested given the low interest rates these days. Trading a sure pension payment of $1000 per month for not so sure invesment income is a decision I would make very carefully.

Keep in mind your employer may prefer the PLOP because it shifts the investment risk on $94,500 from them to you.

 

[rescueme]

I had already made up my made that I would not take a plop as I felt it would reduce my check too much...

The plop would be $94,500 but it will reduce my check by $1000 a month...

I fear I may be forced to start annuitizing sooner than I expected.
Any thought?

One suggestion. Look at Immediate Annuities - Instant Annuity Quote Calculator. and enter your age (and the age of DH, if you want a joint life policy) to see what the numbers are. Are they close to that $1000/mo you may be giving up?

Just to look at comparisions on what you can get now with the $$$, if you don't have immedate plans for the cash (sounds like DH may have ).

BTW, I do have an SPIA - the only annuity product I would recommend, and I did purchase it at an earlier age - 59, when I retired since I had no pension income but was given a lump sum at retirement. It was up to me to make the plan on how that I would handle that "windfall". Also, there is no up-front sales charges on an SPIA (expenses covered by investing your money). If you have somebody promoting an annuity, be careful. It may be an SPIA, but in most cases it is not and will be "sold" to you with a high level of expenses (regardless of what our "resident insurance man" says ).

After your analysis, you may find that it is just to keep the cash in your plan and keep that $1k/mo income, regardless of all the "help" you are receiving from your local sources.

Just my $.02.

 

[nun]

I have met with three companies on their list. They are not much interested in my severance pay. All they want to talk about is my existing 403B and convincing me to take a plop. No matter how much I said I only wanted to talk about the severance, they continually came back to the plop and other monies. When I went to my tax preparer this weekend, she even jumped on the plop band wagon. All I did was ask her a tax question about retirement. Comes to find out, she is in the same line of business as those other guys.

I had already made up my made that I would not take a plop as I felt it would reduce my check too much. Now I'm second guessing myself. Everyone seems so enthusiastic and so forceful in trying to convince me this is something that I should be doing.

The plop would be $94,500 but it will reduce my check by $1000 a month. The agents say that I would gain back the loss if I roll it into a fund paying 4%. (Yeah right, if I live to be 80).



April

Run away form these guys fast!!!!!!!!!!!!! All they want is that partial lump sum payout. Go with your initial thought and DO NOT take the PLOP. You are right!

If you are 55 and buy an annuity with your $94k you'll only get around $500 a month. Whoever said that $94k at 4% would generate $1000 a month for life is not telling you the truth. At 4% with $1000 a month withdrawals, $94k will last you about 10 years.

So refuse the PLOP. Who are your 403b provider choices, we can probably point you to the best of the bunch. If you have TIAA-CREF they are quite good!

 

[travelover]

Run away form these guys fast!!!!!!!!!!!!! All they want is that partial lump sum payout. Go with your initial thought and DO NOT take the PLOP. You are right!

If you are 55 and buy an annuity with your $94k you'll only get around $500 a month. Whoever said that $94k at 4% would generate $1000 a month for life is not telling you the truth. At 4% with $1000 a month withdrawals, $94k will last you about 10 years.

So refuse the PLOP. Who are your 403b provider choices, we can probably point you to the best of the bunch. If you have TIAA-CREF they are quite good!

+1. There is a whole business that revolves around separating public (and nonpublic) employees from their retirement savings. Many of these guys are just vultures.

 

[Texas Proud]

Run away form these guys fast!!!!!!!!!!!!! All they want is that partial lump sum payout. Go with your initial thought and DO NOT take the PLOP. You are right!

If you are 55 and buy an annuity with your $94k you'll only get around $500 a month. Whoever said that $94k at 4% would generate $1000 a month for life is not telling you the truth. At 4% with $1000 a month withdrawals, $94k will last you about 10 years.

So refuse the PLOP. Who are your 403b provider choices, we can probably point you to the best of the bunch. If you have TIAA-CREF they are quite good!

+1 !!!!!


My BIL convinced my sister to take a large lump sum from her retirement.... one of the worst things she could have done...

First, the money was spent (over time, not on one big item).... so it is gone.. second, she now has a lower check and does not do as much as she would like to do is she had that extra income every month...


The reason why they want you to do it is they get FEES.... not because it is good for you...

 

[kcowan]

Good advice guys. Aren't you glad that we might have saved another lamb from heading for the slaughter!

 

[nun]

Good advice guys. Aren't you glad that we might have saved another lamb from heading for the slaughter!

It'll be good to see what the OP decides to do. I'd like to know what her 403b providers choices she has.

 

[rescueme]

Good advice guys. Aren't you glad that we might have saved another lamb from heading for the slaughter!

Only if she/they come back with their decision.

Too often, we try (collectively) to give some good feedback, but don't know the results of our efforts.

Hopefully (when she makes a decision), she will share her decision in this matter.

At least it will tell us (that really care, and try to guide those who have questions) that our suggestions have any merit.

 

[Mulligan]

I had that same option on a public pension and chose to maximize my monthly pension. I reread your post and did not see the word pension even though I am assuming that. If you have a cola pension you know that lowering your pension with the lump sum will also lower your future cola's. Several of us had the option and all passed. The only reasons we could come up in doing a partial lump sum would be if 1) You thought you might die soon 2) Had some big debt you had to pay off 3) Thought you could invest it better than your pension return 4) Solvency of the pension system was in doubt. We found none of the options above relevant to us. Just my 2 cents, and that might be all it's worth.

 

[Purron]

Only if she/they come back with their decision.

Too often, we try (collectively) to give some good feedback, but don't know the results of our efforts.

Hopefully (when she makes a decision), she will share her decision in this matter.

At least it will tell us (that really care, and try to guide those who have questions) that our suggestions have any merit.

Give her a chance to get home from work and check her thread. She replied to her intro thread later yesterday for this reason:
http://www.early-retirement.org/for...-you-a-world-of-thanks-55388.html#post1052782

Not everyone can surf the web at work like I did at my old job

 

[April Fool]

Hi everyone

Okay. I met with the representation today. This one is with ING (I did not say so before because I did not know if it was allowed to mention company names) My exisitng 403B accounts are also with ING but another branch. I have been with them for 20 years and have not lost any money only gained.

I don't have the list with me but I know VALIC was on it, AIM, Something called D&E, I can't rememer the others.

The rep did caution me that to take a Plop you should use it only on your retirement to make it work for you. He said that the $94,500 at 4% being the least it would pay including my remaining pay for twenty years would equal to over 700K.

I did ask him about insurance and he said 250K was insured He did tell me by who but I can't remember.

Even at a reduced retirement check, I will still have over $3000 a month to live on without annuitizing my existing accounts. Even so, I don't have money to toss away.

I kind of hate to admit it, but when that guy left I was punch drunk with stars in my eyes. I had all but promised to put $145K into that ING account (that is with the PLOP, my severance pay, and an additional distritution from my check until I retire). I agreed to the additional check distribution so that I could pay my house off when I retire.

I did tell him I had to think about that plop some more. I wish I knew of a success story regarding it. The people I know who did take it spent every dime and did not have any other investments.

Yet regardless of anything my employer is forcing me to select a provider for my severance and vacation pay. So in this regard I have to choose someone on that list. I did sign up with ING regarding the severance and vaction only. My best friend has been his client for 15 years and is really pleased with him and what he has done for her.

I really appreciate your comments and concerns and won't do anything regarding that PLOP until I know much much more. If you can think of anything else I should be made aware of please let me know.

I want to ask rescueme what is SPIA?

It's correct, I am unable to get on this forum at work. I could last week but suddently when I tried this week I got a message on my computer saying that I was not allowed to visit forums. That's wacked because when I do, it's on my lunch hour.

Thanks so much!

April

 

[REWahoo]

...what is SPIA?

Single Premium Immediate Annuity.

You can find the definition for many of the acronyms used on the forum here: http://www.early-retirement.org/for...slang-frequently-used-on-the-forum-34884.html

 

[nun]

Ok here's what I'd do.

1) Dont take the plop. Your pension is a great benefit
2) put your 403b, severence etc in a money market fund with ING.
3) don't buy any products from ING. No annuities no insurance nothing, just put your money into a MM account.
4) start to educate yourself about mutual funds, bonds and investing.
5) eventually roll your ING accounts over to Vanguard because they are less expensive and won't pressure you at all

 

[nun]

Don't feel pressure by anyone. It's your money and you don't have to make them happy just you.

Don't take money out of your retirement to pay off the mortgage until you understand the tax and possible withdrawal penalties

And above all DONT DONT do the PLOP. Get the biggest pension you can especially with that 3% COLA. You have money in your 403b that you can invest. Your pension is a valuable foundation. It's index linked and guaranteed. I'd kill for a benefit like that. You are throwing money away if you do the PLOT. The only reason I see to do it is if you desparately needed the money and you don't soound as if you do.

 

[April Fool]

Thanks Rewahoo for the link and definition.

Nun, Thanks for the advice.

I really hate to sound dumb but I guess I am. What is a money market? I thought a money market was something high risk. How is it different from an annunity? I signed to put the severance pay in ING but I don't know if it is an annuity or money market. Would it be bad if was an annuity? I am going to go to the library and get some books and seriously start reading up on this. Any references? I still have until June to make my final decisions.

Unfortunity, I know very little about any of this. My financial advisor/accountant/friend of many years died last year. He was a financial guru who lived for and loved playing with money and did make me a lot it. Once he even got me a $10,000 bonus for just putting my money somewhere. I have found no one else I trust like him and feel so bewildered without his guidance. Now I wish, I had gotten more involved, tried to learn more but it seemed so confusing. I think the only thing that mattered was that he was not losing me money so I just let him do whatever he did.

April

 

[travelover]

........
4) start to educate yourself about mutual funds, bonds and investing.
.......

+10

 

[Mulligan]

April Fool, as a fellow cola'd pensioner, we should be very thankful for pensions because as your beginning to find out with all the terminologies being thrown at you, managing your money is no easy task. Although you may not consider your assets extremely large, it is your nest egg and it is very important to you. Posters have suggested to learn (and that is excellent advise) how to handle your money,but at your stage in life, maybe you should consider talking to a fee based financial advisor. A fee based advisor doesnt get paid on selling you products. They could educate you on all important money matters. Ask people within your social or job network to see if they have anyone they know or trust and what it would cost. Something to think about. Good luck!

 

[nun]

Thanks Rewahoo for the link and definition.

Nun, Thanks for the advice.

I really hate to sound dumb but I guess I am. What is a money market? I thought a money market was something high risk. How is it different from an annunity? I signed to put the severance pay in ING but I don't know if it is an annuity or money market. Would it be bad if was an annuity? I am going to go to the library and get some books and seriously start reading up on this. Any references? I still have until June to make my final decisions.

Unfortunity, I know very little about any of this. My financial advisor/accountant/friend of many years died last year. He was a financial guru who lived for and loved playing with money and did make me a lot it. Once he even got me a $10,000 bonus for just putting my money somewhere. I have found no one else I trust like him and feel so bewildered without his guidance. Now I wish, I had gotten more involved, tried to learn more but it seemed so confusing. I think the only thing that mattered was that he was not losing me money so I just let him do whatever he did.

April

A fee base adviser might be good for you to consult, but as you are a novice in financial matters that's just another reason not to do the PLOP. Your pension needs no managing and will provide you with monthly income.

Don't worry ask as many questions as you need. An annuity is a financial product you buy with a lump sum. For that the financial company will pay you a monthly income for a certain amount of time. There are often high fees. They can be quite complex so right now avoid them completely.

A money market fund is very safe. It's almost as safe as a bank savings account. It isn't insured by the government like your bank account, but it's a safe place to put your money while you learn how to manage it.

Please make sure you know what you have with ING! Call the person you talked to and find out exactly what they are offering you. And don't sign anything yet!!!

 

[pb4uski]

April Fool, as the old saying goes, knowledge is power. These representatives you are dealing with have knowledge that you don't, and as a result they have you at a disadvantage. While they will be nice to you, their advice is likely to be biased towards alternatives that give them the biggest commission. Hiring a fee based financial planner (someone with knowledge of these things) evens the playing field and ensures that the advice is based on your individual circumstances and needs.

All of that said, I agree with other posters - do not do the plop, do not buy an annuity of any sort.

 

[April Fool]

I agree that I need an advisor. In fact someone at work told me it may be worth it to pay for one. I am going to call ING to find out exactly what kind of fund I am in. It's sad but many at work are in the same boat I am, nearing retirement, forced into choosing a new provider. We are trying to get help from each other but can't. I'm surprised by how little anybody knows.

Based on all the opposition I'm hearing, I'm pretty sure I won't take the PLOP. I won't buy an annunity (if I have not done that today). Everybody can't be wrong. I will have to convince my husband though.

Thanks for all your input.

April