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Yet Another Lump Sum Question
Old 07-18-2017, 05:47 PM   #1
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Yet Another Lump Sum Question

So a company my wife worked for about 20 years ago sent her an offer of a lump sum payment for $13k she is vested and if she waits until 62 she will get a small monthly payment of $145. She is in good health and has family longevity. So the question is: Should she take the lump sum and roll it into an IRA or just wait and take the small monthly for the rest of her life?
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Old 07-18-2017, 06:01 PM   #2
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IMHO, it is more of a preference than a numbers situation. If you want a numbers answer, Clark Howard provides an excellent analysis. Just Google him and pension choices.

I too have a modest pension from one of my employers. Because my DW is not "into" managing investments, AA, SWR, etc, I did the 100% joint survivor option. Similar to yours, on "straight line basis," we'll cross the break even point about 10 years in (vs lump sum). Of course, a lump sum invested could return XX-ty eleven percent compounded et al; or it could tank with the rest of the market. YMMV.

Good luck!
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Old 07-18-2017, 06:03 PM   #3
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So a company my wife worked for about 20 years ago sent her an offer of a lump sum payment for $13k she is vested and if she waits until 62 she will get a small monthly payment of $145. She is in good health and has family longevity. So the question is: Should she take the lump sum and roll it into an IRA or just wait and take the small monthly for the rest of her life?
not enough information.... how old is your wife?

so if she was 62 now the break even would be about 7.5 year not counting potential investment gains.
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Old 07-18-2017, 06:07 PM   #4
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IMHO, it is more of a preference than a numbers situation. If you want a numbers answer, Clark Howard provides an excellent analysis. Just Google him and pension choices.

I too have a modest pension from one of my employers. Because my DW is not "into" managing investments, AA, SWR, etc, I did the 100% joint survivor option. Similar to yours, on "straight line basis," we'll cross the break even point about 10 years in (vs lump sum). Of course, a lump sum invested could return XX-ty eleven percent compounded et al; or it could tank with the rest of the market. YMMV.

Good luck!
Her break even point would be 7.3 years and then gravy after that.
She also is not into managing investments and such.
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Old 07-18-2017, 06:09 PM   #5
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not enough information.... how old is your wife?

so if she was 62 now the break even would be about 7.5 year not counting potential investment gains.
DW is 53 years young.
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Old 07-18-2017, 06:31 PM   #6
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Of course, Inflation is going to take a ~25% bite after 10 years or so and ~50% after 20 years. Even with that, we were pleased with another buyout I took about 25 years ago. It was a either a one time lump sum or a fixed sum for double the years worked (for us, 14 years so 28 annual payments). And yup, Inflation has dwindled it from a substantial annual Oomph, to more like a 13th annual pay check. But it worked for us and was sorta a benchmark as to why the pension annuity was our preference.
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Old 07-18-2017, 06:49 PM   #7
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Is the company secure? If it is, Id wait till 62 based on the info you supplied. Thats a big pay out in 9 years for 13k now.
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Old 07-18-2017, 06:56 PM   #8
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The reason I asked about her age was I assumed you OP was for 13k now or 145/mo starting at 62. So you would have about 9 years (give or take) for the lump sum to appreciate. Assuming 6% compounding that would give you about 21.96k with some of investment. To compare equals, you would need to look at what you could get a single premium immediate annuity with these $. Obviously we don't know what the annuity market will be in 9 years... but you could base it on today.
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Old 07-18-2017, 07:16 PM   #9
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Is the company secure? If it is, Id wait till 62 based on the info you supplied. Thats a big pay out in 9 years for 13k now.
It is a very secure company.

"Marsh & McLennan Companies was ranked 29th on the 2012 Bloomberg Businessweek 50, the magazine's annual ranking of the S&P 500's top 50 performing companies.[4]

The firm was established in 1905 and is considered the largest insurance broker in the world (2015) by revenue.[5]"




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The reason I asked about her age was I assumed you OP was for 13k now or 145/mo starting at 62. So you would have about 9 years (give or take) for the lump sum to appreciate. Assuming 6% compounding that would give you about 21.96k with some of investment. To compare equals, you would need to look at what you could get a single premium immediate annuity with these $. Obviously we don't know what the annuity market will be in 9 years... but you could base it on today.
Checking annuity calculators they want about $30k for 145/mo return.
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Old 07-18-2017, 07:34 PM   #10
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It is a very secure company.

"Marsh & McLennan Companies was ranked 29th on the 2012 Bloomberg Businessweek 50, the magazine's annual ranking of the S&P 500's top 50 performing companies.[4]

The firm was established in 1905 and is considered the largest insurance broker in the world (2015) by revenue.[5]"






Checking annuity calculators they want about $30k for 145/mo return.
Yup, under those circumstances, I stand by my old post, wait for the for the $145 a month sounds like a better deal.
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Old 07-18-2017, 08:57 PM   #11
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Yup, under those circumstances, I stand by my old post, wait for the for the $145 a month sounds like a better deal.
+1 According to immediateannuities.com, $13,000 premium paid today by a 53 yo female in NY would pay $87/month life beginning at age 62... so $145 is a good deal.
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Old 07-18-2017, 09:32 PM   #12
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Thanks all, good info as always.
It's funny how these companies throw out a number to entice people to get them off the pension books.
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Old 07-19-2017, 09:24 AM   #13
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did your wife work at MMC or Mercer?

If Mercer, what office?
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Old 07-19-2017, 10:14 AM   #14
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did your wife work at MMC or Mercer?

If Mercer, what office?
Not Mercer, MMC on sixth Ave. From 1985-1992. She lost most of her coworker friends because they moved the office to the North tower and their floors took a direct hit. If we didn't have our first child in 92 she would have been there too.
Are you a Mercer alumnus?
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Old 07-19-2017, 10:19 AM   #15
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Not Mercer, MMC on sixth Ave. From 1985-1992. She lost most of her coworker friends because they moved the office to the North tower and their floors took a direct hit. If we didn't have our first child in 92 she would have been there too.
Are you a Mercer alumnus?
Yes, I worked there about 20 years in the Houston office

9/11 was a very sad day for us, I remember it well

(also, for some reason, I didn't get a lump sum packet)
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Old 07-19-2017, 10:30 AM   #16
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Yes, I worked there about 20 years in the Houston office

9/11 was a very sad day for us, I remember it well

(also, for some reason, I didn't get a lump sum packet)
Big company, small world.
The packet came in yesterdays mail so maybe it's still in transit.
She loved working there. Great working conditions, great boss's and coworkers.
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Old 07-19-2017, 11:04 AM   #17
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From what I have seen over the years, taking the payments is almost always better unless you feel very confident in your investing prowess. My guess is that's because interest rates were much higher back when pensions ruled.

I suppose the only consideration not yet discussed (not that I've seen) is whether you need the money currently - enough to forgo the future $145/mo. As with many of our "this or that" path, this is a good "problem" to have. In any case, Just_Steve, good on you for the "found money." Now the burning question is: "Will she share it with you?"
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Old 07-19-2017, 11:44 AM   #18
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Now the burning question is: "Will she share it with you?"
She MIGHT buy me breakfast on occasion, time will tell.
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Old 08-08-2018, 05:52 PM   #19
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So a company my wife worked for about 20 years ago sent her an offer of a lump sum payment for $13k she is vested and if she waits until 62 she will get a small monthly payment of $145. She is in good health and has family longevity. So the question is: Should she take the lump sum and roll it into an IRA or just wait and take the small monthly for the rest of her life?
We declined the 2017 buyout, new buyout came today they are up to $14,185.
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Old 08-14-2018, 11:29 AM   #20
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We declined the 2017 buyout, new buyout came today they are up to $14,185.
Yes, these can be hard decisions. My buyout choices were lump sum rollover, pension now or pension later. I took the pension now as the lump sum rollover and pension later had break-evens with the pension now at age 75 - I was 53 when I took the pension now, so that was a 20+ year period to break even (regular pension payout was at age 65). The lump sum NPV calculation wasn't that much more than the pension now payout. The age at break-even was what pushed me over to the pension now. Also, I have another pension coming at age 60, so basically, I have a series of different streams on income coming at different times of my life.

It is nice to have a small amount rolling in my checking account and it is just that much less I have to allocate for in any portfolio distributions. I look at it as part of my AA.
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