Being Laid Off

[Dtail]

So you can take your pension as a lump sum but the question becomes should you! If your not a savy investor and have longevity in your family you may well be better off leaving your pension with mega Corp and receive monthly checks once your 65.

Just my 2 cents.

What happens if the pension fund gets underfunded years down the road?
I have a small pension coming at 65. Will take the lump sum money and invest myself. Of course being relatively small, it will not cause tax issues, just a substitute for a TIRA withdrawal for that year.

 

[OrangeBandit]

Ohhh, I definitely plan to take the lump sum and roll it somewhere. Where the best place to put it is, well I just don't know that yet. I at least want the pension in MY possession!

 

[Vacation4us]

Penny wise pound foolish, in my opinion. Especially for a newbie investor. Do you know how well funded or not your mega corp pension is or isn't? Do you know the value of the pension if you wait and take the monthly check or do you only know you get 95k now?

People bemoan not having a pension but given the opportunity the first thing they do is cash it out.

I will have 2 small pensions at 65. One I quit over 25 year ago. That hospital has been bought and sold multiple times but my pension still exists. My 2 pensions will be greater than my 1300 SS check. Longevity only exists on mothers side. If I make it my 1500 in pension payments will be much appreciated. If I don't they have a survivor benefit.

Knowledge is power, know your options.

 

[Vacation4us]

I'm really inexperienced with all the investment strategies and seems like a lot to absorb. Oh, I wouldn't mind retiring in the near future if some of you think that would be possible with my paltry

You your self have stated your an inexperienced investor, just don't Do It!!!!

 

[pb4uski]

^^^^ Bad advice without knowing the pension benefit offered in relation to the lump sum. OP is 45 and a lot of bad things can happen in the next 10-20 years before OP starts receiving benefits.

With today's index, balanced and target date funds investing is easy peasy... especially if one is willing to forgo some tax efficiency in exchange for simplicity.

 

[Vacation4us]

^^^^ Bad advice without knowing the pension benefit offered in relation to the lump sum.

Which advise do you feel is bad? I am thinking we are on the same page?

 

[Vacation4us]

Yeah he can lose the 95 k and have nothing!

 

[BeachOrCity]

Ohhh, I definitely plan to take the lump sum and roll it somewhere. Where the best place to put it is, well I just don't know that yet. I at least want the pension in MY possession!

Does your pension have an annuity option and have you checked what that is? My annuity was so generous at over 7% for age 53 w/ J&S 50% that I took the annuity.

Compare the annuity option to a single premium immediate annuity online (you can get a rough quote instantly) and if the company offers you substantially more than SPIA you should give it serious consideration.

 

[pb4uski]

I'm really inexperienced with all the investment strategies and seems like a lot to absorb. Oh, I wouldn't mind retiring in the near future if some of you think that would be possible with my paltry

You your self have stated your an inexperienced investor, just don't Do It!!!!

Which advise do you feel is bad? I am thinking we are on the same page?

My understanding was that you were advising the OP to NOT take the pension lump sum... where you said "just don't do it", "it" was taking the lump sum pension. If that is the case, you can't make an intelligent decision without knowing what benefit is being offered... though I concede that it is more likely that not that the lump sum is better but you can't know for sure without knowing the monthly benefit, when it begins, whether it is single or joint life, etc... and importantly, if it is COLAed.

 

[OrangeBandit]

No doubt that I'm inexperienced in investing but I just don't want to be in a position like the United Airline workers in 2005 where there pensions got yanked around. I guess I just want to protect what I know I have currently. Maybe I'm thinking wrong, IDK.

 

[pb4uski]

No need to worry about lack of investing experience... you could roll your lump into an IRA and invest it in Vanguard Wellington or a good target date fund and then just ignore it for 10-20 years until you are ready to retire.

On the second part, unless you have an unusual benefit (and there are some out there like BeachOrCity had so it is worth checking) it will be best to take the lump sum anyway, making future changes to the pension plan a moot issue.

 

[OrangeBandit]

Yes, I have the Annuity option.
Single life=$435
50%J&S= 387
100%J&S 352


If I took it right now. I will have to go back into the system and check on normal retirement dates. I will do that here in a moment.

 

[Vacation4us]

That annuity seems really small for 95k growth 20 years from now. If that truly is the case and not some inaccurate numbers that don't reflect the value 20 years from now you should take the lump sum and invest as pb4uski suggests.

 

[OrangeBandit]

Here are the numbers if I keep it until 2038 retirement
Single Life=1616
50%J&S=1438
100%J&S=1309

 

[pb4uski]

Interesting... $95k invested in an annuity deferred for 19 years (2038-2019) would generate a benefit of $1,104/month for a 45 yo male in NC. Immediate annuity benefit would be $401/month.

If the $1,616 beginning in 2028 is right then it may be a keeper... a lot better than $1,104.

immediateannuity.com

 

[BeachOrCity]

Interesting... $95k invested in an annuity deferred for 19 years (2038-2019) would generate a benefit of $1,104/month for a 45 yo male in NC. Immediate annuity benefit would be $401/month.

If the $1,616 beginning in 2028 is right then it may be a keeper... a lot better than $1,104.

immediateannuity.com

I have this feeling the OP may have been given the annuity amount in 2038 with the assumption that he keeps working until 2038? The way the numbers look have me wondering this, and the OP should directly ask, or get in writing his "vested monthly benefit in 2038" and put it somewhere safe.

 

[OrangeBandit]

I have this feeling the OP may have been given the annuity amount in 2038 with the assumption that he keeps working until 2038? The way the numbers look have me wondering this, and the OP should directly ask, or get in writing his "vested monthly benefit in 2038" and put it somewhere safe.

I think you are correct. When I plug the #'s in it shows my "last Day of Employment" as 4-30-2038.

This site is amazing and I really appreciate all the feedback.

 

[pb4uski]

I have this feeling the OP may have been given the annuity amount in 2038 with the assumption that he keeps working until 2038? The way the numbers look have me wondering this, and the OP should directly ask, or get in writing his "vested monthly benefit in 2038" and put it somewhere safe.

That makes a lot more sense... the $1,616 definitely seemed too good to be true. It would probably be interesting to get what the benefit would be at ages 55, 60 and 65 and compare the benefit to a deferred annuity.

OTOH, if he immediately annuitizes then the monthly benefits seems in the ballpark with a SPIA, so that is good.

 

[BeachOrCity]

ok, so you are only getting about 5K a year on a 95K lump sum or something like 5%+ which sounds like market rate (not better or worse). Unless you feel that you really want this monthly 'stipend', I think a roll-over IRA makes alot of sense.

 

[Vacation4us]

Personally I believe you should not take the lump sum. You would need to at least triple your money and then earn more than a guaranteed 5.5% until both you and your spouse dies.

Are you confident you can do better than the guaranteed $$ you will receive if you wait?

PS keep in mind that guaranteed pension equals more income than you have managed to amass in your whole working career so far based on your current investments.

 

[pb4uski]

^^^ Based on what he told us about his lump sum and his benefits the above sounds like bad advice.

Can you explain the math behind your comment "You would need to at least triple your money and then earn more than a guaranteed 5.5% until both you and your spouse dies."

.... PS keep in mind that guaranteed pension equals more income than you have managed to amass in your whole working career so far based on your current investments.

How do you get that? He has $200k in his 401k and his pension lump sum is only worth $95k. His current pension benefit is a fixed $435 a month but the $200k could easily provide more than $435/month for life even if he just invested in an ultra safe CD ladder.

Math is hard, eh?

 

[Vacation4us]

If he waits till 65 to collect a monthly pension the payout is 1616 a month. Currently his assists will net him 1 k a month.

To generate 1616 in retirement he'll need at least grow that 95k to 300k and earn a guaranteed rate of return to replace the pension. OP has stated he is inexperienced at investing.

Frankly the OP doesn't even know what he has. I believe he shouldn't look at the 95k only but what the 95 k will get him if he waits TILL 65. I doubt he is even eligible to take the payment now. He should thoroughly understand what he has before taking the lump sum.

He clearly does not.

Math is sooo hard!

 

[pb4uski]

I guess that you didn't see posts #41 or #42 where the OP clarified that the $1,616/month number was only if he worked there until 4-30-2038.

And he said he is eligible to take the lump sum now and a lump sum is a common exit option so I'm not sure why you doubt that he is eligible to take the lump sum now.

 

[marinauser]

I am always a little cautious on stable value funds also. In the early 90s, my father's big corp. 401k had what looked like a great stable value fund with a great interest rate. That was until a couple of the underlying insurance agencies filed for bankruptcy and my parents lost all access to all of that investment. 6 or 7 years later they got most of the money back but no interest in all of those years. One bad experience is enough to make you question an investment.

 

[Vacation4us]

Yes, which leads me to believe he has no understanding of the calculator he used. Nor do the posters giving him advise to cash in.

Just like a SS calculator you enter zero years earned from now until his 65 birthday and out churns an estimate of what his future pension benefit will be.

He doesn't seem to know how his pension was calculated.

For instance one of my pensions was earned at a rate of 1.45% of salary times years of service. I worked there ten years, my pension will be close to 1300 a month at 65.

OP implies he has 20 years of service times what multiple of pay was he earning his pension?

All things he needs to answer before cashing out.