FireAspire
Dryer sheet wannabe
I know there's another active thread on this, but I didn't want to hi-jack the other member's request for help. Hope that's OK.
I received a "lump sum" letter yesterday. I've looked through the related threads here and learned a good bit. I'm still thinking through it and would appreciate some assistance. My particulars:
Immediate annuities says $300k would get us around $1800/mo on a single payout and $1550 joint (starting 6/1/29), so it looks like the pension is a better deal. However, when I model the lump sum vs a joint survivor pension in FireCalc, we would have about $5k/year more to spend with the lump sum invested at our 60/40 AA. Even if I assume the entire $300k goes into bonds and adjust our AA accordingly, I get $5k more per year. The calculators at Fidelity and Personal Capital also show a better outcome with the lump sum.
We have until March 19 to decide. Here is my current thinking: if we take the pension (non-COLA), we've got inflation risk which seems to be increasing as the government does what governments do. If we take the lump sum, we've got sequence of return risks that are probably also significant. I've Firecalced and Exceled it every way I can think of and it seems like the best course is to roll the lump sum into an IRA and invest conservatively (maybe Wellesley). By investing conservatively, we protect somewhat against SOR risk and by taking the lump sum we aren't locked in if inflation goes crazy.
Your insights are appreciated.
I received a "lump sum" letter yesterday. I've looked through the related threads here and learned a good bit. I'm still thinking through it and would appreciate some assistance. My particulars:
- I'm 56 years young, retiring this year, or at least taking a long sabbatical before finding something part time. DW is 59.
- I'm 100% in Firecalc for $90k/year using a 25% haircut for SS and assuming only 90% of our current retirement account balance. Probably overly conservative, but that's me.
- Lump sum offer $300k
- Pension starting 6/1/21 - $1470/mo single
- Pension starting 6/1/29 - $2073/mo single / $1743/mo joint - we would choose the joint survivor option
Immediate annuities says $300k would get us around $1800/mo on a single payout and $1550 joint (starting 6/1/29), so it looks like the pension is a better deal. However, when I model the lump sum vs a joint survivor pension in FireCalc, we would have about $5k/year more to spend with the lump sum invested at our 60/40 AA. Even if I assume the entire $300k goes into bonds and adjust our AA accordingly, I get $5k more per year. The calculators at Fidelity and Personal Capital also show a better outcome with the lump sum.
We have until March 19 to decide. Here is my current thinking: if we take the pension (non-COLA), we've got inflation risk which seems to be increasing as the government does what governments do. If we take the lump sum, we've got sequence of return risks that are probably also significant. I've Firecalced and Exceled it every way I can think of and it seems like the best course is to roll the lump sum into an IRA and invest conservatively (maybe Wellesley). By investing conservatively, we protect somewhat against SOR risk and by taking the lump sum we aren't locked in if inflation goes crazy.
Your insights are appreciated.