Not so hypothetical question...

[imnontrad]

NOOOOOOO!!! Run from that advisor who wants a fat commission!!! That "financial planner" is NOT a fiduciary - and I would be surprised if he was actually a CFP.


First of all, instead of applying for SS at a much reduced rate, your friend should apply for SS Disabillity (SSDI). This would be a LOT higher at whatever his SS amount is at his Full Retirement Age (FRA).

And roll the pension over to a traditional IRA. No taxes due until he withdraws the funds. Plus he can start converting them to Roth in a way that does not affect his Medicare premiums later on. if he cashes it out, he will have a HUGE tax bill and it may make him ineligible for subsidized (ACA) healthcare insurance.

Even if he cannot find a fee-only fiduciary CFP, the most he should pay is 1% - the CFP's fee AND any investment administrative costs. And I think the front end load for many American Funds is 5%.

He might consider having some sessions with a fee-only Certified Financial Planner who has 10 years or more experience and specializes in retirement and disability to draw up a multi-year retirement plan based not only on his health butto take care of any family members. This type of planner provides advice only for an hourly fee and does NOT handle your investments. This eliminates the possibility of bias based on how much commission they would make for their suggestions.
Start with interviewing the fiduciary CFPs at www.http://garrettplanningnetwork.com and www.http://xyplanningnetwork.com.

 

[Omega]

Update

So my friend just turned 62 and got the revised payout numbers. Not good. 418K went to about 335K. Would any of you change your advice? Needless to say my friend is pretty upset.

Also, wasn't sure if I should resume this thread or post a new one.

Thanks.

 

[mystang52]

I'm not an actuary; is it possible the reduced lump sum is because interest rates are currently higher?

 

[Omega]

Yes, that's exactly why. The annuity of $2037/mo. stays the same.

 

[Stormy Kromer]

Put the financial stuff aside.

How is your friend's health ?

 

[Omega]

Put the financial stuff aside.

How is your friend's health ?

Nothing imminent, but unable to work. Hopefully in retirement his health will improve significantly

 

[single2019]

So my friend just turned 62 and got the revised payout numbers. Not good. 418K went to about 335K. Would any of you change your advice? Needless to say my friend is pretty upset.

Also, wasn't sure if I should resume this thread or post a new one.

Thanks.

I would take the monthly pension and try to live off it while delaying social security.

 

[target2019]

So my friend just turned 62 and got the revised payout numbers. Not good. 418K went to about 335K. Would any of you change your advice? Needless to say my friend is pretty upset.

Also, wasn't sure if I should resume this thread or post a new one.

Thanks.

Not sure if you mentioned income and expenses. But I assume he is lower income with close to zero taxes. He may be able to qualify for state benefits, depending on the location.

Taking the monthly payout (~$2,000) still is my choice. But I don't have the insight you do into his situation. I checked an annuties site and the payout would be $1963, but depends on state info to be correct today. So the choices seem equivalent.

 

[TheWizard]

I would take the monthly pension and try to live off it while delaying social security.

That depends on his expected remaining lifespan, (which isn't necessarily easy to determine).

If less than 10 years then, no, don't do that. Instead, take the lump sum and start SS ASAP...

 

[Omega]

That depends on his expected remaining lifespan, (which isn't necessarily easy to determine).

If less than 10 years then, no, don't do that. Instead, take the lump sum and start SS ASAP...

Right. It's just such a hard decision. I feel for him.

 

[Omega]

Not sure if you mentioned income and expenses. But I assume he is lower income with close to zero taxes. He may be able to qualify for state benefits, depending on the location.

Taking the monthly payout (~$2,000) still is my choice. But I don't have the insight you do into his situation. I checked an annuties site and the payout would be $1963, but depends on state info to be correct today. So the choices seem equivalent.

Pension and SS cover his expenses with a little leftover, he just doesn't have a nestegg to speak of. Thanks.

 

[Omega]

I would take the monthly pension and try to live off it while delaying social security.

He thought of that, unfortunately he needs the money.

 

[MarieIG]

How is your friend at handling money.

I ask this as he is 62 and it seems does not have much by way of savings. I will never find it, but I recall reading a number of years back, that there was a study which found that 20 percent of those taking a lump sum in lieu of a pension go through it in five years. (IIRC it only addressed the five year mark, it did not go further.) We have a number of people on this board who handle their finances beautifully; but not everyone can/does.

- Also second/ third the suggestion that your friend immediately seek out attorneys who specialize in obtaining Social Security Disability - and work on contingency (or fees as awarded by court). These firms fixtures in the system and typically do take cases where disability was denied.

 

[Teacher Terry]

I would take the pension as it’s a sure thing. Also it’s very difficult for doctors to predict how long people with serious illnesses are going to live and I have seen people way outlive prognosis’s.

 

[mystang52]

Maybe I missed it in the many excellent replies here, but other strong reasons to take the pension now:
has to draw down on principal to generate equivalent pension income

• may not have the control to limit the draw-down

with S.S., has a good combined income to live his life

Most important, and I don't think this has been explicitly noted before: He's single, no need for an estate. If he dies prematurely, and would have had more money had he taken the lump sum, WHO THE F*** CARES? He sure won't. A corollary non financial factor is taking the pension simplifies his post employment life. He knows what his monthly income is, no need to be concerned about withdrawal rate, etc.