Pension Payout Opinions? -- BOEING

[pb4uski]

pb4uski, no need to flame. I'm merely curious why they'd offer the better deal.

No intent to flame - I thought I was being mild. It is just between this and the other pension thread going right now there seems to be more pre-occupiation with the benefit to the employer and if it benefits them then it must be bad for me rather than looking at the merits of the decision to you.

 

[MooreBonds]

No intent to flame - I thought I was being mild. It is just between this and the other pension thread going right now there seems to be more pre-occupiation with the benefit to the employer and if it benefits them then it must be bad for me rather than looking at the merits of the decision to you.

I know I was certainly a little curious - but just from the aspect of it being "there might be some very fine print or an asterisk you aren't seeing, or some other detail glossed over, because it seems like a no-brainer...and usually, corporations aren't dumb enough to just hand out gift horses like that without any catches".

 

[maxq]

Perfectly said, MooreBonds.

 

[MooreBonds]

The only reason I could think of is that Boeing expects to have a bangout year this year, and a pension starting Jan 2015 would need to be purchased/expensed in 2014. Which would allow them to take the charge against earnings now, vs having to wait 1 or 2 years and taking the expense then. And giving them an easier time showing growth in EPS between 2014 vs 2015 vs 2016.

 

[stepford]

As someone planning to retire from Big B next year I'm keenly interested in this thread. Neither I nor AFAIK any of my colleagues have received this buyout offer. However, if I could magically increase my pension by 10+% by retiring 6 months early I would be sorely tempted.

So what was the phone number of that Lump Sum Service Center....?

 

[maxq]

855-528-8286, M thru F, 8a to 7p Central. I also called the usual Total Access number; after I entered my BEMSID, it went directly to a menu where #2 was for people calling about the Lump Sum offer. Maybe the system is smart enough to connect my BEMSID to the fact I was one who received the offer and offered me a tailored menu. Take a look at Boeing dangles pension buyout opportunity - Local - MyNorthwest.com for a bit more info. A lot of comments there, mostly off-topic, but rather entertaining.

 

[Andre1969]

I got one of these things in the mail the other day, that said to be on the lookout for a packet in the mail. I was a McDonnell-Douglas/Boeing employee from 1992-1999.

FWIW, here are the options they're giving me. I never received the packet, so I went to the website....
1) Lump sum payment of $14,726.74
2) Single Life Annuity: $68.88 for life (no survivorship, as I'm single)
3) Keep the retirement plan, which is $349.20 per month, non-COLA'ed, and will start in 2035, when I turn 65.

I'm thinking about taking the lump sum, and putting it into an IRA. I figure that $349.20/mo isn't going to be much by 2035, and it will be even less as time goes by. But, $14,726K right now, to invest as I please, is not exactly chump change. If I invested it and averaged about 7.1% per year, by the time 2035 rolled around it would throw off about $349.20 per month, anyway.

Of course, I could screw up and lose it all. But I guess the company could also screw up my pension over the next 21 years, anyway.

 

[target2019]

Andre,
Looks like you have sufficient funds to max a Roth IRA for the next 3 years. The is what I'd do.

 

[Andre1969]

Andre,
Looks like you have sufficient funds to max a Roth IRA for the next 3 years. The is what I'd do.

That's a good idea, although I max out my Roth IRA, anyway. If I used this money for that purpose though, wouldn't I have to pay income tax on it now, plus a 10% penalty?

I have a rollover IRA with Fidelity, from the company I worked for after Boeing. I was thinking about just transferring it to that.

 

[Chuckanut]

Using the immediateannuity.com calculator, I'd need a ~$200K lump sum to equal the $985 annuity option. The $140K actual lump sum offer is about the same 30% haircut as described above.

That's one heck of a haircut!

 

[target2019]

That's a good idea, although I max out my Roth IRA, anyway. If I used this money for that purpose though, wouldn't I have to pay income tax on it now, plus a 10% penalty?

I have a rollover IRA with Fidelity, from the company I worked for after Boeing. I was thinking about just transferring it to that.

It is taxable. My mistake. Not sure if you'd rollover to an existing IRA.

 

[FACT0RYGRUNT]

I FIREd from Boeing last fall taking the VLO package. I recently received the pension buyout offer too. Crunching the numbers it looks like taking the lump sum would result in a 30%+ haircut.

Comparing the early pension payout to the standard pension at 65, it seems I'd come out ahead taking the earlier payout.

However, taking the lump sum and rolling it in at IRA has the highest dollar value.

Ultimately it becomes a question of which risk(s) are you trying to mitigate: pension fund solvency risk, longevity risk (i.e. out living your money), runaway inflation risk and/or investment risk. There is no free lunch. YMMV

I found this exercise helpful:

So how many years of company service was this offer to be exact just curious?

 

[nun]

I called the "Lump Sum Service Center" (to me, the literature title and this call center name just emphasize their hope folks take the lump sum even though there are also annuity options) to get more info. I kept getting reps that were unintelligible, so I kept calling back until I found one I could clearly understand and who was friendly. According to her, any former Boeing employee who is vested in the defined benefit pension plan, AND is under retirement age (I didn't think to ask what age this was) AND had not yet requested the start of their pension payments, is eligible. She asked if I had any other heritage plans, but I don't.

Using the immediateannuity.com calculator, I'd need a ~$200K lump sum to equal the $985 annuity option. The $140K actual lump sum offer is about the same 30% haircut as described above.

Just curious maxq, are you married and if so how old is your spouse and what is their sex?

Assuming a single life calculation for a 60 year old male you would need to have an annual return of 6.5% to support annual withdrawals of $11820 from a $140k lump sum. So if you are in good health and don't need the cash lump sum for any emergency I'd go with the pension.

 

[zedd]

IIRC 8 years. 7 years time served plus 1 year added when they sweetened the VLO. Plus another 10 years as a vendor to the same megacorp not counted toward the pension.

17 years of my life I'll never get back. How I love FIRE.

 

[FACT0RYGRUNT]

IIRC 8 years. 7 years time served plus 1 year added when they sweetened the VLO. Plus another 10 years as a vendor to the same megacorp not counted toward the pension.

17 years of my life I'll never get back. How I love FIRE.

So thats 7 years or 8 calculated from Boeing for the 110,000 lump ?

Edit nevermind I was half asleep when I read that last post. Seems low, as im pretty sure they just handed out some more in Sept 2015 to past IAM members at 20-25k per year of service, ill have to ask them again what they were offered.

 

[zedd]

So thats 7 years or 8 calculated from Boeing for the 110,000 lump ?

7, 8, I don't remember. That was a previous life. But since it seems to matter to you I'll go dig up my Total Access credentials and look it up.

In the mean time might we interest you in pasture raised pork finished on organic apples, pears and acorns. We're selling halfs and wholes.

 

[FACT0RYGRUNT]

7, 8, I don't remember. That was a previous life. But since it seems to matter to you I'll go dig up my Total Access credentials and look it up.

In the mean time might we interest you in pasture raised pork finished on organic apples, pears and acorns. We're selling halfs and wholes.

I went back and changed my last post..

 

[Running_Man]

pb4uski, no need to flame. I'm merely curious why they'd offer the better deal.

From looking at this the reason you are being offered more money is because you are switching from a pension to an insurance annuity. They pay the insurance company the money and that is the end of their obligations. If they keep you as a pension as interest rates and life expectancy changes pension expense changes and they are looking to eliminate pension expense from their income statement.

This means with your lower than limit payments to the pension guarantee fund your government guarentee is less valuable and they are offerring a 10% premium to entice you and hold up in court in case the annuity goes up in flames.

By the way you were right to wonder why the company is doing this, that is critical thinking necessary to make sure you are not missing an angle. Companies for the most part hate difficult questions or being honest on how the company is doing by implementing this plan.

 

[supernova72]

So thats 7 years or 8 calculated from Boeing for the 110,000 lump ?

Edit nevermind I was half asleep when I read that last post. Seems low, as im pretty sure they just handed out some more in Sept 2015 to past IAM members at 20-25k per year of service, ill have to ask them again what they were offered.

A friend of mine has a brother who worked in the 737 production area for about 21 yrs. Left about 3 yrs ago at 50 yrs old. His lump sum offer was $157K. From what I heard he's going to take it.

 

[FACT0RYGRUNT]

A friend of mine has a brother who worked in the 737 production area for about 21 yrs. Left about 3 yrs ago at 50 yrs old. His lump sum offer was $157K. From what I heard he's going to take it.

phhhhhh not a smart move unless hes gonna die next year.

At 21 years its worth way more than that. Better check those numbers again.

 

[zedd]

FWIW I looked mine up. 7.2904 years.

 

[supernova72]

FWIW I looked mine up. 7.2904 years.

I just passed 31 yrs. I wonder if I could multiply your 110k by 4.25. Lol. That would be 467K.

I was thinking although there are a bunch of factors to consider and actuarial tables etc it might be up to the benefits folks to determine how much to sweeten the pot? Meaning, if they want say 70% of the folks to take it then maybe they will factor it "up". Wishful thinking of course.

I read history ways when other megacorps offer this up 58% have taken it.

 

[FACT0RYGRUNT]

I just passed 31 yrs. I wonder if I could multiply your 110k by 4.25. Lol. That would be 467K.

I was thinking although there are a bunch of factors to consider and actuarial tables etc it might be up to the benefits folks to determine how much to sweeten the pot? Meaning, if they want say 70% of the folks to take it then maybe they will factor it "up". Wishful thinking of course.

I read history ways when other megacorps offer this up 58% have taken it.

Yeah so yours is probably worth right now if you retired today without early out penalty 35k a year and roughly 700k min thats a big hit off the top.

More than likely anyone current will get offered with 25+ years a early out no penalty full value but no medical after you leave even at under 55yrs old. Basically get rid of the obligation, and the old school workers, and be free to manipulate the younger crowd with carrots.

Either way it will be to benefit the companys pockets, not the workers.