Strange First Steps

[DavidAz]

Hi everyone!

I'm a 50 year old guy who just completed 30 years with a company whose stock has gone from $80 to $2 in 8 months. I think I'm lucky because I'm grandfathered in what's called a 'lump sum' retirement - whose option can be removed by management at any time (since I'm management). The company is also facing layoffs and record declining sales.

So - I decided to pull the trigger and get out now - while the getting was good. My retirement would be about $2700 per month right now (unless the company goes bankrupt and it gets cut by the gov) -- or a lump sum of about $450K. Obviously I'm taking the cash. Decided to cash out some to pay off all bills - but most goes into a rollover IRA. The wife makes very very good $$$ so we will be just fine.

Does this sound like an insane strategy to anyone? We've had folks jumping ship now for several months - and if the lump sum goes I'm at the mercy of a company that appears to be falling off a cliff?

It's a very difficult decision - but I don't think I could wake up every day knowing I blew the retirement lump sum and now have a company that's gone upside down.

Thoughts? thanks ;o)

 

[haha]

Just be sure to take very good care of wifey and you should be fine. You don't say what the company is, but $50 to $2 doesn't suggest prosperity is just around the corner.

Ha

 

[crazy connie]

Welcome David and welcome aboard neighbor! I am another Zonie in the East Valley. I bailed almost 4 years ago. The stock had gone from over $60 to $.97. Sometimes we just gotta take the money and runnnnnnnnnnnn.

 

[jambo101]

I agree, take that money now because it may not be there real soon.Also remember that in a lot of cases its harder for 50yr old people to get a new job than 20yr olds,staying on till the end and not taking the money now might put you in the position of having to look for a new job.And if you did want to continue working wouldnt you rather do it with almost half a million in your asset column.

 

[Caroline]

No offense meant, but I can't believe you're asking the question.

I'd get out of there so fast I'd leave skid marks.

 

[ROIRON]

I left three months before my company claimed bankruptcy. I took my "lump sum", as well. The only subsequent impact would be if your retirement fund was handed over to the Pension Benefit Guarantee Corp. by the bankruptcy court. At that time, the PBGC would "cap" your retirement at the maximum (around $24K per year), and adjust it using a formula that included a reduction for taking a "lump sum" (assuming it was a separate benefit option from your retirement fund). The PBGC also has the authority to reduce your annual payout by 5% for every year you retired prior to the age of 65; i.e., I lost 25% of the max payout ($24K) and receive a reduced amount of around (around $18K) since I retired at 60.

Getting out is a good plan.

ROIRON

 

[ROIRON]

Forgot to include this in my reply to you. You may obtain more information on the PBGC by going to FCIC: Your Guaranteed Pension

ROIRON

 

[W2R]

No offense meant, but I can't believe you're asking the question.

I'd get out of there so fast I'd leave skid marks.

Ditto!! I think you are doing ABSOLUTELY the right thing. This is an intelligent decision, and I believe it is the only reasonable option of those you have listed.

 

[DavidAz]

Thanks a bunch folks - since the company is unionized as well I would bet a weeks salary that they'll go bkrpt - if just to shake the union off of their backs.

After working at the same company for 30 years (starting when I was 20) it's like rising out of a fog realizing what I should be doing and seeing all of the options around me. While I did manage to rise to mid-level corp management - there's such a culture in any kind of large company - almost like Lemmings.

Oh well - I'm sure I'll need some advice to help me 're-align' my head ;o)

 

[CuppaJoe]

Welcome, DavidAZ, I also think you are taking your best option. I would take HaHa's suggestion to heart, too!

 

[travelover]

The smoke detector is blaring - time to exit the building.

 

[Donzo]

I don't understand how leaving now is going to ensure your lump sum - I thought that pension payments or lump sums were not available from your employer until the age of 55? I can't get either until I am 55 and a half from my company.....

Welcome to the forum and good luck!

 

[crazy connie]

I don't understand how leaving now is going to ensure your lump sum - I thought that pension payments or lump sums were not available from your employer until the age of 55? I can't get either until I am 55 and a half from my company.....

Welcome to the forum and good luck!

That is part of your companies plan. Do not trust the office wisdom! Get your hands on a copy of the SPD and confirm it yourself. I pulled the plug 7 weeks after my 50th birthday. Missed the paychecks but saved my sanity and the stress and fear of BK was very real.

 

[Achiever51]

Hi, DavidAZ, and welcome!

I concur with the others...take the lump sum rather than waiting it out. I worked for five years for a major non-profit organization, long enough to become vested in their retirement plan. When I retired, I had the option of taking a lump sum or a monthly annuity and selected the lump sum because I preferred having control of these funds and the opportunity to leave something to my estate.

Good choice...several months after I left, the organization modified the pension program which would have cost me serious $$$. Nothing like a bankruptcy, but close enough for me!!

Good luck...

 

[DangerMouse]

As everyone else has said take that lump sum and run for the door.

BTW will taking the lump sum allow you to FIRE or do you have other plans?

 

[CCdaCE]

I guess the only question is what happens to your wife in the case that you die in a year and you took the monthly payments? Is there some kind of joint-survivor setup?

-CC

 

[DavidAz]

Since I'm taking the lump sum in cash from the company - the money is invested in IRA's that are all joint funds and outside of the companies control.

 

[CCdaCE]

I must be missing something. $2700/mo. is more than 4% of $450k. If you took the lump sum, how much of an immediate annuity could you buy? I'm assuming it'd be less than $2700/mo.

You're questioning the financial stability/ability of the company to pay it forever? Then I can see taking the lump sum. Otherwise, $2700/mo. ...until you die? That sounds better.

-CC

 

[copyright1997reloaded]

Hi everyone!

I'm a 50 year old guy...
My retirement would be about $2700 per month right now (unless the company goes bankrupt and it gets cut by the gov) -- or a lump sum of about $450K. Obviously I'm taking the cash. )

Using the Berkshire SPIA cost estimator to get a rough estimate of the present value of those $2700 monthly checks:

EZ quote

It costs $549,143 for a 50 year old man (born 1/1/1958) in Michigan to get an annuity that returns $2700.00 monthly (single life). So, assuming this is the best deal you can find (for the annuity), you are giving up about 100k in taking the lump sum. However,
a) Your lump sum is yours, can't be reduced
b) An annuity is not a risk-free investment
c) There might be less expensive annuities to compare to, thus less (psychological) loss. (There is profit in the $549k to the insurance company.)

If my pension plan were similar, I'd make the same decision. (Mine is not and the pension annuity includes early retirement subsidies that don't exist with a lump sum.)

 

[DavidAz]

Well - I did it -- Official retirement Day October 24th.

Several friends flew in for a party - very nice presents (gift certs of my choice), little surprised with the cost of the health care ($840) for full family low deduct policy including dental -- but here we go.

 

[DavidAz]

BTW - stock now down to .76 cents o)

 

[Bestwifeever]

Congratulations!

 

[Own2Feet]

>>surprised with the cost of the health care ($840) for full family low deduct policy including dental

that is surprisingly low. I pay $750/year for dental alone, for spouse and self (40% coverage, no maximum). Vision coverage is another $250 (one exam per year, $130.00 every 2 years toward a pair of glasses or contacts for each of us). In addition, health/hospitalization insurance is $2600 a year for a basic plan, prescriptions $65.00 each (non-generic). And, that's the cheapest plan I can get. I didn't realize private-sector health benefits were better than my Federal govt/DoD.

 

[SarahW]

Congrats and best wishes, David. The company I work for still offers a lump-sum settlement which causes prospective retirees a ton of indecision. The instructor at a recent "late career planning" seminar told us the single most asked question she gets is whether to take the guaranteed monthly annuity or the lump sum. Her answer is "tell me when you're going to die and I'll tell you which to choose." LOL!!!

 

[deaneditor]

My DH retired at 61 in 1999. We had to pay into the state High Risk plan for health insurance, no dental, no eyeglasses, and a $2,500 annual deductible apiece. It did have some drug coverage. Can't remember if the drug deductible was in addition to the $2,500 medical deduction. We had no kids at home.

Our insurance payments went higher and higher every year, over $1,900 a quarter for each of us when we finally got Medicare. (I was two years behind DH on that, and he really celebrated when I got Medicare!) I have always said that medical insurance is the only reason to work for someone else. We had no income other than
dividends during those years. It was still 100% better than the job he left at any price. Live Below Your Means and if you can be happy that way, GET OUT. The only time we had a pang about it was when we wrote those insurance checks! Four pangs a year, of about 2 seconds duration.

Congratulations on your retirement! Now you can do anything you want.
Once when my DH was unemployed, he worked with a friend of his who was starting a business inspecting stock for manufacturers. It was dirty, sweaty work and they loved it, the business was established and grew into an empire and my DH got paid in a lump sum. There are opportunities out there.

I try to teach the local waitstaffs how to increase their sales in restaurants, and so far only one person has grasped my advice, (saying "save room for some of our special rhubarb pie today," for instance) but that's one more bump up for the economy. Who knows what you might come up with in the next 50 years!

Another couple in our area began face-paining at fairs to increase their farm income. They had a natural talent and painted so much better than anyone else in Indiana, and they are doing well at their own pace. I've been shouting to the wilderness for so long, do what makes you happy, even though I don't hear replies.

One of our neighbors FIREd, spent two years playing 18 holes of golf twice a day, and teed up one morning and turned around and walked off, going back to his profession. He just worked for a corporation instead of for himself after all the golf. He was very happy.

Let us know how you celebrate. Can you be a househusband?