Being Laid Off

[OrangeBandit]

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.

All these #'s I'm giving out are automatically figured/generated off the company website.
55=$731-single, $650-50%J&S, $592-100%J&S
60=1008-single, 897-50%, $816-100%
65=1436-single, 1278-50% $1163-100%

 

[OrangeBandit]

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.
.

Annual Pay Increase

This is an estimated average annual increase in your pay. This percentage is applied to your current pay to project your pay until you leave the company or retire.
A higher annual pay increase percentage projects more pay before retirement. Higher pay at retirement results in a greater benefit. However, only your actual pay will determine your actual benefit amount when you retire.


I can tell you now that this is only an estimate because this megacorp is notorious for only giving around a 2% annual increase!! The thing is their stock is almost the HIGHEST that it has ever been and they still cry the bank is EMPTY.

 

[Montecfo]

Would it be a wise decision at this age in life to start putting more money into my Roth account?

Have you maxed out other tax-favored vehicles such as 401k or traditional IRA? Funding a Roth (instead of a traditional IRA or 401k) is an implicit bet that you will be in a higher tax bracket when the funds are needed.

Most people are in lower brackets when they retire.

 

[OrangeBandit]

Have you maxed out other tax-favored vehicles such as 401k or traditional IRA? Funding a Roth (instead of a traditional IRA or 401k) is an implicit bet that you will be in a higher tax bracket when the funds are needed.

Most people are in lower brackets when they retire.

I have NOT maxed out other tax vehicles. I always put 8% into the 401K which and that is what the company would match. The last 8 years I started putting 6% into the Roth that is thru the 401K and the other 2% just went into the regular 401K. In the last 5 years or so I also started putting some money weekly into a HSA.

 

[Dtail]

Have you maxed out other tax-favored vehicles such as 401k or traditional IRA? Funding a Roth (instead of a traditional IRA or 401k) is an implicit bet that you will be in a higher tax bracket when the funds are needed.

Most people are in lower brackets when they retire.

Is it that simple?
One could be in a lower bracket when they initially retire, but that could change if delaying SS until 70 and RMD's come along at that time.

 

[Montecfo]

Is it that simple?
One could be in a lower bracket when they initially retire, but that could change if delaying SS until 70 and RMD's come along at that time.

Predictions are hard. Especially about the future.

But the logic is simple.

Roths of course have other benefits over traditional IRA/401k such as no RMDs. But the headline feature IMHO is tax rate arbitrage.

 

[pb4uski]

All these #'s I'm giving out are automatically figured/generated off the company website.
55=$731-single, $650-50%J&S, $592-100%J&S
60=1008-single, 897-50%, $816-100%
65=1436-single, 1278-50% $1163-100%

and they all assume that your last day of work is in 2019?

If so, then those pension benefits look attractive compared to taking a $85k lump sum now and investing in a deferred annuity.

immediateannuities.com
all single since we don't know your DW's gender and age
45 yo male in NC
$95,000 premium

deferred 10 years... $649
deferred 15 years... $850
deferred 20 years... $1,188

But that doesn't necessarily make leaving it best if you are willing to take some risk. If you took the payout and invested it in a balanced mutual fund and left it alone and earned only 5%, which is more likely than not, in 10, 15 and 20 years you would have $155k, $197k or $252k.... and based on current annuity payout rates for life annuities at those ages your monthly benefit would be $730, $1,011 or $1,436.

I just picked 5% off the top of my head but interestingly that growth comes out the same as the growth in your pension at current annuity rates. However, you could do better or worse than 5% in a balanced mutual fund... or annuity rates could change... that is where the risk comes in.

But I'm guessing that the payouts that you quoted might not be guaranteed but just projected. I know that I retired I left my DC pension balance with my employer because at the time the annuity rates that they offered were better than the immediate annuities market... however a few years later they had updated their annuity rates so taking a pension benefit was no longer attractive so I ended up taking the lump sum.

 

[Vacation4us]

Annual Pay Increase

This is an estimated average annual increase in your pay. This percentage is applied to your current pay to project your pay until you leave the company or retire.
A higher annual pay increase percentage projects more pay before retirement. Higher pay at retirement results in a greater benefit. However, only your actual pay will determine your actual benefit amount when you retire.


I can tell you now that this is only an estimate because this megacorp is notorious for only giving around a 2% annual increase!! The thing is their stock is almost the HIGHEST that it has ever been and they still cry the bank is EMPTY.

Huh??

What does an annual pay increase have to do with cashing out your pension? I get that your bitter about megacorp and are about to be let go after 20 years of service. I would be pissed too!

Don’t let your displeasure with your soon to be former employer cloud this very important financial decision.

Although 8% is better than nothing, it’s not a high savings rate. Add to that your minimal experience with investing please don’t let the financially savy on this site convince you you can do better investing this lump sum. Continue to fund your 401k and Roth and have SS and a 1400 pension waiting for you at 65.

 

[OrangeBandit]

and they all assume that your last day of work is in 2019?

Yes this is figured with my last work day being in 2019.
Yes this is "PROJECTED" benefit amount.

 

[pb4uski]

.... Add to that your minimal experience with investing please don’t let the financially savy on this site convince you you can do better investing this lump sum. Continue to fund your 401k and Roth and have SS and a 1400 pension waiting for you at 65.

^^^^ Vacation4us, what is it about investing that scares you so much? I don't get it, but I've been investing for 40 years+

 

[OrangeBandit]

Huh??

What does an annual pay increase have to do with cashing out your pension?.

Well, looking at the "plan formula" the benefit is determined by Final Average Earnings X Credited Service X 3% = Lump Amount.

Sooo, IDK how all this plays out if I just kept it with the company and took it at 65. Does the amount keep gaining 3% even thou I'm no longer working for the company Geez, had no idea it would be so involved but hey, at least I'm learning how it works!!

 

[Vacation4us]

Not afraid. Been investing since my first real job in my 20's so about 25 years plus. The last 10 have been great before that the market and my investments were not so kind.

I am buy and hold no market timing here but I have seen 2 major bear markets were at least once a 50% decline occurred. I still max out my 401k and funded my Roth until I got married and no longer qualified. I am all for saving and investing. A pension has a guarantee and I have seen too many people cash out and lose.

There is nothing wrong with having multiple sources of income in retirement. Especially when the OP reports only saving 8% and is completely lacking investment knowledge.

What works well for some does not work well for all and I think advising the OP to cash out may be the worst financial mistake he'll ever make. Period.

Savings, Pension, SS sounds like the formula to a great retirement to me.

Just my 2 cents

 

[Vacation4us]

Well, looking at the "plan formula" the benefit is determined by Final Average Earnings X Credited Service X 3% = Lump Amount.

Sooo, IDK how all this plays out if I just kept it with the company and took it at 65. Does the amount keep gaining 3% even thou I'm no longer working for the company Geez, had no idea it would be so involved but hey, at least I'm learning how it works!!

You won't be getting anymore raises since you won't be working for the company.

Based on your formula you earn 3% of your salary for each year of service. Usually they use the last 3 to 5 years or the highest salary times 3 years within a certain timeframe.

Bottom line 3% times 20 years of service equals 60% of you pay. Nothing to shack a leg at!

Has megacorp ever sent you the information about how funded their pension is? It should come annually.

 

[ncbill]

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.

IIRC, SS benefits don't increase much past the second bend point.

Probably the pension calculation is not so limited.

 

[38Chevy454]

Am I correct that you do not have any retiree medical insurance? Even at you paying some amount? I only recall discussion about COBRA or ACA. Reason I ask is that my experience with megacorp pensions and healthcare is that if you take the lump sum option, it also takes away any medical benefits. In other words, if you take lump sum it severs all ties to the company. Whereas if you take the monthly pension payment, then you can stay in the retiree medical benefit.


Depending on if you have that retiree medical option, it may skew your decision on the lump sum vs monthly payout.

 

[Al18]

Based on your original post and investable assets, you are off to a good start at retirement savings but not enough to retire yet.



At at 3% withdrawal rate you can withdraw about $12K per year. This is below the federal poverty level for a couple at $16460.


Once your figure out what to do with your pension balance, I would focus on finding another well paying job where you can contribute to a 401K. If you find such a job, I think you may be able to afford retirement in another 10 years. Working another 10 years will give you 35 years of Social Security earnings history - which your SS check will be based on. Some, but not all 401K plans will let you start withdrawing without penalty once your separate from service in the year you turn 55 or afterwards.

 

[MichaelL]

I just want to put my money where it will continue to grow without having to constantly monitor it. My parents always told me to put my money in the 401k and just let it sit and there will be UPs and DOWNS but over time it will all average out. Do you think this is a correct statement about the ups and downs?

As you probably know a 401k is a tax deferred vehicle for holding investments, it's not an investment itself. You can put most anything in your 401k and change investments without paying taxes until you withdraw. I think the reason why people think of a 401k as an investment could be because some companies limit the choices in their plan and often the choice is a broad market mutual fund. Anyway your parents weren't wrong. It's a good idea to buy a diversified fund and just keep investing in it. If you want minimal monitoring I'd invest in a target date fund. These funds have a mix if stocks and bonds and adjust the mix to favor bonds as the target date approaches. You can choose any date that you like but your retirement date, 65 years old is typical.

 

[OrangeBandit]

No medical insurance once I leave the company.


As far as how the pension is funded, IDK. I will need to do a little digging to find out.

 

[OrangeBandit]

Just curious what "form of payment" most retirees go with:
Single Life Annuity
50% Joint & Survivor
100% Joint & Survivor


I know if you no longer have a spouse you would obviously go the Single Life route but I plan on having my spouse around and didn't know if people still choose the Single Life route even thou they still have a spouse. Just curious.

 

[Vacation4us]

Just curious what "form of payment" most retirees go with:
Single Life Annuity
50% Joint & Survivor
100% Joint & Survivor


I know if you no longer have a spouse you would obviously go the Single Life route but I plan on having my spouse around and didn't know if people still choose the Single Life route even thou they still have a spouse. Just curious.

Well if you love your spouse you cover them. Usually to cover your spouse your benefit is reduced by a mere 10%.

Would you want your spouse to struggle financially if you per decease them?

Now if you have assets aplenty and it would have zero effect on your spouse then the choice you make won’t effect them.

We have a family friend who didn’t cover wife of 30 years cause he wanted every dollar now. He had a massive heart attack 1 week into his retirement.

 

[grace_abounds]

Health Insurance

Unfortunately I know I will have to keep working but I think I'm DONE with the corporate BS. I can get by on $1000 per month and that includes all utilities, home & auto insurance, taxes and groceries. The only thing not figured in is healthcare and that is really why I need to keep working(in my eyes) which is sad. Well, maybe the occasional house or car repair bill. I can cut the cord on Satellite & Internet and probably save $150 per month.
I just want to put my money where it will continue to grow without having to constantly monitor it. My parents always told me to put my money in the 401k and just let it sit and there will be UPs and DOWNS but over time it will all average out. Do you think this is a correct statement about the ups and downs?


Thanks for all the advice so far. I will need to look into COBRA. I would like to get on the Obamacare bandwagon for a while!!

I obviously don't know your insurance circumstances, but be careful about the "Obamacre wagon". Several friends got on the Obamacare exchange plans after their pre-ACA plans became too expensive, or leaving their jobs in a,couple instances, or going to part time work in one instance and it bled them dry -- exhorbitantly high deductibles along with high premiums, and difficult times finding participating physicians (seemed like a good idea at the time). The part time person went back to full time work solely because of the employer sponsored insurance. The others have all changed to private non-exchange plans or to health care coops (Medishare and another called Samaritan something). All are much happier with their coverage and have more money left in their pockets.

 

[Dtail]

I obviously don't know your insurance circumstances, but be careful about the "Obamacre wagon". Several friends got on the Obamacare exchange plans after their pre-ACA plans became too expensive, or leaving their jobs in a,couple instances, or going to part time work in one instance and it bled them dry -- exhorbitantly high deductibles along with high premiums, and difficult times finding participating physicians (seemed like a good idea at the time). The part time person went back to full time work solely because of the employer sponsored insurance. The others have all changed to private non-exchange plans or to health care coops (Medishare and another called Samaritan something). All are much happier with their coverage and have more money left in their pockets.

The Obamacare wagon can be pretty good depending what county and state they live in.

 

[gooddog]

Welcome to the site. I lurked on here for at least 5 years before retiring in 2012, and can tell you this is great group of people to get ideas from. You don't have enough to retire on, that much is for sure. If I were in your shoes, I would be focused on how to get to the point where you will be ready to retire. What steps do you have to make to get there. This site is easily the best asset to getting there.

 

[VungTau]

Unfortunately I know I will have to keep working but I think I'm DONE with the corporate BS. I can get by on $1000 per month and that includes all utilities, home & auto insurance, taxes and groceries. The only thing not figured in is healthcare and that is really why I need to keep working(in my eyes) which is sad. Well, maybe the occasional house or car repair bill. I can cut the cord on Satellite & Internet and probably save $150 per month.
I just want to put my money where it will continue to grow without having to constantly monitor it. My parents always told me to put my money in the 401k and just let it sit and there will be UPs and DOWNS but over time it will all average out. Do you think this is a correct statement about the ups and downs?


Thanks for all the advice so far. I will need to look into COBRA. I would like to get on the Obamacare bandwagon for a while!!

You don't want a $1000 a month lifestyle with plan B cutting your net and TV. Plus you have to factor in inflation for the next few decades, the impact of any changes to taxes and entitlements based on SS shortfalls, looming natl debt crisis, etc. More work, and investing, are in the cards.

Yes, invest in a great fund or ETF, monitor it periodically to make sure the company behind it and managers running it are solid and watch it grow over time, including all the ups and downs. It worked for me and lots of others on here I guess.

 

[EarlyBirdly]

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.

BOOM! You get The Big Picture.


A pension is " Two in the Bush ". It's nothing but a promise ( and they are made to be broken ) to pay you something in the future.


Take the Bird in the Hand...



See, you know more than you think you do.





BirdMan