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Mid-50s, ER 2015 - pension/lump options
Old 10-31-2014, 09:18 AM   #1
Confused about dryer sheets
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Mid-50s, ER 2015 - pension/lump options

Hello, been lurking for a few years…
Planning to early retire sometime in 2015 at 57, maybe saving 5+ weeks of vacation until summer starts and easing myself out with 3 day weeks for about 4 months, until the end. Portfolio is about $1.8 mil, split roughly in thirds between taxable account, IRAs (2/3 Roth & 1/3 Trad.) and 401K. Invested 33/67 Stocks/Fixed Income, with half of “fixed” in 2-3% CDs & 401K stable value at 2.5%). Debt free, no mortgage on $300K house. Plan to actually increase stock allocation in next 5+ years (see Wade Pfau Rising Glide Path Thumbs Down on a Retiree Rule of Thumb-Kiplinger), investing excess earnings, but afraid of taking a big market hit, right at the start of retirement.

Over 30 years with Megacorp will yield me retiree healthcare and a yearly pension of about $35 – 40K depending on 50%/75%/100% spouse survivor option (leaning towards 75%). No COLA. I also have option of taking about 45% of it as a lump sum, with remaining as pension. Struggling with decision on that, and formula changes, making partial lump option look better at end of 2014, than next year, though final comparison for 2015 not out until mid-Dec. So there is still a slight chance I’ll bolt at the end of this year, 2014. I’ve looked at the Megacorp pension bucket, as my safest money, so if I take the partial lump, wondering if I should invest like rest of portfolio, or buy immediate annuities over several years. Annuities from insurance companies about match what I’d get from Megacorp by not taking that partial lump, but offer more non-spouse survivor options (10-20 yr guaranteed payouts, cash refunds, etc. to survivors), and would split my risk, if Megacorp’s pension went belly up. Family has longevity.

Expenses tracked for 3 years, run $65,000 per year. If I take the pension, I should need no more than 2% return on my assets to fund my yearly costs. Will figure out when to take Social Security once we get to 62, but will probably wait until 66 or so, which is my full retirement age. Wife has not worked since kids were born.

I was close to retiring in the last 1-2 years, but decided I wasn’t quite ready to hang it up and working several days per week from home makes it easier. Kids are on their own. Decided these last couple working years were ones for the DW and I to take some big trips which we have done & spend more money than two normally frugal people usually do.

Definitely planning more travel, volunteering (what ?) and time for hobbies, but still struggling with what will keep me engaged and meaningfully fill my time once retired, especially in cold Midwest winters.

I welcome thoughts and comments.

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Old 10-31-2014, 10:31 AM   #2
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You have some good options here and there is no "right" answer. Here is a recent thread on the lump sum subject but there are many more:
Personally, I think taking the partial lump sum is a great idea to spread the risk out, but you then do have to manage it yourself.

Glad to hear you have started to loosen the pursestrings a bit to enjoy the experiences sooner rather than later.

In terms of volunteering, my personal advice is to be very picky, especially at the beginning. I was too quick to take on too many volunteer projects early on and am now much pickier, although I do consider myself pretty much a professional volunteer (we can't travel as much as I would like due to DH's disability, and I found that I enjoyed volunteering more than consulting).

One thing that is more and more available is free online college courses (MOOCs). There are so many out there you could never run out of courses to take. I, on the other hand, have so many things going that I haven't finished one yet. YMMV!

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Old 10-31-2014, 10:51 AM   #3
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Perhaps paying a CPA a fee to give you the present value of the various options might be worthwhile. It's a lot of money, and I suspect Megacorp won't let you change things very easily.
The worst decisions are usually made in times of anger and impatience.
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Old 10-31-2014, 10:58 AM   #4
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Hi takeprofits.

I struggled with the lump sum vs annuity option recently and posted a thread - there were several other similar threads about it in the same timeframe. It seems megacorporate america is rapidly trying to offload pension obligations at this particular time. I did not have the partial lump sum option, and my pension was quite a bit smaller... so it was probably less of a struggle for me. I opted to keep the annuity to have a (small) third leg of the 3 legged stool approach to retirement. It adds a little income stream that allows me to take smaller withdrawals. It also helped my decision that the lump sum offer could not buy anywhere near the same size annuity on the private market - so if I wanted any annuity - this was the best deal.

I haven't had an issue filling my time since I retired in June. I agree with MBAustin - choose volunteer activities carefully. I found a few activities that I can do on my own schedule, plus I'm taking a community college course. But one of the longest threads on this forum is over on the "Life After FIRE" board about what folks do all day. You'll see that most retirees here have plenty to keep their life full.
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Old 10-31-2014, 02:03 PM   #5
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If the values and payouts are about the same then I would take a hard second look at taking a partial payout and buying an annuity. I think it would be safer to spread the risk around, ie. moving it to an annuity, just in case 10 years down the road Megacorp fails to properly fund the pension system.
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Old 03-14-2015, 05:43 PM   #6
Confused about dryer sheets
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Retirement starts April Fools Day. Accepted Early Retirement offer.

I had posted earlier I was planning to retire late this year, 2015. Megacorp came up with an early retirement offer that boosted all my pension options 10%. I felt most comfortable with that three legged stool so I took the part lump, part joint survivor annuity option and ran, or technically will soon.

So many of my co-workers have left in the past several years, and many of those remaining work from home a lot, which made the social reasons to keep working less of a benefit.

No more being on call as an I/T person, taking those 2 am pager calls. So I have a little over two weeks to go. With the weather in the upper mid-west hitting an abnormal 60 degrees this week, allowing us to end hibernation indoors, I am getting primed to go.
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Old 03-14-2015, 11:37 PM   #7
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Another child of Ma Bell?

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Old 03-15-2015, 02:16 AM   #8
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You're on your way! Congratulations!

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