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Age 55 and two small pensions -- what would you do?
Old 01-01-2022, 10:55 PM   #1
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Age 55 and two small pensions -- what would you do?

Hi all,

I will turn 55 in May 2022. At that point, I become eligible for payouts from two small pensions. For the single-life annuity option, I could receive a total of about $300 a month at age 55 or $600 a month at age 65. I am married and of course the joint-and-survivor option is less. The pension plans have no lump-sum options. There are no adjustments for inflation.

One of my former employers went bankrupt and the pension is administered by the federal Pension Benefit Guaranty Corporation. Is that a bad or a good thing?

What would you do? Would you start taking the money or wait till you're 65? I'm seriously contemplating taking the money and investing it in a brokerage account. I might think differently if the pensions were adjusted for inflation. I like my odds in the stock market better, particularly with one of the employers going bankrupt. (The other might soon follow.)

I'm angling toward retirement but will not retire completely. My wife likes her job and we're probably firmly in the 22% federal tax bracket, regardless of what I do.

Interested in any thoughts, particularly from those who have been in similar positions. Thanks.
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Old 01-01-2022, 11:08 PM   #2
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Using an annuity calculator the present value of the $600 at 65 is a bit more than the the $300 at 55. That said I think this calculator doesn't adequately factor in inflation risk nor your projected return if you invested the monthly payout. For this reason I'd probably take the $300 now and invest it as you suggested.

It's not a big deal either way. If you're in the 22% bracket these pensions aren't a big part of your planned retirement income whichever option you choose.
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Old 01-02-2022, 04:36 AM   #3
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According to immediateannuities.com, a $500/month pension beginning at age 55 for a 55 yo male in MN is valued at $127,119 and a $600/month pension beginning at age 65 for a 55 yo male in MN is valued at $88,999... so I would take the $500/month.
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Old 01-02-2022, 06:04 AM   #4
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Except it was $300 & $600, not $500. Such a relatively small amount, of your income, just take the $300.
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Old 01-02-2022, 10:16 AM   #5
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PBGC is a good thing - to answer your question. It is the federal government paying your pension. PBGC is an insurance company owned by the US Government, employers buy pension guarantee insurance through this federal agency.

"PBGC guarantees the "basic benefits" you earned before your pension plan’s termination date (or the date your employer’s bankruptcy proceeding began, if applicable) up to legal limits set by Congress. Benefits include:

Pension benefits at normal retirement age
Most early retirement benefits
Annuity benefits for survivors of plan participants
Disability benefits (see exception below) . . ."

https://www.pbgc.gov/wr/benefits/guaranteed-benefits
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Old 01-02-2022, 10:32 AM   #6
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Another vote for take the 300. My reasoning is the same, not a big part of your retirement either way and best to get it going.
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Old 01-02-2022, 11:18 AM   #7
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Good discussion. I've been separated from my original MC over 25 years but still have a pension coming anywhere from age 62 to 65 (my choosing). For the last two decades, this info has been collecting dust. Now with 62 coming into site in a few years, I've dusted it off and I'm thinking. I have no lump provisions either, it has to be monthly.

So my numbers:
- Age 62, $385, annuity lump value: $85k
- Age 65, $520, annuity lump value: $105k

I was first thinking of "longevity insurance" and just letting it ride until 65. But the more I think about it, the more I want to take it at 62 because these few bucks are no insurance.

Perhaps I can use it as mad money and blow some dough instead. I never look at money that way, but with this little nugget, maybe I should, if just for this.
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Old 01-02-2022, 11:45 AM   #8
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i have a second small pension with no flexibility, ~300 @65
I always look at it like the mobile phone bills
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Old 01-02-2022, 10:51 PM   #9
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Thanks for your thoughts and feedback everybody, I appreciate it.

When I left the second pension-providing job in 2003, I joked that the monthly amounts would pay for one of my prescription meds when I retired. I wasn't far off, except I'm not retiring and luckily am not on any prescription meds.

It's not a lot of money, but it's not nothing either -- if that double negative makes sense. I might as well put it to work. I'm definitely leaning toward starting the payments when I turn 55 in May.
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Old 01-03-2022, 06:27 AM   #10
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I'm in a similar spot as the OP, I'm 57 & retired in 2020. Have two pensions that are a little larger, not COLA'd. Have weighed lump-sum vs taking at age 65 in my mind for a while.

A 3rd option that I only became of aware of recently is just letting it ride past age 65. At least one of the two pensions will continue to increase (both the lump value and the monthly benefit) after age 65, I'm thinking this might be the better option for me. I'm not married so a survivor's benefit is not a consideration for me. I'd look at it as both longevity insurance and an investment that is not subject to market risk.
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Old 01-03-2022, 08:11 PM   #11
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Quote:
Originally Posted by pb4uski View Post
According to immediateannuities.com, a $500/month pension beginning at age 55 for a 55 yo male in MN is valued at $127,119 and a $600/month pension beginning at age 65 for a 55 yo male in MN is valued at $88,999... so I would take the $500/month.
Quote:
Originally Posted by Perryinva View Post
Except it was $300 & $600, not $500. Such a relatively small amount, of your income, just take the $300.
You are correct... $300 and $600... so the values are $76,271 and $88,999... I'm patient... I would take the $600 all else being equal.
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Old 01-03-2022, 09:00 PM   #12
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I'd take the $300 and invest it.
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Old 01-04-2022, 02:35 AM   #13
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I'd be tempted to take the money and add it to current investments (DCA style.) Having said that, YMMV and you didn't pay us for the advice.
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Old 01-04-2022, 04:37 PM   #14
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Even if it's $300, it's better than $0. Hopefully it's adjusted for Inflation. Put it in an Index MF and watch it grow !!
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Old 01-04-2022, 07:47 PM   #15
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Thanks all ... interesting discussion. I appreciate the thoughts.

For sure, it's not a ton of money, but as was said it's better than zero.

If the pension was adjusted for inflation, I might let it ride. But it's not. So I probably won't. Have a few months to decide.
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