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Old 08-03-2020, 10:29 AM   #21
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Repeating the question asked earlier - IS THIS PENSION INFLATION ADJUSTED?

That makes a big difference.

When I had to make the decision on my micro pensions - my NON cola'd pensions would have taken about 130% of the lump sum offer to buy a replacement SPIA.

Also - are you single. That makes a difference because you can choose a percentage of the pension to go to a surviving spouse.

Assuming single, no COLA, you could take the 680k and roll it into a SPIA and get $2434/month... (I used immediateannuity.com)

I'm a fan of the 3 legged stool approach to retirement: 1) SS, 2) savings, 3) pension...

With 3 legs you have more security if something impacts one of the legs... (SS reductions, market crash, pension goes belly up)... Your eggs are in 3 baskets. I have 2 solid legs, and a small third leg - so my 3 legged stool is a bit tilted. LOL.

I used immediateannuities.com to look it up.

If the pension is inflation adjusted
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Old 08-03-2020, 11:00 AM   #22
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Old 08-03-2020, 11:28 AM   #23
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We took the view that this decision was part of a larger retirement finance question that revolved around asset allocation.

I do not think that there is any one right answer. Far too many variables-financial, health, personality, etc.
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Old 08-03-2020, 11:52 AM   #24
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I am about to start my pension. I did not get the offer of a lump sum. Since I am a widow I would have taken the lump sum. The pension goes away when I die. If you are married it is more of a ponder.
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Old 08-03-2020, 12:07 PM   #25
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Originally Posted by rodi View Post
Repeating the question asked earlier - IS THIS PENSION INFLATION ADJUSTED?
magic 8 ball says "HIGHLY UNLIKELY"
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Old 08-04-2020, 12:29 AM   #26
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It depends - I had this decision thrust upon me at the age of 53 - I took the non-COLA pension. However, my situation was:

- Recent divorce, thrust into paying health insurance at a much higher level
- No job - minimal consulting
- Mother with terminal cancer who needed me to pay her living costs at the end of her life
- Took a 6 figure hit to portfolio due to said divorce
- Calculated payback age for pension now (reduced), pension later (at age 65) and lump sum (with assumed return - would be rollover, so would also need to look at RMD's and/or Roth conversions) - turned out the crossover age was 85 for when taking the pension later would equal what I was paid now (53) for 22 years
- I was eligible for another COLA'd pension in seven years

I did it for cash flow reasons at the time and the analysis gave it an extra push

If it had been COLA'd, that would have been even nicer; if I hadn't gotten divorced, I would have probably either let it ride until age 65 or taken the rollover. I had gotten offers before, however, I had decided to defer.

So, it depends what is going on in your life at the time and how the numbers calculate out.
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Old 08-14-2020, 04:57 PM   #27
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I would definitely see if any medical benefits are tied to your pension before making the decision.
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Old 08-14-2020, 05:07 PM   #28
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With $680,000 invested to earn 4%, a withdrawal of $2,800 a month will last for 500 months. (500/12=41 years) So, conservatively speaking, a draw of $2,800 a month will last you until age 91. Draw only $2,200 at the onset of retirement and let the remainder grow and you'll have a COLA of sorts built in.

I'd take the lump sum.
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Old 08-14-2020, 05:24 PM   #29
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If we can assume you have no other savings or equity and can retire at 50, which option would you suggest?

A) Lump Sum of $680,000
B) Monthly Pension of $2200
$680,000 x 4% / 12 = $2267 / month

$2200 x 12 / 680,000 x 100 = 3.88 %

For me, Iíd take the lump sum, and roll it over into my IRA.
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Old 08-14-2020, 05:26 PM   #30
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$680,000 x 4% / 12 = $2267 / month

$2200 x 12 / 680,000 x 100 = 3.88 %

For me, Iíd take the lump sum, and roll it over into my IRA.

This preserves the entire $680,000 lump sum with zero draw down. The author will end up with either a large estate to be inherited by their heirs or can increase their withdrawal amounts over time to cover COLA perhaps.
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Old 08-14-2020, 06:00 PM   #31
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Pension crunch is just starting. I never advise leaving money on the table for others to promise a return. Roll the lump sum and start investing the proceeds.
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Old 08-14-2020, 06:09 PM   #32
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Given those assumptions, I would say take the pension.

The folks I know who had good corporate jobs and are now near poverty in retirement all cashed in their pensions for lump sums.

I think they were not very financially sophisticated and let financial advisors do what they wanted with the money because they thought the advisors knew best.

-gauss
I think this is a very insightful response. Being at retirement without any other savings is indicative of someones propensity and aptitude to manage a lump sum to payout for the remainder of their life--unsuccessfully.
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Old 08-14-2020, 06:14 PM   #33
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Pension crunch is just starting. I never advise leaving money on the table for others to promise a return. Roll the lump sum and start investing the proceeds.
That is some great advise. I have doubled mine in 4 years (well over 1M) and can control my investments and have complete ownership on my money not depending on someone else.
The other factor with a pension is we don't know how long we will live. If both of us die the money is gone, nothing to leave no one. Pensions are not my style even if they figure out to be better, I will take the hit and just to have complete ownership/control.
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Old 08-14-2020, 06:33 PM   #34
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A Verizon pension. Pretty secure (as of now) It is funded at 90%.
Nobody ever expected United Airlines to go bankrupt and have their pensions grabbed by the PBGC in 2004, but it happened.

Less than a year before the pension dump, my pension was funded at 90% or perhaps even higher. When the PBGC takes over and does their funny math, suddenly we were only funded about 50%.
That still left us with what many people would consider to be a reasonable monthly pension, and fortunately we also had a really big defined contribution plan.

You can expect further reductions if you are less than 70 years old.

The mission of the Pension Benefits Guarantee Corporation is to Guarantee that they never have to pay and of their own money into Pensions.

Of course some people make bad investment decisions and ruin themselves. But my general attitude is "take the money and run".
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Old 08-14-2020, 07:11 PM   #35
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We were offered the same deal at age 49. We took 100% joint survivorship immediate payment with ongoing medical, drugs and dental coverage (not available with lump sum). Non-COLA. It provided a safety net for me to take on speculative executive positions for the next 10 years. Fortunately inflation has been low.

I am now 78 and the pension is a minor part of our net worth/income. I have collected $1.65 million so far. And many dental and drug claims.

But the true answer is "It depends"! There is no right answer....
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Old 08-14-2020, 07:27 PM   #36
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That seems like a very big lump sum for that amount of annuity.
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Old 08-14-2020, 07:54 PM   #37
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Too low. Int rates I would guess?. No idea. 4 yrs ago I took $1520 monthly rather than 310k at 55. So far so good. Look online at annuity calculators. Will make the decision easy.
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Old 08-14-2020, 08:27 PM   #38
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If you can live off of $2200 a month, I would take the pension. If you have no other savings or equity at this point in your life, I don't believe that you would be financially responsible enough to manage a lump sum payment. JMHO
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Old 08-14-2020, 08:40 PM   #39
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What kind of asset allocation are you guys plugging in to project the 4%-ish returns required for him to stay disciplined?
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Old 08-15-2020, 09:23 AM   #40
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Iíve not read all the responses, but Iím curious if youíre planning on working for additional income, or you plan to retire completely at this stage in your life? We also donít know youíre expenses or situation.

If you need the income, go with the pension. Iím not sure it will be enough for one to live on - and I live in a low-cost state. If youíre going to work enough to cover cost of living, and youíre secure in your ability to do so, Iíd Invest the lump sum - if you have a 7 - 10 year investment horizon, retiring completely at 57 or 60.

It wasnít the question you asked, but Iím concerned youíre not financially set for retiring completely.
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