Pension v. lump sum: non-financial reasons?

[pb4uski]

^^^^ In this case the pension was very attractive.... in order to replicate the pension life annuity the single premium would be 112% of the lump sum..

Sounds to me like the plan is giving you an annuity benefit that is worth $956k in terms of today's annuity pricing in exchange for $852k.... I'd take the pension benefit.

 

[bbqcoder]

My father retired around 1994 and he also took the lump sum. I don't know how much he got but he invested in mutual funds and a few companies (Merck, Apple) so he did pretty well for someone who did not earn a lot of money. My parents thought they would run out of money after 20 years of retirement but no, the account is worth around $1.7M today. He passed away last year so it's just now my Mom living off SS & their savings.

 

[38Chevy454]

I had no choice, pension was the only option. Mainly because retiree healthcare pre-age 65 plus Supplemental Medicare payments per year ($1800/yr MFJ) for life are included. It is comfortable getting a monthly check, that, along with SS, when I file, covers all essentials and then some. It made refinancing my house to 2.5% very easy. No income...no refinancing. If the company offered later, after I was collecting SS to buy out my pension, I would consider it, though.

I was going to add this fact about the retiree medical. I am in same position, in that if I took a lump sum, all ties to company are severed and no retiree medical benefits - they are gone for good. In my case, I could not even defer pension until older age, it was become pension recipient at time when leaving company, or lose medical benefit portion. So I became an early retiree reduced pension benefit recipient. It has worked well and I also appreciate that monthly deposit into checking account each month.


The pension also allows me to be more aggressive on my AA, as I view the pension as indirectly part of my fixed income type allocation.

 

[Big_Hitter]

Yes, today was my decision day. And my decision was to defer my decision

 

[Big_Hitter]

Did anyone take the lump sum because they were afraid of investing?

not quite...

https://www.early-retirement.org/fo...-retirees-tend-to-choose-lump-sums-82584.html

 

[TheWizard]

The "non-financial reasons" in the thread title is interesting, since practically all the replies deal with financial reasons.

In my case, I had no pension waiting for me. What I had was a good sized accumulation in my 403(b) plan with TIAA from 40 years of employment.
Close to half of that accumulation was from employer contributions.

So I made my own pension by annuitizing a hefty portion of that accumulation at start of retirement, age 63. The majority of my pension/annuity is variable, based on commercial real estate or the broad stock market. So my income has tended to increase month to month.

If there's a partial "non financial" thing about my choice, made eight years ago, it's that my retirement income after starting age 70 SS a year ago is way more than adequate.
So rather than taking $$$ from my investments for spending, I'm putting a few thousand dollars per month of excess income back into my investments, my taxable account.

So there's a certain comfort in that...

 

[Finance Dave]

Yes, today was my decision day. And my decision was to defer my decision

I am really still torn between the options. Every one of the points people brought up here resonate in some measure or another. I did confirm during my conversation with the retirement specialist that I can defer a decision up until my 65th birthday, so have plenty of time. Realistically, it will only continue to grow until my 62nd birthday, but that's still a few years away. I have funding options in the interim, so I realized there isn't a need to push me into a decision before I'm ready.

I really appreciate all of the input here. Only 8 more days of w*rk until retirement is a reality! I'm sure I'll have many more questions to tap into the collective wisdom here as this process keeps moving forward.

Congrats!

I FIREd from MegaCorp about 9 years ago and then "rehired" into a different career. I decided to leave my MegaCorp Cash Balance Plan sit there. Why? The annuity payout is more than I can buy through a private annuity, so there's that. Also, the CBP has a feature that pays interest at prime +1% until I decide...so there's that. I would choose a 50/50 J/S annuity so DW would have some coming in should I pass first.

At any point between now and age 65 (I'm 59), I can either take the lump sum, start the annuity (non-COLA'd), or defer. I just let it sit there for now. I'll re-evaluate as interest rates rise to see if publicly-available annuities will pay better...but I doubt they ever will. Along with SS, this will provide a foundation of "forever" money, even if it's not COLA'd.