Originally Posted by Klubbie
Has anyone experienced anything similar and what are some considerations that I should be making here when assessing what to do with the cash balance pension?
I'm retired now and older (64). I have a cash balance plan still in deferral that I monitor Some of the considerations I consider important:
1. What is the interest rate calculation ? Typically it is calculated based on some long term published rate, with a guaranteed floor.
2. What is the health of the plan ? This isn't necessarily based on the corporation's business health. The important metric is plan funding status, which has to published annually. Check with the custodian for current funding status.
3. What are the rules that govern the availability of lump sums ? Generally this is based on the funding status and lump sums will be disallowed when/if the funding status falls below a threshold, usually 80%.
4.How does the annuity payment option compare with what you could buy on the individual SPIA market ? Usually cash balance plans pay a better annuity than you could buy yourself with the cash balance. Do you think that an annuity option is a consideration for your future ?
5.Is there an "uplift" or "whipsaw" calculation that inflates the value of a lump sum taken well before annuity age ?
6. Who is the custodian ?
In my case, I choose to keep my cash balance plan because it has a good guaranteed interest rate floor of 5% (5.8% currently) and will pay a better annuity than I could buy with the lump sum. I intend to take the annuity option at age 70, subject to change. My plan's current funding status is 138% and is managed by Fidelity. If my plan's funding status started falling I would consider withdrawing the lump sum before the door closed, but that isn't a concern for now.