Last day in mid January '13

[jandog]

Hello,

I'm 50 years old single with no kids and I'm retiring from what used to be known as one of the Big Three automakers. I've had the same job with the same company for 32+ years (I started there on the day after high school graduation).

By early December I have to make the call - either lump sum or pension. I'm scheduled to meet with my financial consultant next month to figure which route to go. My big concern is long term solvency of the pension plan.

My existing health care coverage continues until age 65 at which time (if I select the pension option) I'll receive a $350/month stipend for a Medicare supplement policy. Otherwise the stipend gets cooked into the lump sum.

I have a long term care policy that I've been paying into for years. (Got to review terms to see how much it pays out.)

I owe $82k on my house. Part of the lump some decision will involve deciding whether to pay it off or just refi for 15 years at 2.6%.

My plan is to cover current spending ($3500-$3700 month) plus inflation. Although I'll will probably take a rinky-dink part time job of some sort, I don't want to have to work. Reviews with three different consultants (plus FIRE Calc) have confirmed that this is doable with my assets.

$30k after tax savings
$560k tax deferred savings
$586k Lump sum or $2900/month

Retirement plans are to include low budget travel, more participation in church activities, volunteer work and care for aging but still independent parents.

How's that sound? Comments/concerns/suggestions?

Jandog

 

[MichaelB]

Hi jandog, welcome to the forum. There are lots of threads about mortgage you can find using the search function, in addition there is a FAQ http://www.early-retirement.org/for...f-the-mortgage-or-invest-the-money-30644.html Likewise for the pension discussion. Here is one recent thread http://www.early-retirement.org/forums/f28/ford-to-offer-retirement-buyout-61411.html If you browse past threads you will find many discussions on pension lump sum vs annuity. Good luck!

 

[pb4uski]

It seems that you probably have enough but the other thing to consider is whether you can get access to your money without penalty. If you need $45k a year and you can't access your tax deferred savings or lump sum (assuming you go lump sum) without penalty before 59 1/2 - where would the funds you need from now to 59 1/2 come from?

Alternatively, if you take the pension you only need $10k a year, but after your taxable funds are gone, where will that $10k a year come from?

Also, it seems to me that the health care coverage if you select the pension adds considerable juice to the pension option compared to the lump sum.

 

[obgyn65]

Welcome, jandog.

 

[jandog]

It seems that you probably have enough but the other thing to consider is whether you can get access to your money without penalty. If you need $45k a year and you can't access your tax deferred savings or lump sum (assuming you go lump sum) without penalty before 59 1/2 - where would the funds you need from now to 59 1/2 come from?

Alternatively, if you take the pension you only need $10k a year, but after your taxable funds are gone, where will that $10k a year come from?

Also, it seems to me that the health care coverage if you select the pension adds considerable juice to the pension option compared to the lump sum.

The plan would be to do the 72t thing for pre-59.5 dollars.
Also, the health coverage is subsidized through age 65 either way, whether I choose to go with pension or lump sum. If I choose the lump sum, I will not see the $350 starting at age 65, but it will be considered in the lump sum calculation. It will not be left on lying on the table.

Jandog

 

[Trawler]

Jandog
Welcome aboard!!
Looking OK. Would only ask yourself will spending change from current spending.

 

[GT1 Doug]

At the risk of sounding like a broken record, I recommend that you look at the Pension Benefit Guaranty Corp website (Pension Benefit Guaranty Corp - PBGC Protects America's Pensions) and verify exactly what protections you will receive to determine what your risk is. Your "protections" are pro-rated by age. I am currently wrestling with your same decision. The pension with the survivors option offered by my megacorp while not overly generous is still better than any annunity I could find. Some of the retirement seminars I attended stressed that at least a portion of one's retirement income should come from "guaranteed" income streams to provide some balance.