Boeing Pension Safety - lump sum the right choice?

[tominboise]

I have 10 years of service at Boeing, which will result in a pension of ~$487/month, starting early next year when I turn 65. Or I could take a lump sum of $73k. Given Boeing's struggles with safety, quality, worker strike, etc I am starting to get worried that Boeing may fail financially and in it's reincarnation out of bankruptcy, unload it's pension obligations. The pension fund does have something like $70bil, so it may worrying about nothing.

So should I take the lump sum offering or take the $487/month? The breakeven (assuming no growth of the lump sum) would be about 13 years, or age 78. I hope and expect to live longer the 78 but who knows.

 

[RetiredHappy]

Run the numbers usinng immediateannuities.com to help you decide.

I ran it for 65 yo male in Idaho using $73K, it returns as $449 per month for life, although it is $454 per month for life and 10 years certain. If you don't trust Boeing, you can take the lump sum and buy your own annuity/SPIA.

 

[rk911]

Given the very real risk I'd opt for the lump sum. Even if Boeing was super-healthy I'd still rather be in control of my money. You'll likely have more investment choices on your own than you would wirh Boeing.

 

[tominboise]

Thanks I will look at that. There is the tax hit that will happen if I take the lump sum, so I'd be starting out with less in the annuity or other investment to begin with.

 

[rk911]

Thanks I will look at that. There is the tax hit that will happen if I take the lump sum, so I'd be starting out with less in the annuity or other investment to begin with.

Thanks I will look at that. There is the tax hit that will happen if I take the lump sum, so I'd be starting out with less in the annuity or other investment to begin with.

Since you have a lump-sum option you may be able to roll the payout into an IRA.

 

[RetiredHappy]

You would roll the lump sum into your IRA. You can always buy an annuity/SPIA inside your IRA.

 

[rembrandt]

Thanks I will look at that. There is the tax hit that will happen if I take the lump sum, so I'd be starting out with less in the annuity or other investment to begin with.

You can directly transfer your pension lump sum or IRA into an annuity without adverse tax consequences. Your employer can roll over your 401k into an annuity without having to withhold any taxes. There is no mandatory withholding requirement if your funds are rolled over directly into an annuity.

 

[tominboise]

I don't necessarily want an annuity product. I'd be more likely to invest it per my current asset allocation inside my IRA.

 

[Al18]

Even though Boeing has been having problems the past few years, it seems unlikely you would loose your pension. Your pension should be covered by the Pension Benefit Guarantee Corporation in the event Boeing is nearing collapse Home Page | Pension Benefit Guaranty Corporation

 

[Texas Proud]

The company can be bad but the pension rock solid... you have to look at its funding...

As others have noted I would want to roll it into an IRA and then do with it as I pleased...

 

[Jerry1]

I would take the lump sum. When I had that decision to make, I took the pension. One of the reasons I did that is that the pension beat the comparison to an annuity significantly. Given that yours appears to be similar to an annuity, I’d take the lump sum knowing that if I wanted the guaranteed cash flow, I could get that through the annuity option.

As others have mentioned, you would roll the lump sum into an IRA and be able to do whatever you want with the money subject to the IRA rules. There’d be no up front tax consequences.

 

[Surewhitey]

Even though Boeing has been having problems the past few years, it seems unlikely you would loose your pension. Your pension should be covered by the Pension Benefit Guarantee Corporation in the event Boeing is nearing collapse Home Page | Pension Benefit Guaranty Corporation

This... Just talking to a friend who was under the max pension guarantee and he said he is still getting the monthly amount after the company went belly up. He also said he knew a couple of upper level guys who lost more than half as they were above the threshold of $85k annually (if I'm correct)...

I wouldn't sweat it if you chose it.

 

[VanWinkle]

Would 487 per month make your life more secure? If so, take the pension. If not, lump sum and roll it into your IRA, invest in your allocation. I took the pension from my company, but the numbers were much better than yours for the pension.

 

[tominboise]

Would 487 per month make your life more secure? If so, take the pension. If not, lump sum and roll it into your IRA, invest in your allocation. I took the pension from my company, but the numbers were much better than yours for the pension.

Not really. It would roll into my checking account and pay some bills every month. I could, theoretically, withdraw $487 less every month then I do now. But unlikely in reality.

If I take the lump sum, it would go into my IRA and get invested in something, so likely to grow over time.

 

[AzDreamer]

When I retired we already had enough savings so I opted for the monthly pension. It's nice to have a steady cash flow.

 

[Koolau]

Boeing seems to have lost its way for a while. But I wouldn't bet against it. I think their pension will be just fine though I have no special insight. YMMV

 

[Telly]

I wouldn't worry about your pension going belly-up.
From my 2020 Annual Funding Notice (I think the last one that was automatically mailed to us, or maybe there is a newer mailed one, just looked quick):

As of 2020 Boeing had 10 different retirement plans. I'm in the Boeing North American Retirement Plan. For my plan, the funding has been excellent. Using the pre Map-21 funding rules, it was 100.5% funded, and had been increasing in the previous years. Applying MAP-21 rules, which bring in 25 year interest rates into the computations, it's funding is 109.5%
Also as of 2020, (i'm rounding for speed) my plan had 38k total participants in it. Of that 200 were active, 28k were retired or separated and receiving benefits, 9,700 were retired or separated and entitled to future benefits. So risk for me is very low.

For 2020, if the PBGC should need to take over, the maximum PBGC supported limit is $5,813/mo., $69,756/yr. for taking it at age 65. Max Ben may be reduced for taking it earlier, or if the benefit at the time is being provided to a survivor of a plan participant.
So your benefit is very safe, as compared to United Airline pilots, of which most exceeded the PBGC max limits, so they didn't get full benefits when UA filed for bankruptcy years ago.

You could look online, maybe through your benefits portal account, or maybe it's all public info anyway, for newer Boeing Annual Funding Notices.

I took mine at 55, been getting it for years. IIRC, getting a lump-sum was not an option for me. I took it single, as it's a small pension.

 

[tominboise]

I wouldn't worry about your pension going belly-up.
From my 2020 Annual Funding Notice (I think the last one that was automatically mailed to us, or maybe there is a newer mailed one, just looked quick):

As of 2020 Boeing had 10 different retirement plans. I'm in the Boeing North American Retirement Plan. For my plan, the funding has been excellent. Using the pre Map-21 funding rules, it was 100.5% funded, and had been increasing in the previous years. Applying MAP-21 rules, which bring in 25 year interest rates into the computations, it's funding is 109.5%
Also as of 2020, (i'm rounding for speed) my plan had 38k total participants in it. Of that 200 were active, 28k were retired or separated and receiving benefits, 9,700 were retired or separated and entitled to future benefits. So risk for me is very low.

For 2020, if the PBGC should need to take over, the maximum PBGC supported limit is $5,813/mo., $69,756/yr. for taking it at age 65. Max Ben may be reduced for taking it earlier, or if the benefit at the time is being provided to a survivor of a plan participant.
So your benefit is very safe, as compared to United Airline pilots, of which most exceeded the PBGC max limits, so they didn't get full benefits when UA filed for bankruptcy years ago.

You could look online, maybe through your benefits portal account, or maybe it's all public info anyway, for newer Boeing Annual Funding Notices.

I took mine at 55, been getting it for years. IIRC, getting a lump-sum was not an option for me. I took it single, as it's a small pension.

Good info - thanks. My $487/mo seems safe

 

[NanoSour]

The Steve Miller Band had a song with your answer. "Go on take the money and run...whoo whoo whoo." Especially if you don't need that $487/mo to live on. The 73K in the market in a total market index fund will be much more favorable to your estate in the years to come.

I had an offer to buyout my megacorp pension 10 years ago. I stuck with the pension at the time and regretted it. When the opportunity presented itself in 22' I jumped on it and cut the chord with my old employer for good.

 

[Slim11]

The risks are up to you to decide. But depending on your tax situation and where you live 70 k will be closer to 55k. Do you need the 55k or is 500 a month a better deal for you?

 

[LateToFIRE]

I'm fairly familiar with Boeing from past work - if I told you about it, I'd have to kill you ;-). I don't have a view on lump sum vs pension especially as the amounts in question probably won't make or break your retirement picture. But, I would advise that you should not make the decision out of fear of Boeing going under. You have to understand, Boeing, for all its huge problems, is strategic to the U.S. economy - it is an industry unto itself and it competes in a duopoly. In other words, there is only one real competitor (Airbus). It's not going anywhere. As for stock price or anything like that, who knows, I wouldn't want to try to catch that falling knife, but bankruptcy risk is very remote. Maybe I could see a forced merger scenario. In any scenario, merger, bankruptcy, etc, the pension plan should be in good shape (but do your own homework on that) and would likely remain intact, albeit might get off-loaded to an insurance co. What I'm saying is that your benefits are unlikely to be impacted even in a worse case.

 

[brett]

I believe Boeing is safe.

No doubt the competition has been eating Boeing's lunch for the last five-ten years.

That, combined with an appalling lack of focus on manufacturing and safety have made Boeing the opposite of the darling of the aviation industry. Very, very sad. Deplorable actually.

All compounded by incredidly poor management. But for some reason well compensated. Who says failure is not rewarded

But...the Government will not let them go under IMHO. Not even close.

It will get better. There is only so long a critical company can produce industry sub standard products before a change is forced on them.

At the moment their domestic and their international reputation is in tatters. But...it will get better. Eventually.

But....given the numbers above I would be inclined to take the money and do your own thing.

 

[rembrandt]

FYI:

Boeing to lay off 10% of workforce​

By Andrew Barker, Editor at LinkedIn News
Updated 12 hours ago

Distressed aerospace giant Boeing will lay off 10% of its workforce, or roughly 17,000 people, it announced on Friday. The company also revealed it will not deliver its new 777x planes until 2026, with CEO Kelly Ortberg saying in a memo that "restoring our company requires tough decisions." Ortberg added that executives and managers will be among those impacted by the job cuts. Embroiled in an ongoing machinists strike, Boeing is at risk of seeing its credit downgraded to junk status. Also on Friday, a U.S. government watchdog criticized the Federal Aviation Administration's oversight of the company.

 

[AudiDudi]

Boeing transfered both mine and DW's pensions to MetLife years ago.

 

[Koolau]

I'm fairly familiar with Boeing from past work - if I told you about it, I'd have to kill you ;-). I don't have a view on lump sum vs pension especially as the amounts in question probably won't make or break your retirement picture. But, I would advise that you should not make the decision out of fear of Boeing going under. You have to understand, Boeing, for all its huge problems, is strategic to the U.S. economy - it is an industry unto itself and it competes in a duopoly. In other words, there is only one real competitor (Airbus). It's not going anywhere. As for stock price or anything like that, who knows, I wouldn't want to try to catch that falling knife, but bankruptcy risk is very remote. Maybe I could see a forced merger scenario. In any scenario, merger, bankruptcy, etc, the pension plan should be in good shape (but do your own homework on that) and would likely remain intact, albeit might get off-loaded to an insurance co. What I'm saying is that your benefits are unlikely to be impacted even in a worse case.

Yeah, you hate to say "too big to fail" but if that doesn't apply to Boeing, not too many companies ever would IMHO.

It's difficult to sit here and watch a great company do so many dumb things. Don't have enough insight to say "it's management" or just bad luck, but in any case, I really don't think the pension is in jeopardy but YMMV.