Advice on Pension options

[Rainger99]

I have to make a decision on my pension.

I have the following options.

Please note that x changes below.

Single life annuity. I get x every month until I die.

10 year certain amount and life annuity. Pays out for my lifetime and fixed amount for 10 years. X here is about 94% of single live annuity.

50% joint and survivor annuity. I get x for my lifetime and wife gets .5x for her life. X here is 87% of single live annuity.

75% joint and survivor annuity. I get x for my lifetime and wife gets .75x for her life.
X is 81% of single live annuity.

100% joint and survivor annuity. I get x and my wife gets x for her life. X is 76% of single live annuity amount.

Lumpsum. A lumpsum payment. This would amount to 124 months of the single live annuity.

I am thinking the best choice is a lumpsum payment.

On all of the other choices (except for the 10 year certain amount and life annuity), if my wife and I die in a car crash a month after taking the pension, I am leaving a lot of money with the company. On the other hand, if we live 30 more years, we would do pretty well with the 100% joint and survivor annuity.

Any recommendations or suggestions? Thanks.

[Stu from NYC]

I have to make a decision on my pension.

I have the following options.

Please note that x changes below.

Single life annuity. I get x every month until I die.

10 year certain amount and life annuity. Pays out for my lifetime and fixed amount for 10 years. X here is about 94% of single live annuity.

50% joint and survivor annuity. I get x for my lifetime and wife gets .5x for her life. X here is 87% of single live annuity.

75% joint and survivor annuity. I get x for my lifetime and wife gets .75x for her life.
X is 81% of single live annuity.

100% joint and survivor annuity. I get x and my wife gets x for her life. X is 76% of single live annuity amount.

Lumpsum. A lumpsum payment. This would amount to 124 months of the single live annuity.

I am thinking the best choice is a lumpsum payment.

On all of the other choices (except for the 10 year certain amount and life annuity), if my wife and I die in a car crash a month after taking the pension, I am leaving a lot of money with the company. On the other hand, if we live 30 more years, we would do pretty well with the 100% joint and survivor annuity.

Any recommendations or suggestions? Thanks.

Talk to a fee only professional for advise. In any case I do not see how anyone could advise you with rather incomplete info.

[dewilson58]

Talk to a fee only professional for advise. In any case I do not see how anyone could advise you with rather incomplete info.

BINGO


Close the thread.

[villagetinker]

I took option 1, and then got a VUL life insurance policy for and amount for my wife to live comfortably. This maximized my monthly income, the VUL now has sufficient cash value I no longer have to make any more payments.

NOW as stated above speak with a financial advisor, what works well for me may not work well for you, the devil is in the details.

[Toymeister]

I have to make a decision on my pension.

I have the following options.

Please note that x changes below.

Single life annuity. I get x every month until I die.

10 year certain amount and life annuity. Pays out for my lifetime and fixed amount for 10 years. X here is about 94% of single live annuity.

50% joint and survivor annuity. I get x for my lifetime and wife gets .5x for her life. X here is 87% of single live annuity.

75% joint and survivor annuity. I get x for my lifetime and wife gets .75x for her life.
X is 81% of single live annuity.

100% joint and survivor annuity. I get x and my wife gets x for her life. X is 76% of single live annuity amount.

Lumpsum. A lumpsum payment. This would amount to 124 months of the single live annuity.

I am thinking the best choice is a lumpsum payment.

On all of the other choices (except for the 10 year certain amount and life annuity), if my wife and I die in a car crash a month after taking the pension, I am leaving a lot of money with the company. On the other hand, if we live 30 more years, we would do pretty well with the 100% joint and survivor annuity.

Any recommendations or suggestions? Thanks.

How much is your wife counting on this income? Is she younger than you? Does she have a pension or annuity? If so do you get survivor benefits on her annuity/pension? Do you care about any of this?

[Tom52]

I can give the the correct answer if you provide the following:

Your age
Wife's age
Your expiration date
Wife's expiration date

Without that information you have to make your best estimates and don't look back.

[Rainger99]

I can give the the correct answer if you provide the following:

Your age
Wife's age
Your expiration date
Wife's expiration date

Without that information you have to make your best estimates and don't look back.

I agree. If I know we are both dying next year, the lump sum is the easy choice.

[CarlR33]

Please, consult FB not the TTOV? You really need a long term financial person.

[Dusty_Star]

Talk to a fee only professional for advise. In any case I do not see how anyone could advise you with rather incomplete info.

This is definitely the correct answer. We don't have enough info to help, & we are not asking for more.

[PersonOfInterest]

I have to make a decision on my pension.

I have the following options.

Please note that x changes below.

Single life annuity. I get x every month until I die.

10 year certain amount and life annuity. Pays out for my lifetime and fixed amount for 10 years. X here is about 94% of single live annuity.

50% joint and survivor annuity. I get x for my lifetime and wife gets .5x for her life. X here is 87% of single live annuity.

75% joint and survivor annuity. I get x for my lifetime and wife gets .75x for her life.
X is 81% of single live annuity.

100% joint and survivor annuity. I get x and my wife gets x for her life. X is 76% of single live annuity amount.

Lumpsum. A lumpsum payment. This would amount to 124 months of the single live annuity.

I am thinking the best choice is a lumpsum payment.

On all of the other choices (except for the 10 year certain amount and life annuity), if my wife and I die in a car crash a month after taking the pension, I am leaving a lot of money with the company. On the other hand, if we live 30 more years, we would do pretty well with the 100% joint and survivor annuity.

Any recommendations or suggestions? Thanks.


Take the lumpsum which can then has no limits to the investment options.

[villageuser]

When I had such a decision to make, I talked with the people at Merril Lynch in Sumter Landing. They looked at all the data, including my health, my husband’s health, our current ages, what we would like our lifestyle to be, our risk tolerance, the market, and other parameters. There was no charge for this, and I was not a customer of theirs, nor was I pressured to become a customers of theirs. I was quite impressed with them.

Rather than asking people who you don’t know their qualifications, I highly recommend for you to do as I did, and as others have recommended. Talk to a financial expert. Bring them all the documentation they require. Hear their pros and cons of the scenarios based on YOUR needs and requirements. Listen to their recommendation and then decide what rings true for you.

[Caymus]

You may have better success finding a fee only advisor than I did. The ones I talked to either didn't seem more knowledgeable than me or wanted to turn me into an "income stream" for them. On paper those options are equal based on standard actuarial tables. An advisor could help you decide if you have any unique circumstances (i.e. one spouse 80 years old, one 25)

[MikeN]

Ask a qualified financial planner. All you will get here is opinions. Too many variables. Own your own home? Money in stocks or savings? Other assets? Etc. hope it works out for you

[jimhoward]

I recommend not taking financial advice from anyone on an Internet forum….oh wait.

[CoachKandSportsguy]

If the annuity is a fixed amount over the period of time, say until 90 years old,
and inflation is 4% per year over that time period, at what point won't the payment cover the monthly food bill?

Its not advice, its a question ie, size matters. .

[Shelbyh]

I have to make a decision on my pension.

I have the following options.

Please note that x changes below.

Single life annuity. I get x every month until I die.

10 year certain amount and life annuity. Pays out for my lifetime and fixed amount for 10 years. X here is about 94% of single live annuity.

50% joint and survivor annuity. I get x for my lifetime and wife gets .5x for her life. X here is 87% of single live annuity.

75% joint and survivor annuity. I get x for my lifetime and wife gets .75x for her life.
X is 81% of single live annuity.

100% joint and survivor annuity. I get x and my wife gets x for her life. X is 76% of single live annuity amount.

Lumpsum. A lumpsum payment. This would amount to 124 months of the single live annuity.

I am thinking the best choice is a lumpsum payment.

On all of the other choices (except for the 10 year certain amount and life annuity), if my wife and I die in a car crash a month after taking the pension, I am leaving a lot of money with the company. On the other hand, if we live 30 more years, we would do pretty well with the 100% joint and survivor annuity.

Any recommendations or suggestions? Thanks.

Quite a few variables to consider to include current health and age, financial picture, assets, etc. I can share our experience with this when my husband retired. gets His pension amount is 60% of his annual salary. That doesn’t change. Our decision was we could buy an annuity of any percentage of his pension which will only pay me(wife) if he dies first. Our financial advisor suggested to buy as much as we could afford based on our ages and other factors. We decided to buy 100% because I didn’t have a pension. So no matter what happens we are both good. Hope that helps.

[Caymus]

Quite a few variables to consider to include current health and age, financial picture, assets, etc. I can share our experience with this when my husband retired. gets His pension amount is 60% of his annual salary. That doesn’t change. Our decision was we could buy an annuity of any percentage of his pension which will only pay me(wife) if he dies first. Our financial advisor suggested to buy as much as we could afford based on our ages and other factors. We decided to buy 100%. So no matter what happens we are both good. Hope that helps.

And did you buy the annuity from that advisor?:smiley:

[Rainger99]

I do appreciate all of the advice. I plan on talking to at least one financial advisor but I also thought that getting opinions from other people (that may be more objective because they will not get any commission) would be very helpful. Some of the people on TOTV have very good ideas.

I think that the more information I get, the chances are that I will make a better decision.

[Marine1974]

I have to make a decision on my pension.

I have the following options.

Please note that x changes below.

Single life annuity. I get x every month until I die.

10 year certain amount and life annuity. Pays out for my lifetime and fixed amount for 10 years. X here is about 94% of single live annuity.

50% joint and survivor annuity. I get x for my lifetime and wife gets .5x for her life. X here is 87% of single live annuity.

75% joint and survivor annuity. I get x for my lifetime and wife gets .75x for her life.
X is 81% of single live annuity.

100% joint and survivor annuity. I get x and my wife gets x for her life. X is 76% of single live annuity amount.

Lumpsum. A lumpsum payment. This would amount to 124 months of the single live annuity.

I am thinking the best choice is a lumpsum payment.

On all of the other choices (except for the 10 year certain amount and life annuity), if my wife and I die in a car crash a month after taking the pension, I am leaving a lot of money with the company. On the other hand, if we live 30 more years, we would do pretty well with the 100% joint and survivor annuity.

Any recommendations or suggestions? Thanks.
I had similar choices . I was married . I chose 100% joint and survivor annuity . I received the pension . It was about $200 a month less . I was 60 my wife was
63 . If you chose this and divorce as I did my spouse was entitled to a portion of my pension depending on how many years she was married to me while I was working for the company I retired from .
It was 94 % of the time .
She gets alittle less than half monthly I receive alittle more .
If I die first I recover her portion and if she dies first I recover her portion for the remainder of my life . Since I was married to her 100 % of the time she worked I was entitled to what was left from her lump sum pension .
If your wife will not recover your portion of the pension if you die the company you worked for benefits. And same for if your wife dies first .

[Stu from NYC]

If the annuity is a fixed amount over the period of time, say until 90 years old,
and inflation is 4% per year over that time period, at what point won't the payment cover the monthly food bill?

Its not advice, its a question ie, size matters. .

95% of females will agree with you

[Stu from NYC]

Quite a few variables to consider to include current health and age, financial picture, assets, etc. I can share our experience with this when my husband retired. gets His pension amount is 60% of his annual salary. That doesn’t change. Our decision was we could buy an annuity of any percentage of his pension which will only pay me(wife) if he dies first. Our financial advisor suggested to buy as much as we could afford based on our ages and other factors. We decided to buy 100% because I didn’t have a pension. So no matter what happens we are both good. Hope that helps.

Wonder what this advise cost you in the long run.

[jcreason5616]

I have to make a decision on my pension.

I have the following options.

Please note that x changes below.

Single life annuity. I get x every month until I die.

10 year certain amount and life annuity. Pays out for my lifetime and fixed amount for 10 years. X here is about 94% of single live annuity.

50% joint and survivor annuity. I get x for my lifetime and wife gets .5x for her life. X here is 87% of single live annuity.

75% joint and survivor annuity. I get x for my lifetime and wife gets .75x for her life.
X is 81% of single live annuity.

100% joint and survivor annuity. I get x and my wife gets x for her life. X is 76% of single live annuity amount.

Lumpsum. A lumpsum payment. This would amount to 124 months of the single live annuity.

I am thinking the best choice is a lumpsum payment.

On all of the other choices (except for the 10 year certain amount and life annuity), if my wife and I die in a car crash a month after taking the pension, I am leaving a lot of money with the company. On the other hand, if we live 30 more years, we would do pretty well with the 100% joint and survivor annuity.

Any recommendations or suggestions? Thanks.

No one can give you a good answer with that information. You described the options available through your company for pension payouts. What you did not mention was your age, your spouses age, the status of your health, how much you have accumulated in your pension account, what savings you have amassed for your own retirement, what you would do if you took the lump sum to protect those assets through the duration of your life, whether your wife is capable of handling those investments, should she be left a widow, and so much more. These are all questions that you need to work through on your own or with a pension professional. You also did not mention any other income that you receive on a monthly basis, which can also factor into your decision. Good luck!

[tophcfa]

I can give the the correct answer if you provide the following:

Your age
Wife's age
Your expiration date
Wife's expiration date

Without that information you have to make your best estimates and don't look back.

You forgot probably the most important tidbits of information.

How well is the pension plan funded?
What entity is funding the plan and what do their financials look like?
Is your plan backed by a third party like the Pension Benefit Guarantee Corporation, and if so, how does your lifetime annuity payments compare with the maximum guaranteed payments?

Bottom line, your analysis should carefully consider the likelihood that you will actually receive the lifetime annuity you are due if you select that option. Don’t blindly consider it to be a done deal.

[rsmurano]

never take out an annuity.
close the thread before somebody else gets sucked in on buying an annuity. The only people that make money on an annuity is the issuer, not the receiver.
You can make up to 20x more money in the stock market than any annuity will give you and quite a few index funds have very low risk.
Just because you/we are older, it doesn't mean that you need to stop making money.

[opinionist]

I had to make a similar decision some years ago, and I chose the annuity option rather than the lump sum to adjust for a budget shortfall. If you are financially secure without the extra income, the lump sum option could make the most sense because inflation will diminish the value of the income with time. If you take the lump sum, then be careful where you invest the money. Too many investments have a negative real return when inflation is considered. A financial advisor is helpful if they do not have a specific product line they are motivated to sell. For example, if you go to a car dealer, they will tell you that "the best choice for you" is a car on the lot (even if it is not).

[retiredguy123]

Take the lump sum payment.

[rjm1cc]

Remember when one of you passes, you lose the lower social security payment.
Not knowing your finances, age, or health I would take the option that pays the most to your wife after you pass.
I do not worry about what I leave to the company. I look at the pension as reliable monthly income with no market risks. Now if you want to leave a lot of money to someone you might have a different opinion.
Yes a meeting with a fee only planner is a good idea.

[manaboutown]

In my life major decision must pass my "sleep at night" test. Before I act on it I pretend I made a decision and then discover if I am resting easy with it.

People have different tolerance levels for financial risk for various reasons. I agree with talking with one or preferably more fee-only FPs who have substantial experience with people in your circumstances. Then weigh their recommendations and make your choice. You are the one who must live with it.

I also agree that posting on TOTV is a good idea. One never knows where a a useful suggestion may come from.

[Jalane]

I have to make a decision on my pension.

I have the following options.

Please note that x changes below.

Single life annuity. I get x every month until I die.

10 year certain amount and life annuity. Pays out for my lifetime and fixed amount for 10 years. X here is about 94% of single live annuity.

50% joint and survivor annuity. I get x for my lifetime and wife gets .5x for her life. X here is 87% of single live annuity.

75% joint and survivor annuity. I get x for my lifetime and wife gets .75x for her life.
X is 81% of single live annuity.

100% joint and survivor annuity. I get x and my wife gets x for her life. X is 76% of single live annuity amount.

Lumpsum. A lumpsum payment. This would amount to 124 months of the single live annuity.

I am thinking the best choice is a lumpsum payment.

On all of the other choices (except for the 10 year certain amount and life annuity), if my wife and I die in a car crash a month after taking the pension, I am leaving a lot of money with the company. On the other hand, if we live 30 more years, we would do pretty well with the 100% joint and survivor annuity.

Any recommendations or suggestions? Thanks.

Your spouse would appreciate getting 100%!

[Stu from NYC]

In my life major decision must pass my "sleep at night" test. Before I act on it I pretend I made a decision and then discover if I am resting easy with it.

People have different tolerance levels for financial risk for various reasons. I agree with talking with one or preferably more fee-only FPs who have substantial experience with people in your circumstances. Then weigh their recommendations and make your choice. You are the one who must live with it.

I also agree that posting on TOTV is a good idea. One never knows where a a useful suggestion may come from.

The problem with posting this here is that someone may give an answer that sounds good, the op acts on it and than learns it was the worst possible thing to do.

[CoachKandSportsguy]

So here is the the scenario from the insurance company point of view.:

How do insurance companies invest the money to give you an annuity stream, over that length of time?

Answer, the invest the remaining money after the commission, into the SP500 and in additionally buy put options to cover any downside risk to the investment. There are tables and financial formulas to determine the amount of money which can be withdrawn assuming a market return of X%, with a protective put option. .

Lets look at a hypothetical example:

$1,000,000 used to purchase an annuity:
5% commission = $50K

$950,000 to be invested
$ 900,000 to go into the market,
$ 50K to be used for protective put options, use for cash flow first year if the market doesn't go up. .

Their investment assumptions:
8% index growth average per year,
2% dividends
10% taken from principal per year equals $7,500 per month income,$90,000 per year in the first year.
Zero loss of principal after 30 years, after the good years and the bad years of the market. .

At 4% inflation after thirty years, its equivalent to $2,312 per month today, or $27,750 per year today.
Social security goes up with inflation, annuities do not. Your investments will go up with inflation,

Assuming that $27,750 won't be enough to live on today, and its your only income, then you might want to invest the money yourself
into the SP500, reinvest dividends and take withdrawals only when you need it. . . and save the commissions and hedging activities

Annuities are sold as comfort and safety, just like insurance is for homes.

Lump sum of 124*$7,500 = $930,000

Invest that and don't touch it for 5 years, and at the same assumptions, 8% growth + 2% dividends you will have $1.5 M, 50% more than the original annuity, and then start taking the $7,500 annuity amount out, and you will much more after 30 years. . with the option to take more when needed

My parent's lived within 1 social security check, and continually reinvested their distributions from their IRA distribution, and never touched their taxable investments in high quality SP500 stocks, and never took an annuity, My mom is 97 and still has enough money to live in assisted living at currently $13K per month, for another 5+ years from the investments they never used, after 3 1/2 years already paid out to assisted living

its all about wealth creation and living within means. and the older you get, the less you spend, as your activity level continues to slowly decline'

Good luck. .

[Altavia]

Take the lump sum payment.

Agree, life is full of twists and turns.

Take it before the end of the year and interest rates drop.

[Rainger99]

Agree, life is full of twists and turns.

Take it before the end of the year and interest rates drop.

This is interesting. I called my employer today and they told me that all of my options will go DOWN if I don’t take it by December 1. I assumed that the lump sum and all of the other options were invested and paying some interest on a daily or monthly basis.

So I get more money if I cash out now rather than waiting until end of year!

The woman in HR couldn’t explain why it would go down but said it would go down!

[retiredguy123]

This is interesting. I called my employer today and they told me that all of my options will go DOWN if I don’t take it by December 1. I assumed that the lump sum and all of the other options were invested and paying some interest on a daily or monthly basis.

So I get more money if I cash out now rather than waiting until end of year!

The woman in HR couldn’t explain why it would go down but said it would go down!
I think the comment in Post 32 was directed to the fact that, the earlier you take the lump sum, the sooner you can invest the money in a high paying CD or other fixed income investment.

My advice to take the lump sum was based on the fact that your employer does not want you to take a lump sum. That is why they are offering you annuities instead. You can always buy your own private annuity, but I don't recommend it. Invest the money yourself.

[virtue51]

I worked in the Benefits Department at my company. We offered our employees the lump sum option; for married employees the monthly pension options were: 50% Joint & Survivor; 10 Year Certain; 75% Joint & Survivor; 100% Joint & Survivor. I am surprised that you have the single life option as a married employee -- this means that if you pre-decease your spouse, she receives none of the pension benefit.

This is one of the most important decisions because you cannot go back in a few years and change your mind. You mentioned if you and your spouse should pass shortly after retirement then the pension is not paid to anyone. This is the wrong mindset.

When thinking of your pension, you need to consider that you may be collecting a pension for 20 to 30 years depending on your age, health, etc. There are lots of factors to consider -- your age at time of retirement; other investments; whether or not your spouse has a pension or other assets; your tolerance for risk, if electing the lump sum option; you also need to be very honest about how you view money and handle money.

I had employees tell me that they will have no expenses when they retire because the house is paid for -- really, does the hot water heater last 30 years? will you be climbing a ladder at age 80? etc. In the last few years, the cost of food, housing and other everyday items has increased. My point is you need to carefully consider the options.

Also, you and your spouse will be collecting Social Security benefits -- when one person dies then there is only on Social Security benefit.

Does your pension have a cost-of-living benefit?

Did your employer offer a 401(k) benefit? If yes, you may want to reach out to the adminstrator of the 401(k) benefit because they may offer employees access to a financial planner at no cost to you. The financial planner does not receive commissions -- this was true with 401(k) administrator of our plan. You can check with your Benefits Department.

I would suggest that you consult with a certified financial planner to review your situation. Based on your questions, this will be money well spent so that you have sufficient funds to provide for your expenses now and in the future.

[jimmy o]

I have to make a decision on my pension.

I have the following options.

Please note that x changes below.

Single life annuity. I get x every month until I die.

10 year certain amount and life annuity. Pays out for my lifetime and fixed amount for 10 years. X here is about 94% of single live annuity.

50% joint and survivor annuity. I get x for my lifetime and wife gets .5x for her life. X here is 87% of single live annuity.

75% joint and survivor annuity. I get x for my lifetime and wife gets .75x for her life.
X is 81% of single live annuity.

100% joint and survivor annuity. I get x and my wife gets x for her life. X is 76% of single live annuity amount.

Lumpsum. A lumpsum payment. This would amount to 124 months of the single live annuity.

I am thinking the best choice is a lumpsum payment.

On all of the other choices (except for the 10 year certain amount and life annuity), if my wife and I die in a car crash a month after taking the pension, I am leaving a lot of money with the company. On the other hand, if we live 30 more years, we would do pretty well with the 100% joint and survivor annuity.

Any recommendations or suggestions? Thanks.
Be careful not to lose sight of the fact that a pension purpose is to provide security for you and spouse. Choose the option that gives you the best retirement life style possible. Do not take any consideration to leaving money on the table. That type of thinking will sabotage a good plan.

[Altavia]

This is interesting. I called my employer today and they told me that all of my options will go DOWN if I don’t take it by December 1. I assumed that the lump sum and all of the other options were invested and paying some interest on a daily or monthly basis.

So I get more money if I cash out now rather than waiting until end of year!

The woman in HR couldn’t explain why it would go down but said it would go down!

How do Interest Rates Affect Pensions? | Miramontes Capital (https://miramontescapital.com/how-do-interest-rates-affect-pensions/)

If interest rates are low, a lump sum pay out looks rewarding, even better than an annuity from a big company. In short, when interest rates are high, lump sums shrink. If they are low, lump sums grow.

Because of this, some choose to retire early when they see the interest rates begin to creep up. This may not be a bad idea if one is close to retirement age with a low chance of being able to see interest rates lower again.

In the current interest rate environment, generally, every one percentage point rise in interest rate reduces a lump sum’s value by 10% to 15%. For example, if your lump sum payout is $500,000, a one percentage point rise in interest rates could lower the amount by $75,000. Also, typically every $1 of pension income translates to about $140 of lump sum payment. If your monthly pension payout is about $1,500 a month, your lump-sum would be about $210,000.


Inflation And Pension Lump Sums: Timing Is Everything (https://www.forbes.com/sites/leonlabrecque/2022/08/09/inflation-and-pension-lump-sums-timing-is-everything/)

[Rwirish]

Great place to get a recommendation, a social media site. Contact several financial professions and then make your decision.

[Rainger99]

Great place to get a recommendation, a social media site. Contact several financial professions and then make your decision.

Just because the information is posted on a social media site doesn’t make the information bad. In fact,
some of the threads are very helpful. There are some very smart people on TOTV.
After reading the posts, I am in a much better position to discuss my options with a financial advisor.

[Villagesgal]

For you and your wife's best financial future see a certified financial planner, or possibly 2 or 3 each with a different company and have them give you several options, then discuss it with your wife and make a decision. This is the rest of your lives, doesn't that warrant seeing an expert?

[rsmurano]

There is no such thing as a high paying CD or money market. Both of these will always give you a return less than the inflation rate. A 5.25% money market return 2 years ago was 1/2 the inflation rate.
I cashed out of 2 pensions when I left each company because I knew I could make more off that money investing it myself and I quadrupled the value of those payouts easily.

I know the average rate of return is around 8% over the life of investing, but why shoot for average? Average is boring! There are so many low risk index funds out there that you can make over 30% so why would anybody put money in a cd or in a savings account or bonds? I’ve used these same funds for decades bringing me similar returns when I’m invested in the market. I looked at these funds a couple weeks ago and even over a 10 year period, they had a return of 15% which is very good when markets have had 2 big downturns in 2020 and 2022. Some of us bought Apple, meta, nvidia, tesla, and other stocks in late 2022 and those have returns that have doubled to quadrupled since their lows of 2 years ago.

[Caymus]

Just because the information is posted on a social media site doesn’t make the information bad. In fact,
some of the threads are very helpful. There are some very smart people on TOTV.
After reading the posts, I am in a much better position to discuss my options with a financial advisor.

I agree. There are many financially knowledgeable people in TV. At worse it gives you a list of questions to have the paid "experts" answer or catch in lies.

[CoachKandSportsguy]

Great place to get a recommendation, a social media site. Contact several financial professions and then make your decision.

The most interesting point of asking TOTV is that most of us "have had to make the decision" and are seeing the results of the decision. In other words, we have had skin in the game. Go to a sales rep at a financial institution, and you will be talking to a sales rep. Only a fee only CFP will answer the questions as a fiduciary, in your best interests..

Getting the voice of experience is what you get here. So if you think that we are all idiots after making informed decisions, then I think you have the wrong opinion of the retirees of the Villages. . . So why are you here?

[retiredguy123]

Call me skeptical, but why is the employer offering all of these complicated options? You are leaving the company forever, so why does the employer care what you do with the money that you have earned? If you give all employees the maximum amount of money as a lump sum, they can make their own choices. If they want an annuity, they can buy one from an insurance company, or they can invest it themselves. What am I missing? To me, it sounds like the employer is trying to reduce or delay their pension costs at the expense of their employees.

[Caymus]

Call me skeptical, but why is the employer offering all of these complicated options? You are leaving the company forever, so why does the employer care what you do with the money that you have earned? If you give all employees the maximum amount of money as a lump sum, they can make their own choicevs. If they want an annuity, they can buy one from an insurance company, or they can invest it themselves. What am I missing? To me, it sounds like the employer is trying to reduce or delay their pension costs at the expense of their employees.

At least in my case the pension(annunity) offered was much better than what I could find on the open market. Maybe they had some sort of volume cost advantage.

The employer isn't really doing that much additional work in offering options. A third party is handling most of the "paperwork".

[Rainger99]

Article on lump sum versus monthly payments.

Lump-Sum vs Monthly Pension Payments: Which Is Better? (https://www.aarp.org/retirement/planning-for-retirement/info-2020/monthly-pension-vs-lump-sum-payout.html)

[retiredguy123]

At least in my case the pension(annunity) offered was much better than what I could find on the open market. Maybe they had some sort of volume cost advantage.

The employer isn't really doing that much additional work in offering options. A third party is handling most of the "paperwork".
My guess is that, instead of getting a volume cost advantage, they shortchanged the employees on the lump sum payout they offered.

[Rainger99]

The US retirement system gets a C+ in global study coming in 29th out of 48 countries!
We are behind Saudi Arabia but ahead of Poland!

The US retirement system gets a C+ in global study (https://www.yahoo.com/finance/news/the-us-retirement-system-gets-a-c-in-global-study-230119976.html)

[Joe C.]

Take your information to a FIDUCIARY ...... not a financial advisor. There's a BIG difference between the two. You will have better results with a fiduciary.

[ton80]

This is interesting. I called my employer today and they told me that all of my options will go DOWN if I don’t take it by December 1. I assumed that the lump sum and all of the other options were invested and paying some interest on a daily or monthly basis.

So I get more money if I cash out now rather than waiting until end of year!

The woman in HR couldn’t explain why it would go down but said it would go down!

Lump Sum Changes With PBGC Defined Rate for a defined time period usually 3 months

When I retired in 2002, my employer published what the PBGC rate will be for the next 3 month period. With some digging we verified that the HR provided Lump Sum Amount was really a Net Present Value of the retirement payments up to the actuarial expected life expectancy . This was about 83 years and 6 months in 2002. Net Present Value is a standard Application/formula in Excel and other spreadsheets.

I devised a spreadsheet which had input of my birth date, start of employment date, retirement date, PBGC rate and had the spreadsheet estimate the lump sum for retirement. The spreadsheet proved very accurate especially doing estimates of the cases where only difference were the retirement at the current interest rate and retiring a month later with the new PBGC rate. If the rate went up the lump sum went down and you actually lost money by working the extra month even after taking credit for the one month extra salary. If the rate went down your lump sum went up.

The spreadsheet was specific to me, but I devised a generic spreadsheet with a given final salary of 100,000$ so that others could input their specific data and get a result for their situation.

This does not influence your options in the original note but it helps with the decision when to retire in the short term.

[Caymus]

Take your information to a FIDUCIARY ...... not a financial advisor. There's a BIG difference between the two. You will have better results with a fiduciary.


Being a fiduciary doesn't guarantee competence or honesty. Bernie Madoff was a fiduciary.

[Rainger99]

Lump Sum Changes With PBGC Defined Rate for a defined time period usually 3 months

When I retired in 2002, my employer published what the PBGC rate will be for the next 3 month period. With some digging we verified that the HR provided Lump Sum Amount was really a Net Present Value of the retirement payments up to the actuarial expected life expectancy . This was about 83 years and 6 months in 2002. Net Present Value is a standard Application/formula in Excel and other spreadsheets.

If the rate went up the lump sum went down and you actually lost money by working the extra month even after taking credit for the one month extra salary. If the rate went down your lump sum went up.

Thanks! I should have paid more attention during math classes!

[Battlebasset]

Can't advise you, but I will tell you what I did:

At age 58, I took the monthly option, with 100% for my wife if I go first. But I took a smaller monthly amount in exchange for a lump sum that I rolled into an IRA, invested in stocks. I figured that was my "inflation hedge" as my monthly pension amount will be the same today as it will be in 30 years. That lump sum has grown 33% over the two years it has been invested. And should we both die in a car crash, that lump sum amount can be willed to my kids, church, etc. Not so with the monthly pension alone.

So a compromise that has to this point, been a good decision. And if I die earlier, what will I care? I'll be dead.

[SusanStCatherine]

IMHO each person is different in many factors needing to be considered. If you have children and want to leave them an inheritance, then the lump sum for sure and you have total control over it. If you take the lump sum then you are responsible for handling it, but you have freedom to do so and make changes yourself later on. If you have plenty of money and children, make sure half the money is titled to both you and your wife split 50-50 and transfered upon death to your children. Annuities, pensions, and social security end at death - lump sums do not. Consider your personal life expectancy based on genetics and current health. Don't forget to consider tax implications. You can get advice free or pay for it but you still need to make your own decision. I've been ill advised by lawyers and tax specialists so that can happen and can also happen with financial advisors as well. Good luck!

[Altavia]

Lump Sum Changes With PBGC Defined Rate for a defined time period usually 3 months

When I retired in 2002, my employer published what the PBGC rate will be for the next 3 month period. With some digging we verified that the HR provided Lump Sum Amount was really a Net Present Value of the retirement payments up to the actuarial expected life expectancy . This was about 83 years and 6 months in 2002. Net Present Value is a standard Application/formula in Excel and other spreadsheets.

I devised a spreadsheet which had input of my birth date, start of employment date, retirement date, PBGC rate and had the spreadsheet estimate the lump sum for retirement. The spreadsheet proved very accurate especially doing estimates of the cases where only difference were the retirement at the current interest rate and retiring a month later with the new PBGC rate. If the rate went up the lump sum went down and you actually lost money by working the extra month even after taking credit for the one month extra salary. If the rate went down your lump sum went up.

The spreadsheet was specific to me, but I devised a generic spreadsheet with a given final salary of 100,000$ so that others could input their specific data and get a result for their situation.

This does not influence your options in the original note but it helps with the decision when to retire in the short term.

Adding, some companies set the PBGC rate once per year. For my employer, it was Jan 1.

Interest Rates | Pension Benefit Guaranty Corporation (https://www.pbgc.gov/prac/interest)

[ton80]

I suggest that Rainger99 should ask Company HR what the PBGC Rate is and what it will be and when does it change. From her answer that the lump sum will go down in January, it seems that the PBGC rate used will go up Jan 1, 2025 as per Altavia's example.
If the rate goes up the Lump Sum will go down. If the rate goes down the Lump Sum will go up .

[Rainger99]

I suggest that Rainger99 should ask Company HR what the PBGC Rate is and what it will be and when does it change. From her answer that the lump sum will go down in January, it seems that the PBGC rate used will go up Jan 1, 2025 as per Altavia's example.
If the rate goes up the Lump Sum will go down. If the rate goes down the Lump Sum will go up .

They told me that if I wait until next year to start taking my pension that all of the options will go down. The monthly payments and the lump sum!

[Altavia]

They told me that if I wait until next year to start taking my pension that all of the options will go down. The monthly payments and the lump sum!

If I understand correctly, the annuity is essentially based on the value of a lump sum at time of retirement.

[ton80]

In my case 22 years ago, the Defined Pension Benefit was a retirement pay equal to 1.6% times the years of accredited service times your best 3 years of your last 5 years salary as long as you reached retirement age of 55 yrs old at retirement. Earlier retirement had some severe penalties. There was no lump sum annuity set up for all retirees. The Company paid retirement from current income and profits. They also used these sources to fund most projects. Things have changed

They also offered similar options as in the original post. If the wife were not a beneficiary SHE must sign a document stating that she agreed with that.

[retiredguy123]

In my case 22 years ago, the Defined Pension Benefit was a retirement pay equal to 1.6% times the years of accredited service times your best 3 years of your last 5 years salary as long as you reached retirement age of 55 yrs old at retirement. Earlier retirement had some severe penalties. There was no lump sum annuity set up for all retirees. The Company paid retirement from current income and profits. They also used these sources to fund most projects. Things have changed

They also offered similar options as in the original post. If the wife were not a beneficiary SHE must sign a document stating that she agreed with that.
LOL. That is great if the wife knows what she is signing. My cousin was a military wife who signed the document, but didn't know that she wasn't a beneficiary until after her husband died.

[Rainger99]

lol. That is great if the wife knows what she is signing. My cousin was a military wife who signed the document, but didn't know that she wasn't a beneficiary until after her husband died.

Wow! Do you know if he intentionally cut her out or whether he made a mistake. I am going through my pension forms and they are pretty complicated!

[ton80]

In the Company I worked for, the wife was an integral part of the retirement meetings and signings. The HR folks prepared courses that explained everything to the best of their ability. On the wife agreeing to sign away her rights to the pension they made sure that she knew again to the best of their ability. Is it 100% GUARANTEED...NO, but it is an open discussion both in the courses and in the individual retirement signings. The courses and signings were done at the Company HQ not a local office.

[CoachKandSportsguy]

What an annuity is equivalent to is buying a bond with fixed monthly interest payments, with an unknown end point if it's for life. However, the for life actuary uses your life expectancy from actuarial tables, which is very generic.

my current life expectancy is
Northwest Mutual life span calculator is 91 years old after answering all questions accurately
Social Security calculation based upon birthdate only 84.6 years old

which life expectancy do you think the retirement company picked with the actuarial lump sum payout?

[Altavia]

What an annuity is equivalent to is buying a bond with fixed monthly interest payments, with an unknown end point if it's for life. However, the for life actuary uses your life expectancy from actuarial tables, which is very generic.

my current life expectancy is
Northwest Mutual life span calculator is 91 years old after answering all questions accurately
Social Security calculation based upon birthdate only 84.6 years old

which life expectancy do you think the retirement company picked with the actuarial lump sum payout?

Very key point for the OP.

[manaboutown]

I just did the NWML test and came up a life expectancy of 105. I had to laugh. I am now 82.

[Jim1mack]

I have to make a decision on my pension.

I have the following options.

Please note that x changes below.

Single life annuity. I get x every month until I die.

10 year certain amount and life annuity. Pays out for my lifetime and fixed amount for 10 years. X here is about 94% of single live annuity.

50% joint and survivor annuity. I get x for my lifetime and wife gets .5x for her life. X here is 87% of single live annuity.

75% joint and survivor annuity. I get x for my lifetime and wife gets .75x for her life.
X is 81% of single live annuity.

100% joint and survivor annuity. I get x and my wife gets x for her life. X is 76% of single live annuity amount.

Lumpsum. A lumpsum payment. This would amount to 124 months of the single live annuity.

I am thinking the best choice is a lumpsum payment.

On all of the other choices (except for the 10 year certain amount and life annuity), if my wife and I die in a car crash a month after taking the pension, I am leaving a lot of money with the company. On the other hand, if we live 30 more years, we would do pretty well with the 100% joint and survivor annuity.

Any recommendations or suggestions? Thanks.

My finiancial advisor said, 'if only we knew how long you’re going to live'.

In our case it was my wife’s 401k that we bought a lump sum one. We were 60. If she dies monthly payments stop and I get what’s left. The longer she lives the less I would get should she pass before me. We are still healthy at age 72 and have watched the survivor (me) benefit dwindle. We should live to age 85 or beyond after which time there would be 0 survivor benefit. Should I survive her after age 85 and having to long-term care insurance I’m kind of screwed.

So we are looking at taking what’s left of the lump sum and adding it to our current brokerage account. After lengthy investigating I’ve determined that the dividends earned then would easily replace the Annunity benefit plus some while protecting the principal which could be used for long term care if need be. Of course stocks go up and down and dividend payouts can also fluctuate both up and down. I’ve seen it happen on the 10 stocks I bought 8 years ago just based on their yield. 10% or higher. Some 15%. They weren’t AAA rated stocks but I still receive dividends today between $700 and $900 monthly based on the quarter. That’s our ‘fun’ and travel money. I would keep those so theyd be in addition to the dividends we’d see should we proceed with this plan so kind of a hedge to down stocks and decreased dividends should that occur.

Haven’t ran this pass my advisor yet but will do next week to see what holes if any he shots into this ‘plan’.