<p>They probably will. And you should think about declining it. Assuming your 500k is about the number that you would get, it means that your annual pension would be well under the threshold that is insured by pbgc (albeit tenously insured). So the taxpayers and PBGC have your back if HP screws up. </p>
<p>If you look at the current returns and options for investment, you’ll discover that its going to be very hard to duplicate the payment stream that you are promised with the lump sum that you get, even if you roll it into an IRA. Even though lump sum settlements are way up over the past few years, they aren’t up enough to allow you to confidently replicate the annuity stream from your defined benefit program.</p>
<p>They do offer lump-sum options - cash, IRA, 401K and the option to defer to 70.5. I don’t really think that I’m going to need the pension at retirement age though that’s my thinking now - it might change in a decade.</p>
<p>If you take a lump sum, can you still enroll in their retiree health care plans?</p>
<p>The high lump sum amounts are due in part to the ridiculously low interest rates we have right now, right? By the time you retire, if rates are more normal, the payout might be a lot less.</p>
<p>DW has a small ($300/month) pension due her DEC days, I wonder what the lump sum would be.</p>
<p>zooser…
I imagine the donut shops are local, nobody is bringing Dunkin any more. I have trouble remembering all those shop names, I do not buy donuts myself. some are lazy and get them in a store, but they are NOT what the office is looking forward to have as a b-day treat.
And you can defer indefinitely at the place of current employment. The other places, yes, you have to withdrew min. at 70 (maybe 70.5), here is another reason to work, that is if you are not kicked out (I prey every day). You also can roll from other places into your current, then you do not need to withdraw while working. However, any account is covered only up to 300k.</p>
<p>I took lump sum, I do not trust anybody. Otherwise, I would have something close to $300/month. It was so long ago that I do not remember the amount at all.</p>
<p>Thats about right. If rates rise, that will change to a lower amount. The calculation is prescribed by the labor department, and right now works out to about 173 times your monthly benefit (if you’re in your early to mid sixties).</p>
<p>But do the numbers. If you put 52K into the ten year treasury today, you’ll get 1.9%. Thats $988/year of pretax income. Or, lets say you put it into stocks and you get a modest return of 2% dividend, and 2.5% appreciation, for a total of 4.5%. Thats still only $2,340 annually (albeit tax advantaged because of the dividend and capital gains treatment).</p>
<p>Of course, your annuity assumes that you die at some point (usually around 83) and those numbers above are just looking at the annual income available from the principle without any principal drawdown. The comparison is not as stark as those numbers make it seem. </p>
<p>I would simply counsel people to make sure they are clear headed when they take these lump sums. I think most are not.</p>
<p>Things can change, and there are scenarios under which you’d clearly be better off with the lump sum managed by you. But, for most people it is far from clear cut that they should take the lump sum. I think they can simply not resist. Also, since a lot of people are taking lump sums, it actually strengthens the quality of the pension stream for those who stay in it.</p>
<p>Women’s calculations are wrong on all of the lump sums, because they use a melded life expectancy that does not take into account gender differences. So are men’s, but they get a slight advantage. The women get slightly less than they should.</p>
<p>Frankly, do not remember no 50+k, they take the lump sum taxes out of it also. Maybe it was some 30+k, maybe not even that, pennies, considering tuition, dissappearred, gone with the wind, no trace…as well as many other thousands of 401k, but for the best cause on earth.</p>
<p>The 401K plan that H has assumes he will live to be about 97.4 years old and bases the payout on that, with upward adjustments as he ages. This is OK for him, but not so good for me as his spouse, since I’m much younger than him. If we rolled it over to an IRA, we would be able to divide by 30.4 instead of 27.4, but the higher fees at the brokerage makes it seem better to keep it at the 401K with employer.</p>
<p>Since my family tends to live a VERY long time, it is slightly concerning. We do have other assets as well.</p>
<p>Have read some doom and gloom about American stocks, which is also troubling. <sigh></sigh></p>
<p>HImom, if your brokerage charges higher fees than your 401K plan, and that is preventing you from rolling into an IRA, then you need a new broker.</p>
<p>Just using Schwab as an example, I pay no maintenance fees and I have investment choices that include Schwab ETFs that are stock market index funds, no commision to buy or sell and annual fees of the etf are .08% (less than 1/10 of 1%)</p>
<p>I use Schwab too. OK, maybe I ought to look more closely at their annual fees of .08%–I thought they were closer to 1%. The 401K funds are being held by H’s employer, the federal government, so they should be pretty safe there. Thanks for the nudge, NJres. I need to have H’s IRA/401K last as long as is possible. Most of our retirement funds are in his name, as he has been the full-time paid worker in our marriage.</p>
<p>I have read that many companies are now requiring the individuals taking the lump sum sign an agreement that they are aware of the potential risk. Apparently some earlier retirees came back to the companies when they lost their money and wanted the company to make them whole.</p>
<p>I worked for a company that administers private pension plans and we always went through a lot of trouble to make sure that those taking a lump sum understood the risk, and wrote our plans so that they were not even permitted over a certain amount.</p>
<p>Now 30 years later, I’ve talked to my old boss and the topic of lump sums came up. A goodly number of those who got their lump sums did come back broke and looking to see if there was an pension. Despite all we made the go through as they shifted their weight acting like they had to go to the bathroom when we went through the spiel and had them sign, notarize and sign again, and still a number, much more than one would think, hoped there was still some money left.</p>
<p>Making funds last when interest rates are so low is very challenging, any way you look at it. Many people aren’t as savvy about managing investments as they thought or hoped. Tough situation for the retiree and sad for former employers too. </p>
<p>Am so grateful has defined benefit pension which is supposed to have COLA too. That is a nice stable base. We could live pretty comfortably on only that but also have some retirement savings we are forced to have RMDs from.</p>