The 50/50 option for my husband’s company was to take 50% of the value as an annuity and 50% as a lump sum payment. We had already chose the 100% survivor option years ago.
Years and years ago, my husband’s plant manager was diagnosed with terminal cancer while near retirement but before drawing. He had (probably) never changed from when he was single to include his spouse. I remember that there was a period of uncertainty that he would live long enough for the plan to change to 100% survivorship.
After that, the company made a big deal that everyone needed to be informed about how the pension would pay out.
Every company has different circumstances and ideas of what their pension plans offer.
Thats so sad. I had a friend growing up whose father was a local police officer (fairly high ranking I think) and retired in his 50s maybe (??), taking the 100%/nothing to spouse (who was a SAHM, but the kids were grown or almost grown). Middle class family. Well, you can tell where this is going. A few months after he retired, he had a MI and died. Lots of juggling by other family members to help out the widow.
I will buy taxable bonds, not munis - such as federal agencies - like Federal Farm Credit or Home Loan - backed by the full faith and credit of the US government - because I can get 5.5 instead of 4%. But - with no call protection whereas I can get 8-10 years on a muni.
Why taxable? Because it will be in an IRA.
It’s interesting - the $$ amount they’ve left me - says as of Dec 31 2024.
So maybe the amount they gave me ismore than I’d get…
So you’re saying, if I wait for a fed cut, the $$ can go up. That makes sense - it’d cost them more to achieve the annuity…makes sense.
I have til Nov 13th - so it makes sense in that case to wait.
I do need to talk to someone in the know - I agree - and a nice poster was nice enough to DM me a video - I need to watch first.
Then I have a single life / ten year thing - that’s less $$ than #1. I’m not sure the difference but maybe that it lasts a minimum ten years even if you die?
My concern in general is - what if I don’t live long enough to “earn” the money. With a lump sum, I take that worry away. On the flip side, what if I live long.
Maybe it’s smart to take the lump sum but delay SS?
These are the questions I’ll ask.
Like everything, I’m guessing there’s no right answer. Only a right answer for me.
H was federal employee and had option of choosing max of 55% survival benefit for me or any lower amount. He/we opted for the 55%, which causes his monthly payout to be 10% lower than it would otherwise have been.
We didn’t have any cash payout as an option. The closest we had was we contributed after tax funds to voluntary contribution fund that we had an option to roll into a roth ira OR get a fixed pension with no cola for that amount. We chose to roll it into a roth IRA without a ton of thought.
Perhaps it would have been more prudent to speak with a financial advisor but we didn’t. We are pretty satisfied.
Since people are talking about spousal benefits related to pensions/buyouts - please consider the cost of taking a the pension in a reduced amount with benefit to spouse vs the cost of a life insurance policy payable to the spouse.
My uncle, who was the head of HR for a federal agency, took that option after a cost comparison, and I’ve heard of others doing it too.
My H was 70 when he retired and we considered without researching that a life insurance policy on him would be very very expensive and more than the 10% we sacrifice every month. It probably would have been prudent to research but 55% of H’s pension would have cost us a ton.
We took the monthly payout with 100% survivor benefits as the monthly difference was not large. However, we did not look at buying an annuity instead. I have heard, however, that annuities typically have a higher cost than a pension so not sure that the lump sum would have provided as much income with an annuity.
DH was not offered a buyout. If he was, and the amount was signficantly higher than the lump sum, that might have been a different discussion. Unfortunately, the pension does not grow with inflation so given the market that last few years, the lump sum would have grown. However, having a known monthly income without worries about the market is comforting to us.
When DH applied for his retirement, the HR rep said that women almost always choose the 0% survivorship option, but the men choose 50-100%. I thought that was interesting. We did 50% because 100% was a pretty big cut to me, and I can squeeze blood from a turnip if need be.
I’m planning on doing 50% for H as well, but we will see how the numbers (and his health) look later. But something I learned with H’s retirement plan that is also the same for mine… If you take the cut for survivorship and then the beneficiary dies before you, your check reverts back to the full amount, 0% survivorship option. I thought it was set in stone forever and just another gamble to make.
Mine also does not ever increase with inflation which stinks. H is on the state plan, so that one will increase at least.
A good CFP will lay out all of the retirement options. Ours did several columns for comparison. Center column was both of our retirement accounts together. Left column was what MY retirement income would look like of DH died first. Right column was what DHs retirement income would look like if I died first.
This helped me decide how to deal with my pension. In my case, DH would get 50% if I die first, so there is a small reduction in my monthly pension now. But if he dies first, my pension reverts to 100% of the monthly amount.
DH doesn’t have a pension, but since I’m named as beneficiary on all of his accounts, I think I’ll be fine, even though I will completely lose his SS benefit (I’m subject to the offset and windfall provisions so can never collect on his earnings).
My husband and I “split our bets”…. both picked 50% survivor benefit. I recall it was a pension hit of approx 10% (I think a little more on his since he is 7 years older than me, less on mine).
After reading all these posts I’m thinking I need to consider some low risk positions. I’ve been investing sine the 80’s. My brokerage portfolio dash board continues to characterize all of our accounts as “Aggressive Growth”
This is a little off topic, but there is a Goldilocks portfolio to ensure the maximum safe withdrawal rate. Below are a couple of Boglehead podcasts covering specifically that, queued to the appropriate point.
possible retirement!