Rising interest rates had a significant impact on actual versus calculated lump sum. Between 1 quarter, my lump sum dropped by 20%. Frankly, I don’t understand why those who are RE or near 65 would want to stick around.
7 replies (most recent on top)
@3flq ok, where is your lump sum invested to get 30 years good returns? How did you assess and determine the profile risk?
@2jww , your statement is very naive and shows little understanding of finances. You may have very little fun with taking pension in a high inflation environment, as this may end very badly for folks if long term inflation runs high. Please google “Rule of 72” and apply this to your decreased purchasing power with a fixed monthly pension; at 5% inflation your money is worth only 50% in 14.4 years so your purchasing power cut in half. In about 28 years your purchasing power is only 25% of what it is now. You are at mercy of inflation if you take pension. If you take lump sum and are not very stupid, you can conservatively invest and reasonably expect earn 2-4 % above inflation rate long term and be much better off. The key is balanced and diversified portfolio that is conservatively invested. Anyone in position of making a decision like this can easily connect with financial adviser (preferably a CFP) to understand their own situation and also consider own financial position and potential influence of social security on their decision. If inflation runs hot at 6-8% for next 3-5 years pension would be severely eroded very early on. This is real life decision making showing that voting matters.
Lump sum is not necessarily the best option regardless of the interest rates.
People staying beyond 55 now either didn’t save, took an unexpected late divorce or can’t do math. Sadly for an engineering company we have a lot of people that can’t do math…
Those who Retired in 4Q 2020 had the best lump sum interest rates in all recorded history. I know a few folks who took advantage of that.
Won't see those numbers possibly ever again before the whole 'Pension' setup is eliminated at EM. In a few years.
LS is not the only option.
Because I make a great salary, and I love my job!