Thread regarding Allstate Corp. layoffs

Post ID: @1kvri+15KBxRu4 You are mixing the two pensions.
The Cash benefit pension is based on Treasury bond rates and the amount the account grows is based on the Interest Crediting Rate.
The (frozen) Defined Benefit pension earns NOTHING! Before is was frozen, it grew based on your age, tenure and salary. Now it only grows based on you age and 'less penalty' for taking it prior to 65.m The only interest rate that matters for the Defined Benefit pension is the lump sum calculation. Back in the 2000s and before, the interest rate that was used was treasury rates so relatively speaking the lump sums were larger. The Pension Protect Act (aka corporation bailout on the backs of workers) switched the calculation method to Corporate Bond Rates which is usually several % points higher than treasury bonds. So, it was really a double whammy of frozen pension and when you finally do get a chance to take your $, the rules were changed. But the interest rates have been trending down so this is to our benefit.
It's your call when you take your pension. It's your call if you take a lump sum or choose to have a monthly check. If you take the lump sum and roll it into your IRA you will want to invest wisely. These are historically low interest rates but they could still go lower. You can wait and decide Sept 2021. It's possible they could go even lower.

Is it just me or did Allstate manipulate the interest rate they apply to minimize the lump sum increase? While the 1st segment rate dropped a full 1.5%, the Interest Crediting Rate they apply only dropped 0.76%, from 2.12% in 2019 to 1.36% for 2020. Trust me when I was running projections before the rates were announced I saw what the increase was for half a percent and a full percent, and now that I can see what the projection is with the new rates it’s right in between, i.e. they applied the 0.75%. If they had applied the full 1.5% it would have been a massive increase. Don’t get me wrong, this bump is sweet, but last year the 1st segment was 2.09% and the interest crediting rate was 2.12% so why the big difference now with the new rates? 1st segment 0.52% and interest crediting rate of 1.36% - I would have expected the interest crediting rate to be just slightly above 0.52%.

You can now calculate your 2021 benefit. They updated all interest rates. In addition to the 3 segment rates, they also updated the Interest Crediting Rate from 2.12% in 2019 to 1.36% for 2020. That's a 0.76% reduction year over year.

It applies if you are retiring in 2021 and are eligible to take the lump sum. There are a number of eligibility variables, so need to check with HR on your individual situation.

Does this applied if you are 55 ?

Please continue to update us!

Thanks for the below response.. the rates were announced today and we can check Monday... I will check with that article but I was leaning toward lump sum anyway and the higher rates help with that decision..

Do you anticipate this trend continuing in 2020? I’m 59 and I guess I’ll find out in the next 2 weeks or so if I’m gone..

To the person who asked if the monthly payment would be increased the answer is no. Here's a good website for you to compare lump sum vs monthly pension. https://www.bankrate.com/calculators/investing/annuity-calculator.aspx
Leave the Annual Growth Rate blank and it will calculate for you what the equivalent investment yield is. The decision is personal one that depends on your own personal financial situation, invesment risk comfort level, etc. It all depends on your income needs. If you decide to take the monthly pension payment PLEASE make sure the you invest your 401k/IRA Rollover for growth. Why? The monthly pension will never increase. Imagine how much that monthly payment will be worth in 30 years. At 2.4% inflation your buying power will be halved.
Need help? Vanguard, Fidelity and Schwab have low cost financial planners. I get nothing for this referral code but you get $500 if you deposit over $100,000 at Schwab. http://www.schwab.com/public/schwab/nn/refer-prospect.html?refrid={REFID}

So if you decided to take monthly payments would those also be roughly 9.5 % higher?

This just in. IRS announced rates
Segment 1 Segment 2 Segment 3
Aug 2020 0.52 2.22 3.03
Aug 2019 2.09 3.00 3.61

This means approximately a 9.5% increase in your lump sum if you take your pension in 2021. It'll take a week or more before Allstate announces this, and then about a month before you can calculate it. Hint: Compare lump sum Nov 2020 to Jan 2021.

The 1st rate is down 1.5% from 2019, but that 3rd rate is just .5%. Any drop is nice, but if there were to be a full 1.5% drop that would be awesome for next year! We’ll see next week. As for lump sum, if you have a financial adviser and you take your 401k and lump they can really put that to work for you to last a lifetime, with something left when you’re gone. Monthly is nice but nothing left to give when you go, if that’s a consideration. Run the numbers on different return scenarios and break even dates.

I’m trying to decide about monthly or lump sum.. started looking into it the week before the lay-off announcement.
Monthly is a huge benefit.. not many people have that and no fees etc and guaranteed for life..
Putting it in your own annuity means fees and no guarantees and in my state pension income is not taxed.. tough decision

The problem with the monthly annuity is that it goes away if you die. I may be wrong but that is how it was explained to me

To answer the question, 'I wonder how they figure what the interest rate drop is among the 3 used when calculating benefits? " The actual breakdown is in the pension documents but to simplify, back in 2009 they changed the interest rate used from 30 year US treasury bond rate (currently 1.41%) to a mix of short, mid and long term (investment grade) corporate bonds. I think it's split 1/3 to each segment but I'm not 100% sure. It's crazy but it's based on the rate at the end of the month, in our case it's the August month end rate which is then used for all lump sum calculations for the following year.
Even thought the pension is frozen, it does sort of grow. Every year you age your penalty for early withdrawal is reduced. Age 63 -65 it's 8%. Let's say you are 63 and you decide you want to take the lump sum based on the Aug 2020 rates. You don't have to take it in Jan. Let's say it's 300,000 if you take it in Jan 2021. If you wait until Dec 2021 the early withdrawal penalty will be reduced and you lump sum should be ~323,000. Now here's the important part. Let's say interest rates Aug 2021 are up an average of .5%. If you wait to take the lump sum until Jan 2022 you'll receive about $307,000.
Run your numbers! Understand the important dates. It's your money!

I wonder how they figure what the interest rate drop is among the 3 used when calculating benefits? For instance, the 1st one dropped 1.5% from 2019, the 2nd .75% and the 3rd .5% When you project your lump sum on YBR it allows you to make interest rate adjustments downward by .5% and 1% it doesn't allow any bigger adjustment than that in calculating your projected benefit. A .5 % drop results in a very nice bump, a 1% drop is huge! I can only imagine if it were to drop 1.5% that would be astronomical, and seems too good to be true. My projection jumped about 9% with a .5 % drop, and almost 20% jump at 1%! If it truly drops 1.5% for 2020 that would be amazing. That's why I think they must use some sort of blend among the 3 rates because the 1.5% drop in the 1st rate just seems too good to be true, but here's hoping! Find out next month I guess.

To the poster who asked "Is a lump sum better than monthly payout? ", suggest reading:
https://www.schwab.com/resource-center/insights/content/lump-sum-vs-annuity-1

I retired in 2019 and opted for a monthly payout from my "old" pension. I was allowed to and decided to leave my 401k with Allstate/Aon Hewitt. Have until 72 when I will be required to start minimum withdrawals.

Good luck!

July 2020: 0.59 2.25 3.01.

I retired August, 2018 and waited until the new rates were announced in September, and took my lump sum in November, 2018. In spite of the market ups and downs, the way it's invested with my advisor, I'm doing just fine!

Is a lump sum better than monthly payout? My nephew who is financial advisor says to take monthly payout if healthy, but I've never heard of anyone taking the monthly vs lump sum. How do you figure out?

"How about if the individual is 66, over 20 years in. Can they defer the lump sum payout until 2021?"

That's a good question. It looks like it's term date plus a month which would not be good. That's worth a call imo. If you can just get to Dec 1...

Allstate will have HR councillors to guide you.

If you are laid off in August and no longer on company email do they send you a letter or how to you access how the rates will affect you?

If I get laid ff, I turn 60 next June and was planning to hold of until then. Especially if the rates are favorable toward doing that.

If you get laid off but are eligible for a retirement do they hook you up with a person to help you handle all of tha?

I have that question as well. If you are laid off at the end of August, from what I have heard they give you 60 days. Can you then at the end of September take the updated pension and take the severance?

How about if the individual is 66, over 20 years in. Can they defer the lump sum payout until 2021?

Yes. You can delay until you are 65. Assuming the Aug 2020 rates are lower than 2019, you can wait until Aug 2021 rates are announced too, just in case they are lower. Every year you delay the penalty for taking it early declines too. I think it's 4.5% until 62 and then 8% from 62 to 65.

So question... if you get laid off, you can opt to decide not to take your pension right way and wait for the rates to be announced?

Very much appreciate the mention of these figures. I've never fully understood how it works, but I knew there was a reason some stay, while other's retire in November. For me, everything is pointing to me not making a decision is to when I will retire until the end of Sept.