Does it make sense to take a lump sum with so much market uncertainty?
I mean, the market seems unhinged from reality, inflated by the FED during what is essentially the worse economy since the great depression.
The pension is at least guaranteed by the companies ability to pay.
What do others think. There are a pros and cons to each, so Lump sum or pension for life? Which is better and why?
26 replies (most recent on top)
Does anyone remember United airlines losing a great chunk of their pensions after United went bankrupt? Take your pension in lump sum and throw it in your Fidelity account. It's yours and you can will it to your family. If your afraid of losing money because of market volatility, buy CD's instead through Fidelity. If most of us can Twitter, Google, Youtube, and countless other websites, there's no reason why you can't manage you own money. You've done it most of your lives. ALWAYS take the lump!
Not great numbers for October...Maybe good for the economy, but not the pension lump Doeplan on taking in Jan.
October 2020: 24-month average segment rate - 2.11% (1st segment), 3.30% (2nd segment), 3.86% (3rd segment)
Segment rates for September just came out 0.51, 2.31, 3.15
I stand corrected: those segment values were for August not September. September’s should be out in a few days
Minimum value segment rates went down again in September Waiting to see how October’s will fare
To: @1ayd+17oDDG0D
My pension also goes up about 15% taken with the Aug rates and assuming they remain the same until November. I however, do not plan on waiting a year before deciding to take the pension. I'll take my lump sum in January. What you neglected to calculate is the time value of your pension. Even if it goes up a bit in 2022 (Nov-21 rates), I'll be out of the market for the year (although pension, I believe, will still be earning interest - currently 4%).
Also - The Nov-2019 numbers were record low. Covid made them drop tremendously. Even if they stay at this historic low rates (low rates = higher pension), at most, I expect Nov-2021 numbers to be a slight downward drift.
I'll take my money on Jan 1 and roll it into my IRA (already did the same with my 401k) thank you very much.
For those considering a lump sum pension, the payout amount is based on segment interest rates established and published by the IRS every November. These rates impact the lump sum payments for the upcoming calendar year. If the November interest rates are lower in November 2020 versus November 2019, the lump sum payout amount in 2021 will be higher. Based on the August 2020 interest rates, I modeled my lump sum payout for January 2021 and it is approximately 15% higher than if I took the lump sum in October 2020. Based on these August rates, my payout increases by about 3.4% per month. If you don’t need access to the lump sum payout in the next 12 months, you may want to consider holding off on taking the lump sum until the November 2021 interest rates are published. If interest rates increase from November 2020 to November 2021, you can take your payout in December 2021 based on the lower November 2020 interest rates. You can model your lump sum payout on the Fidelity pension website. The IRS rates are published monthly at this site:
https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates
Cash value pension is guaranteed, but those with a tradition pension is not guaranteed. Prem techs cash value pension, while they top out at 25% less then the traditional pensions can be taken to the next company one works at
Considering a lump sum payment is a real concern that we all need to understand, as 1glf+17oDDG0D wrote and others have posted inflation will erode the purchasing power of non COLA (cost of living adjustment) annuity. Don't discount your future! Using the simple accounting principal "Rule of 72" will illustrate how our money will lose value over time due to inflation, example below. I used the historical rate of inflation of 3.5%, 72 / 3.5 = 20.5. What this formula says is it will take 20.5 years to lose 50% of the purchasing power of your annuity, or prices of goods will double in 20.5 years. Inflation is often overlooked but unfortunately it is a real concern and may return with vengeance in our lifetime. I see folks often refer to the advice of a Financial Advisor, if you decide to seek help consider a "Fee for Service" financial planner. Where I live (SF Bay Area) there are many Fee for Service financial planners who will give you a free hour consultation and go prepared knowing your numbers (yes, every nickel). This does take some time but it is well worth the effort.....good luck to all Management and Bargained.
Dont you dare leave any money with AT&T, My first retirement I moved my pension 250K it has now doubled.
"quote" The one problem I'm seeing with stream payments is, the Federal Reserve is printing money to finance the national debt. This predates Covid-19. This could lead to currency debasement.
Currency debasement? what you meant was your worried about inflation eating away a non-COLA pension annuity!
The reality is inflation is well below targets, why? Globalization! Check the cost of living in other countries vs the US. The LCOLA area's currently in the USA are ten times more expensive than HCOLA area's in mid/far east.
What do you think Brexit and make America Great Again are about?
The Future will be about balancing act and that does not bode well for inflation in this HCOLA country!
I took the lump sum since I'm comfortable with "moderate-conservative" risk investments. I go to a financial planner and I have done well the last few years. I can also will the money when I pass. The pension doesnt give that option.
But talk to a FP and see what the say. Good luck.
The one problem I'm seeing with stream payments is, the Federal Reserve is printing money to finance the national debt. This predates Covid-19. This could lead to currency debasement.
There was a recent stimulus budgeted for about $3T. Where did the government get the money from? Oh, they borrowed it. From whom? The Federal Reserve. And where did they get it from? They "printed" it or otherwise created it. The money didn't exist until it was created. The process is called "quantitative easing". President Trump has been calling for quantitative easing throughout his presidency, and the Fed has obliged.
They started in earnest in Dec 2018. They wanted to pump the stock market so they attempted to lower interest rates. Well, that leads to less entities willing to lend, and more entities wanting to borrow, resulting in a liquidity crisis. So, the Fed started printing, because only a printer of money lends at 0%.
https://fred.stlouisfed.org/series/WALCL
Take the Money! and RUN
Read the fine print, aka "the company can change the pension plan anytime". I think a change is coming before November, when the interest rate is adjusted again. They don't even have to file bankruptcy, it can be changed at will. I didn't trust this place to keep controlling that pile for years. I took out my lump sum and rolled it into a rollover IRA, no taxes due. For sure, you can roll it into an annuity somewhere else. I would take it out of their clutches, either way.
It’s a cash value pension. It is guaranteed. It makes no difference if AT&T remains solvent. Seek the advice of a retirement professional. In retirement you will need as much guaranteed income as you can get. Risking tour pension in the stock
Market is very risky. Get some real advice from a professional advisor
Asking for answers about a pension on a forum like this or Facebook probably means you don't have much to work with. I'd say cash out and take the family to a nice dinner at McDonald's on a Friday night. If there's anything left after that, you could always buy a lottery ticket.
pull your money out ASAP. End of story
Lump sum. If you dye tomorrow at least someone will be happy.
Take the money and run (fast).
Lump. Or trust T to stay solvent.
Pretty easy choice.
If you seriously cannot sleep at night if you aren't receiving a monthly annuity, then check with a reputable insurance company and buy an annuity there. I mean if you for some reason are iffy about drawing it from here. Most people do not like to be tied into an annuity, but if you want monthly payments like AT&T any financial firm or insurance company can structure one for you with your lump payment and it is exactly the same.
If you are seriously wanting to know if you should take the lump sum vs. annuity, then you want to speak to a financial adviser. The answer to the question is not a one size fits all response. It depends on your individual circumstances and factors specific to you. While at one time it appeared that this board was a viable source of information, there appears to be more misinformation being posted as opposed to valid assistance. Also, ATT has a retiree page on Facebook, if you are retirement eligible. That group would be more helpful.
Pick lump sum and invest all of it in S&P 500. Remember, economy is not even open completely yet. Once there is a vaccine, the market will rocket. Plus you have access to your original cash. Pension holds on to your money for ever. Still, it depends on your threshold for risk. If you can't stand some market downs, you may be the right person for monthly pension payments.
Take the lump sum and put it into Apple!
Lump Sum.
After t files bankruptcy, the Pension Guaranty Corp will take over Pension obligations and you will receive maybe .45 cents on the dollar. Also, under Democrat Socialist rule - inflation will eat up your pension dollars as you will NEVER receive a raise on your pension.
Take the Lump Sum and buy some Vanguard Funds.