Do higher interest rates translate to a larger lump sum? Or is it the other way around?
9 replies (most recent on top)
@1ncm+1gmxMqCV
“ especially if retiree has lined up other work”
Are XOM retirees (excuse me, annuitants) allowed to work after retirement? I don’t see any working in the industry, so I thought there might be some “golden handcuffs” type restrictions that people don’t know about until retirement.
each 0.5% increase is equal to working another year when you are under 60 and subject to the lump sum discount (note: if you have saved money or continue to work you can defer taking lump sum and avoid discount, but you could lose money if interest rates keep rising). A 2% increase in interest rates could mean it is attractive for a 56 year old to retire and take lump sum now...especially if retiree has lined up other work. If you stay, you are working for free, maybe even paying the company to work, if Fed increases interest rates by 2%
@vkg explained it below
Higher % interest rate, the lower the $$$ lump sum.
Pinch a penny now is right. You've been pinched your entire career.
Enjoy the dottering years now.
Don't be an ID--T! GET OUT NOW! At least by May 31, the Magical day before the big lump softens. Don't work for free! Expect higher medical premiums after retirement but don't let Joey and the Feds ruin your retirement! DW won't mind, you are replacable.
For every 1% interest rate increase, EM pensioner's lump-sum loses 10% -15% of lump-sum value. The FED is projecting to increase rate from 0% - 0.25% at the beginning of 2022 to at least 2.50% by end of 2022. Do your own research and math.
The low sweet spot is going away quickly and quarterly.
Best was during PiP Layoff 1 (2020) - very low rates / very many lump summaries.
And nobody who worked for this company should live past 75 imo.
The other way around. The interest rate is used to discount the future payments (monthly retirement pay, from age 65 to the actuarial death) to present value (i.e., the lump sum). The higher the interest rate, the higher the discount so lower the lump sum.