Given that the Federal Reserve seems to be indicating that they are in no rush to raise rates, is it better to delay taking the Pension Lump Sum ?
16 replies (most recent on top)
@GrkfZqO-3gqa, Absolutely not, you're not greedy at all, just the opposite in fact, you're being generous! You are accepting LESS money for your monthly benefit for life!! And once you make that decision, with today's new laws, you cannot change it. And don't think for one second that the SS administration doesn't already have the mortality tabled tweaked to the point that you are getting a good deal by doing that.
The SS administration thanks you for your generosity, and so do all future SS recipients for you doing your part to keep the OASDI program solvent!
Thank you sir or mam for being a true patriot. You generosity is much appreciated.
@2pgx, Don't make the mistake of thinking anyone is a "greedy gotta get my share now" type of person for taking Social Security early at 62. I worked for 40 years during my lifetime and the government didn't ask me if I wanted to contribute to S/S. No, they took it right out of every damn paycheck. So now that I've "retired" from Chevron and thinking of getting my benefits early at 62, doesn't make me greedy. The US Government took MY MONEY and promised it to me later when I retired. Now it's my turn to collect and I expect every nickel for as long as I live. Don't call me greedy, since it's all my money.
The question is what happens from here on, does anyone expect rates to go up in the next 6 months ?
The fed rate was only raised 25 bases points about a year ago. We are near deflation. What is your point?
Because most greedy "gotta get my share now" people take Social Security early and also most greedy "gotta get my share now" people take their pension as a lump sum, that means we all should be that way - By all means.
Most people vote democrat too. You see where THAT got the country.
Hard work, being independent, and standing on your own two feet are a thing of the past.
There is also the Mandatory RMD distributions after 70 that may lead to a higher tax on your social security income
Approx 60% of retirees take their social security at 62 years of age? Most of the remainder take it at 65 (when Medicare kicks in). Very few wait until 70. Build a simple Excel spreadsheet with columns for the benefit you will receive for each month starting at 62, 65 and 70. Your break even analysis will give you a better way of deciding when you should start collecting. Of course, start at 62 or immediately after you retire. The government cannot be trusted to continue social security at current rates forever.
The problem with taking early social security if you don't have to is you may be thinking the entire time, what if i would have just waited, I may have gotten a good bit more per check (24%)and then I would be living large at that point on with just a small sacrifice now. The whole time you may be wondering if you made the right decision. If you wait til 70, and can afford to do so, the whole time you are looking forward to the big payouts with a smile and peace of mind. Of course, if you die early, you miss out on the payments you would have gotten and it's a total loss. Dead people don't worry, though do they?
So, the time up to that day that you die can either be spent 1- knowing you are looking forward to the big payout gray train with a smile on your face, or 2 - wondering if you made the right decision by taking that cut on SS for just a few more years of benefits. I believe spousal benefits will be higher too taking at 70, if applicable, and they may outlive you. So there are more reasons than just "total money paid out" Also, it takes a while but after a certain age, the overall payout is roughly even. Who cares if you rape the abused and fraud-ridden SS system as much as you can. It's in poor enough shape without people doing that.
Many advisors (especially the government) would tell you to wait until 70 to start collecting social security, especially if you don't really need it. If you are still working, I'd say to hold off and let it grow. But if you have retired, take it as soon as 62. When you collect early, the benefit is smaller, but you collect monthly payments for a longer term than waiting. The sweet spot is collecting at Full Retirement Age (65-67). At that age you collect your full benefit and get to bank more payments over your life expectancy.
Is it not better to wait till 70 to take your social security if you don't need the money ?
Congratulations, you have done a great job financially to ensure a prosperous retirement
@wbb, delaying taking the pension until age 60 diminishes the Early Retirement Factor (ERF) by 5% annually (prorated by month). No problem doing that if it's part of your well thought-out plan. It can be looked at as a 5% return on investment if you don't want to invest your pension in the market to offset the loss. That's fine, but at some time (by age 60) you will need to invest your pension lump sum to make it last a lifetime. Depending on how many years you plan to wait until age 60 to commence your pension, be cognizant the benefit of a reduced Early Retirement Factor might be cancelled out by a lower lump sum payout due to interest rates going up. What I did was take my pension as an annuity at 58. Instead of waiting 24 months to collect without the ERF, I collected the annuity without waiting. The way I look at it, I would have 2 years of payments to my credit rather than waiting that much time just to collect my first slightly higher monthly check. Also, it won't be long before I dip into social security at 62 to complement my monthly cash flow. Each person's situation differs, so my tact may not suit yours. Besides, I have over $1.25 million sitting in my Vanguard ESIP 401k that I don't need to live on right now. I'm good with my annuity payments. Best in retirement to you. Seek the best advise from a trusted Certified Financial Planner. Talk to Vanguard, Charles Schwab and Fidelity.
The issue is there is no risk free investments that have any kind of decent yield. At least with the pension , if you do not take any action, the way I understand it if interest rates remain the same, it gets you between 4 to 5 percent return per year until you reach 60. That is pretty appealing to me
I don't blame you, obc. These kind of decisions are not easy to make. But, don't gamble with your retirement savings. You worked long and hard to earn what you set aside. Gambling for just a little more is tormenting and can lead to a lost opportunity. Make sure you and your spouse schedule a free consultation with a Vanguard Financial Advisor and also visit with at least 2 local Financial Advisor offices (Fidelity, Edward Jones, Charles Schwab) to have a face to face conversation. Have a rough plan in mind, how much money you need per month, etc. Prepare a financial statement in advance. Establish a budget detailing all your expense items and other income sources. Commit to not enter any large financial expenses for at least a year after retirement. Pay off credit cards and debts if you can before retiring. All-in-all, I've been there. I'm enjoying my retirement. But although I made plans in advance and I retired debt free, this is a new stage in your life. Take retirement slowly. That's my best advise to all. Good luck.
It is a tough decision. Iam going back and forth and what to do
OP, the Federal Reserve rate and the Corporate Bond rates are not the same, but may have some correlation. Your premise of holding off to take the lump sum pension later may be correct.