GATT rate will most likely be going up, so the already depleted lump sum amounts will be going down......again.
16 replies (most recent on top)
@2xvd, correct. I was just about to mention this, and I was also going to mention the company selling some pension obligations and the retirees suing over it. See links at end of my comment.
Then there's also the fact that the PBGC is underfunded by billion of dollars. I just don't like it. Unfortunately interest rates are going up and people are going to have to choose between a lower lump sum or trusting the company to administer the pension for the rest of your life. This is why I had asked earlier if any smart person knows of a way to hedge against these $40k+ losses I've been seeing in my lump sum amounts the past year.
http://www.pionline.com/article/20121017/ONLINE/121019896/verizon-transfers-75-billion-to-prudential-in-partial-pension-buyout
https://www.institutionalinvestor.com/article/b14z9mxfq33d9y/verizon-retirees-score-victory-in-fight-for-their-pensions
Before you trust the Kompany with your monthly annuity, make sure you completely understand what Verizon did to retires assigned to Idear. (The directories spinoff). They did it once, they'll do it again.
https://www.hr.com/en/communities/benefits/retirees-charge-verizon-idearc-with-illegal-pensio_g2z6pmoh.html
"If you take the monthly, it pays at a better rate than 4%, is safer, carries no fees and you can still use your 401 as a lump sum."
Right, but not quite apples to apples. With the monthly, once you (and partner if that is chosen) die, the money is gone. With a lump sum, while there is a risk of running out of money, it's more likely, even with 4%, that there will be a lot of money (often more in real dollars than the original amount) left to go to your beneficiaries
Don’t become so focused on the lump sum that you dismiss the monthly pension without checking it out. Many, if not most, financial advisors that are independent say that the monthly pension is almost always better. For example, a $500,000 lump sum seems nice, but consider that it is not recommended to withdraw more than 4% annually to make it last. That’s only $20,000 a year.
If you take the monthly, it pays at a better rate than 4%, is safer, carries no fees and you can still use your 401 as a lump sum.
Give it some thought before just grabbing a lump sum that has to be carefully invested with someone you don’t know, yet must trust.
if your planning on leaving in the next year then you should leave now or you are basically working for nothing since the rates are going to keep going up for at least the next 2 years.
@1bvg: All the info is available on "About You" in the pension info section. You can also call VZ benefits with questions. They will explain it to you, but it's complicated.
@zsm, thank you so much for this info. This is useful. Can I ask you how you became savvy regarding the lump sum pension? I'm trying to understand how they arrive at the figure but I can't seem to get a grasp on it. Is there a good source of info somewhere regarding Verizon's lump sum plan specifically? Thanks in advance for any pointers.
Fed raised rates another 1/4 point today and plan 2 more hikes this year. 3 more expected in 2019 -2020. Lump sums will continue to drop over this period.
On a lump sum pension, you will take a hit as interest rates rise, of course. But, you can still take the lump sum now and then structure your own monthly annuity on your own terms and investment preferences. You will have more options that way, but you are also free to lose it on your own! Good luck.
i will speak only for myself, but my lump sum option gives me choice of better rate- PBGC (120% for pensions over $25,000) or GATT. 3rd quarter PBGC rate not announced by govt til 19th of june. so you really cant say what lump is yet for july using the PBGC rate. Until verizon updates it with july rate, you still see june online in your benefits connection , even if you put in a july date to leave. check more at end of month for real lump sum value. If your last day is june 30, and july rate is better, you will get higher rate, since pension is eff 7/1.
I am also very interested in commenters mtf's question - is there away to protect yourself against the losses in the lump sum value? Maybe there are products you could buy in your 401k that would counteract the loss that the rising gatt rate causes?
Of course you still "can" take the lump sum but if the amount gets too low, it is a better payout to take the monthly. Nobody said you can't opt for the lump sum but if the monthly pays better why would you? Monthly only ever goes up the longer you work here.
Agreed krn. Take your lumps.
Wrong! You can still opt for a lump sum.
There’s nothing you can do about it, it is the way that VZ calculates lump sums. Anyone retiring anytime soon will be stuck with the monthly pension.
You're right. I just checked and am taking a $40k hit on lump sum amount from this month to next month. Damn! This is the second time I've seen a significant drop in a year. Any smart financial people out there who know if there is a way to hedge against this? It would be nice if insurance companies sold GATT insurance.