You’ve worked hard to earn your pension. Now that you’re ready to retire choosing whether to take a lump sum or the monthly payments option is important.
In this video we’ll outline:
1. how to check the financial stability of your pension plan. www.freeerisa.com
2. factors you should consider when making your decision.
3. a framework for making the right pension choice for you and your family.
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You need a better microphone. It sounds like you are talking into a soup can.
I work for a company in the DOW. Pension over lump sum with a 3% yearly inflation increase in the payment. I can reduce it and have my spouse collect the full amount that way, but I found a glich that if I get my spouse to sign a waiver then my youngest child will receive the payment instead. So she can give it to my spouse if I die and when she should pass both of my kids will be able to split it the rest of their lives. People just need to figure those loop holes out.
i Live in Scotland and am taking a lump sum and a smaller yearly pension when i retire. Gonna spend winter in Thailand surrounded be hookers and beer gonna live my life before i need to rely on viagra. Peace out. Roll on 2037
Good analysis. Most investment retirement planners have a bias for lump sum because they can get commissions. An objective point of view looks at both sides as you are doing.
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What if your pension policies from your old company retirement plans are stuck back in the uk and you left over ten years ago
Retirement, As the word implies you’re retired whatever ull get , enjoy it , uve worked all your life so just enjoy ur money , invest ? For what ? Ull soon be dead anyways
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I retired from Nursing in 2014 ,took the monthly pension.Claimed Social Security benefits last year at 62. Glad I retired and claimed Social Security benefits when I did.Three former coworkers died in the last 18 months,so I’m glad I retired when I did.
I was at a retirement seminar and the speaker spoke on how he quit his job after he made well over $650,000 PROFIT within 3months he invested $120,000. I just began investing and i will really appreciate any tips or helpful guide.
Pension? What's that? Just kidding, but take the lump sum and invest. You'll do so much better and your heirs will get the full amount.
I’m in Canada so I’m sure many of the rules on pensions are different than the US but both myself and my husband have Defined Benefit contributions plans that are over 100% funded. We don’t have the option to take a lump sum. The only way we can take a lump sum is if we had less than 25 years of pensionable service but both of us have over 30 years of pensionable service so we have to have a monthly payment. I’m not at all concerned that either of our companies will default on those payments.
My mother retired from the phone company in 1992 when the employer offer a bonus payout (added four years of service and four years of age to the pension computation). Several of her co-workers accepted the early retirement offer along with her and everyone who retired in her office except my mother took the lump sum. She met her former co-workers in group gathering a few years later and everyone did not have a single penny left of their lump sum (either bad investments or just out spent the money-most outspent it) and they all had to get another job or just get by on Social Security while my mother keep getting her monthly pension checks.
Taxes are progressive, so it you take a lump sum and don't roll it over into an IRA, a large part of the lump sum will be lost from taxes.
Excellent advice. I think one thing glossed over for simplicity sake is that all traditional pensions are a separate legal entity from the company that set them up. This is why the funding percentage is critical. A company can go bankrupt or be bought out and its pension can still survive for years if its funding is 80%-100% and the stock market doesn't tank. The PBGC he mentions is more like a federal insurance program that all traditional pensions are required to pay into each year. Think FDIC except for pensions. On the PBGC web site it list how much of a monthly pension it will guarantee. It is possible your entire monthly amount might be guaranteed depending on the type of pension, your age at retirement, and the year the pension became insolvent.
Most people should take the lump sum if they can. (1) pensions are assets owned by employers, not by the workers (2) pensions may or may not managed well, plenty have had scandals & bankruptcies (3) more investment options in the open market & not restricted by ERISA rules (4) open market has performed better than typical pension (8-10% plus vs ~6%) but can have more volatility (5) PBGB is in financial trouble (6) can leave an IRA to kids/charities because its part of your estate
What a waste of time!
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I know people who took the lump sum and spent it all quickly having no financial discipline. If you take a lump sum, you better be active in managing it. It's all on you. It would make sense to take a lump sum from a private company since there is no COLA and the company could fold in the future. As for the government insurance on pension, it isn't very good coverage. You'll still be hurting even with this benefit.
Great video
So if I take the lump sum. Will I have to pay Uncle Sam and the state?
Thank you
will the pension rollover exceed the $7.000max contribution for 12 months
will the pension rollover exceed the $7.000max contribution for 12 months
I started making early moves about retirement last year, I look into so many online market tradings and finally made an investment with a professionals platform. It's a capital platform with so many good retirement plan which has profited me so much lately
Please do a video on Private reserve accounts for retirement
Not sure I trust my company to keep pension payments coming…30yrs I’ve watched down size after down size….what if the company declared bankruptcy.
Exactly what I’m trying to figure out now. Retirement is here.
Roger, I don't recall hearing a discussion about the impact of taxes on lump-sum vs monthly payments. The taxable value of one-lump-sum pension payout could be significant vs a monthly payout. I would propose developing a comparison of both options on an after-tax basis showing how they effect one's overall financial plan.
I had to decide whether or not to take a lump sum some years back. I made pretty good money when I worked (6-figures) but I'm not a good saver. Buying art has long been my drug of choice. Decided to take the pension as I'd probably spend the lump money. Been getting pension checks ever since I was 50.
Fortunately I'm healthy as a horse. At 68 I've never had an operation or been admitted to a hospital. Still ride 100+/- miles/week on a bicycle. Worked as a pilot so until mid '13 for 38 years got a comprehensive Class I flight physical every 6 months.
Take the lump sum and run with it as fast as you can !
If you think of the lump sum basically as "principal", there is no universe where surrendering your principal to get a 6% return makes any sense.
Pension isn’t covered if you work for city and they file bankruptcy
One thing you should have suggested to everyone is that they compare their company pension's monthly benefit to what they would get from taking the lump sum and purchasing an immediate fixed benefit annuity from some big insurer and choose whichever has the higher monthly payout. Why did you not even mention this ?
Check out the survivor benefits of a monthly payout. My pension would only pay 50% to my surviving spouse. For this reason, I took the lump sum after experiencing a health event.
It was kinda of a no brainer for me and my wife. We calculated the lump sum would be equivalent to 13.7 years of monthly payments. We are very healthy with no chronic issues so we took the monthly. We didn't need the money right away too. We are 62 and assume we will survive past 75.
Lump sum all day long. My pension is around $24,000/year. Lump sum is $500K. At 5%/year the $500K would bring in $25,000/year and still have the $500K sitting there. If I die a month after retiring, my wife get 50% of my pension. With the lump sum, she gets the same $25,000/year income and the $500K still sitting there.
The lump sum means you think you can do better in the Wall Street Casino than professional investors. Of course if you're betting that your company goes belly up on the pension before you do yourself… I suppose it's an option.