patrick.net

if You can get 100% lump sum and are good at investing, that’s the way to go. Otherwise the 100% no survivor one is best. Momma better keep you healthy.

At least with the lump sum you know you will really receive it.

With the pension, there is some non-zero probability it will be cut off at some point. So maybe it depends on your faith in this pension.

100 percent pension, JMHO. Odds are she will outlive you. Enjoy your retirement.

Maybe the amount of the federal pension guarantee scheme (backed by the printing press) can be part of your calculation.

How much is the lump sum?
How much is the pension monthly benefit?
How solvent is the place giving the pension likely to be (I.E. - How likely are they to go under and your pension goes away)?

Can't really answer if we don't know these things.

zzyzzx says

How solvent is the place giving the pension likely to be (I.E. - How likely are they to go under and your pension goes away)?

Excellent consideration. These days I'd take the lumpsum. No pension is safe anymore.

If your wife was always a stay at home wife/mother, you have to do the right thing.

Either take the lump sum, or the option that takes care of her.

Tenpoundbass says

If your wife was always a stay at home wife/mother, you have to do the right thing.

Either take the lump sum, or the option that takes care of her.

This unless you have a backup life insurance of some sort.

Government pensions are pretty much guaranteed so I’d recommend pension and not lump sum.

Unless you are a supreme investor. Dude at 62 isn’t the age to take risks. How much can you afford to lose or play with?

That’s just my advice. I don’t have a pension, just invest my own money since I’m in private sector.

Fortwaynemobile says

Government pensions are pretty much guaranteed so I’d recommend pension and not lump sum.

Careful there, bro.

There's a cap on the guaranteed benefit. The PBGC has a website with the information. It says for 62, the benefit is 3900-4400 depending on survivor y/n.

Like you, I have no pension. If I did, I'd find out the amount that generated up to the cap, and take no more than that in pension.

I have a relative who gets paid by the PBGC instead of the pension that went bankrupt. Since the pension was modest, the monthly amount was not severely impacted. However, those with higher salaries get the same pension my relative gets (no more than that!).

It truly was karma. Big Shots, Big Wheels, Living Large 'cause they knew they had the Big Pension coming. Heh heh

Here's a link to the website

https://www.pbgc.gov/wr/benefits/guaranteed-benefits/maximum-guarantee




Here's a link to website.

A wise old man once told me, never ask Mannequin fuckers if you should take care of your family when you retire.

mell says

Excellent consideration. These days I'd take the lumpsum. No pension is safe anymore.

Especially with all the Boomers retiring and breaking the system. They’re gonna suck it dry before they shuffle off.

Tenpoundbass says

If your wife was always a stay at home wife/mother, you have to do the right thing.

Or you could do the Indian thing. When the husband dies, the wife is supposed to toss herself onto his pyre and burn up! Saves on elder care.

Some employers don't actually manage your pension. They just use the money they have saved for you to buy an annuity from an insurance company and wash their hands of you. Annuities require great care in selecting and purchasing, and from your description, you are choosing amongst annuities chosen by your employer.

You could take the lump sum and shop for your own annuity with the best terms and conditions. Who knows if your employer gets some kind of consideration for steering your annuity purchase in a way that benefits him and the insurance company rather than you.

You still have 2.5 years to pay medical premiums until Medicare, which would soak up the unemployment check for a while, unless you risk going 'naked' until then. If you have the option to extend your medical benefits from your employment, you should probably consider that, but you will have to pay the group rate, which will likely be smaller than anything you could get as an individual.

i would vote for lump sum and turn it over into a retirement account mutual fund. You can always purchase an annuity later at your leisure.

Ceffer says

You still have 2.5 years to pay medical premiums until Medicare, which would soak up the unemployment check for a while, unless you risk going 'naked' until then. If you have the option to extend your medical benefits from your employment, you should probably consider that,

This should be emphasized more, because at anything >= 50 you should really have health insurance, even a crappy policy.

I don't fully understand the options you are given in your question.

If you accept a lump sum, realize that you may likely be able to safely spend around 5+% of it per year indefinitely although some guys say the figure is 4%

We don't know other facts; is your wife 20 years younger than you? Is she working?

Do you qualify for social security ?

Tip; the expected payout for your "full retirement benefit" of social security that you have in mind depends on your actually working until full retirement age (66 or 66 and a few months I think for your age)

Once your medical coverage runs out, you will be shocked at how much Obamacare costs you; mine went up to $924/month at 64.

For this reason, I would consider avoiding the annuity income maybe; if you have income which pushes you over the "Subsidy" income threshold for Obamacare.

If you wife is employed, maybe her health insurance covers you; maybe not.

After 2018, you do not pay a penalty for having no health insurance; but this is of course risky in case you get sick or injured.

Some annuity income is always nice; having some dough is also nice. Maybe you can take some of each without triggering unexpected tax problems.

This is a Publicly held company pension. I realize there is no guarantee, but they have been in business since 1907. But I guess it's true, the pension could go unfunded some day.

It's worth about $600K as a lump sum. If I take it monthly, varies from monthly $3200 with 100% survivor vs. $3800 no survivor for life. No survivor plus an insurance policy on me is probably too much money. So it's Lump sum or lowest monthly payout. Can we make more than $3200 a month on $600K? That would be about 5% after inflation, or 8% gross. That would be tough to beat (especially with my low risk tolerance.)

My wife is about my age, she didn't work much outside the home. She'll be getting paid 1/2 of my SSI, right?

She's thinking our health care is going to be $3k a month for both of us until Medicare kicks in at 65. I think that's a Cadillac plan.

clambo says

Once your medical coverage runs out, you will be shocked at how much Obamacare costs you; mine went up to $924/month at 64.

I thought that it was more like $1000+

rocketjoe79 says

This is a Publicly held company pension. I realize there is no guarantee, but they have been in business since 1907.

UPS?

What other income will you be earning?
IE- dividends, interest, etc.

A bird in the hand is better than 2 in the bush. Take the lumpsum at least everything left is squarely yours. Find a cheap place overseas or one fo the few left in the US and live like a king.

That's the bad news. The good news is you wont be around long enough to suffer through the consequences .
Fortwaynemobile says

Dude at 62 isn’t the age to take risks. How much can you afford to lose or play with?

zzyzzx says

Can't really answer if we don't know these things.

Yes. I know that with some pensions the annuity stream is worth FAR MORE than the lump sum up front amount option.

It's tricky. If you use a financial calculator to analyze the net present value of an income stream (annuity), you need to estimate how long it would occur, and you need an interest rate to discount it at. In this case the lower rate makes it worth more.

Obviously when you take the lump sum to analyze what kind of income stream you could generate you need to amortize it for the same length, but in this case, of course the higher the rate of return you estimate gives you a bigger income stream.

Use the same interest rate for both. Something like 4 to 6%. I think I would recommend 6% to be conservative.

OR just take the lump sum amount , and assume something like 4 % and a decent guess as to how long you'll live, and annuitize it, and see how it compares. There must be a lot of calculators online that will help you with this.

But then I think it's going to come down to your assumption about how long you're going to live, and your wife too. Hence the pension probably ends up being the conservative option.

rocketjoe79 says

She's thinking our health care is going to be $3k a month for both of us until Medicare kicks in at 65. I think that's a Cadillac plan.

Not really. It's for a plan with normal coverage just with low copays. You know, just like the plan you probably had something like 30 years ago.

Booger, I quoted the Obamacare for one person in Florida; a couple would be more and California likely would be more.

If I were in Roketjoe's shoes, I would take the lump sum and take $200K and call Vanguard and buy a fixed annuity; this would pay about $1000/month. I calculate that for each $100K you'll get about $500/month at your age. Vanguard can tell you the exact figure of course.

This would leave me with $400,000 left to invest in various ways. I would probably split it among mutual funds which were tax efficient but they don't provide much income.

Remember, you don't have to pay for Obamacare if your income is low enough; it would be about $50,000 or so for a couple when the subsidy starts to disappear and you pay it yourself. Check the amount out for yourself, since I am not part of a couple I don't know the figures.

Also, go to Fidelity and buy a Health Savings Account; this will be like another IRA account invest to mutual funds but this is the ONLY thing which helps reduce your Adjusted Gross Income on the form 1040 for purposes of Obamacare subsidy. You could put in about $8800 for you and your wife.

The two best investments available today are 1. Roth IRA 2. Health Savings Account . After age 65 you can spend the HSA on anything just like you spend down an IRA.

Think about the tax consequences of taking the whole thing as an annuity; it may fuck you over for Obamacare subsidy and California income taxes; if you invest the dough after you take a lump sum maybe you can live on less until you are on Medicare then you are home free.

I have a bit of a bias; I am extremely concerned with tax avoidance.

You may also want to factor in state income taxes for pensioned amounts. From what I've heard California gets to levy taxes on pensions derived in California even if you move out of state. I think by rolling it into an IRA, you can move to a lower tax local without the state of California becoming involved. I am not certain of this...it is just what I've heard. Sounds like you may wanna pay some for fee financial planner to run things by.

You can get a quick annuity quote from https://www.immediateannuities.com/

I plugged in some numbers real quick, and assuming you and your wife are both 62, and you want the payments to start immediately and pay until both of you die, at which point no more payments will be made, you get about $430 monthly per 100k invested. so 600k = ~2600 a month, which is much less than the very nice rate the pension pays.

I'm not sure how much you care about leaving leftover money to heirs, but taking a lump sum and investing it is obviously riskier, but also opens the door to possibly leaving quite a bit of money to children, opposed to a pension/annuity, which usually wont leave any. The pension and annuities can pay what looks like a nice rate, but obviously no principal remains afterwards.

I didn't catch any info about your other finances, but if you have other money that could comfortably support you, I feel this would make me more likely to take on risk in pursuit of a better retirement and/or leaving more money to heirs. In which case, Marcus' suggestion of using net present value and lifespan estimation could be revealing.

clambo says

Think about the tax consequences of taking the whole thing

How is a pension lump sum taxed? If its taxed as regular income, that would be a really shitty tax year.

When I wrote "taking the whole thing as an annuity" I meant not taking the lump sum but rather having the entire amount paid as an annuity.

Immediate annuities are generally taxed as income.

Yeah, no way I would take the lump sum as cash - I would roll it over into a "Qualified" Plan. Seems very hard to beat the 8% return to match the Pension monthly.
When the Bull run ends (which it will), having myself exposed in equities seems a bad idea. I might be starting retirement with 30% less money and have to grow it back, somehow. Eating Rice and beans along the way. Not the best plan. And No, I won't get effing annutites or life insurance to "cover" anything.

Here's the plan so far:
1. Take the Pension with 100% survivor. Start collecting SSI benefits for Me and wife. Put the 401K in safe mode until the recession hits.
2. Take the 38 weeks severance and 6 months unemployment time to renew, get my health in line, and relax.
3. Get certified as a flight instructor with my previous military time. If I like it, I can earn enough to pay for health care, or maybe even find a flight-related job with a health plan.
4. At 65, re-evaluate when Medicare kicks in.
Thanks for all the input!

Quigley says

Tenpoundbass says

If your wife was always a stay at home wife/mother, you have to do the right thing.

Or you could do the Indian thing. When the husband dies, the wife is supposed to toss herself onto his pyre and burn up! Saves on elder care.

Why wait for your death. "Burn her on Stake" like your forefathers and you have more money for your retirement.