Retirement thoughts Past Present Future

[Oaktree]

So here’s a question. Let’s say you have a company pension that pays you $5000 per month. And let’s say you live another 20 years. So that is 20 years times 12 months times $5000 per month. That is $1.2 million.

How common is a pension that pays that much? That's $60k/yr. I've never worked at a company that offered one, nor have I ever earned even close to that amount in any year. I would imagine only a very select few get that kind of retirement income.

 

[JJT]

Nvm. I just read the rules of my pension, and I’m not allowed to take a lump sum payment. Bummer!

Hopefully your pension has a survivorship option, mine does, my spouse gets 75% of my pension for life, if she out lives me.

 

[check]

Hopefully your pension has a survivorship option, mine does, my spouse gets 75% of my pension for life, if she out lives me.

Yep. It does. I can choose the amount, but I am choosing 100%. Great option!

 

[check]

How common is a pension that pays that much? That's $60k/yr. I've never worked at a company that offered one, nor have I ever earned even close to that amount in any year. I would imagine only a very select few get that kind of retirement income.

Well, I have worked there for 40 years, so I have built up quite a pension, which will pay me almost $11,000 per month. And my wife will get the same amount if I die first.

 

[bdhsfz6]

So here’s a question. Let’s say you have a company pension that pays you $5000 per month. And let’s say you live another 20 years. So that is 20 years times 12 months times $5000 per month. That is $1.2 million.

Now let’s say that the value of your pension is also $1.2 million, and you could choose to take it out rather than receive your pension. So then let’s say you invest that $1.2 million at 5%. That is $60,000 per year, or $5000 per month.

Isn’t it better to take the lump sum? Because when you die 20 years later, you still have the original $1.2 million, but if you choose the monthly pension, you get nothing when you die.

There are many important factors to consider when faced with this choice. Most have already been discussed in this popular thread and all I can add is based on my own personal experience.

I retired early 20 years ago, almost to the day. I was 57 at the time and worked for a large utility company for 38 years. They were looking to downsize and offered an early retirement package which I accepted. My choices were, a $2250/mo. pension or a $600K pension "buyout". I chose the lump sum buyout, which I combined with my $600K 401K.

I took the $1.2M, shopped EXTENSIVELY for the right financial planner and never regretted my decision. Yes, the investment risk was a cause for concern at times. During the 2008 recession, that $1.2M dropped to $980K but has since recovered to $1.7M. This does not include the $50 - $80K annual withdrawals made for living expenses.

Of the 2,2000 employees worldwide who accepted the offer, only 8% took the monthly pension. In my case, $2250/mo. , when combined with projected 401K earnings, was only 70% of my estimated needs and most other retirees felt the same way. I keep in touch with many of my ex coworkers and those who took the monthly pension regretted doing so. The average 5% increase did not keep up with their needs.

This decision is not one to be taken lightly and will likely be one of the most important of your life. In my case, there were many factors involved, too lengthy to discuss here, but I consider myself lucky for the way my choice has paid off.

 

[JethroB]

So here’s a question. Let’s say you have a company pension that pays you $5000 per month. And let’s say you live another 20 years. So that is 20 years times 12 months times $5000 per month. That is $1.2 million.

Now let’s say that the value of your pension is also $1.2 million, and you could choose to take it out rather than receive your pension. So then let’s say you invest that $1.2 million at 5%. That is $60,000 per year, or $5000 per month.

Isn’t it better to take the lump sum? Because when you die 20 years later, you still have the original $1.2 million, but if you choose the monthly pension, you get nothing when you die.

I took the pension lump sum payout and rolled it into an IRA. One deciding factor was my original employer/company was bought and the pension was frozen by the new owners. The pension basically became an orphan that the new foreign owners would love to dump. They paid a 20% bonus to the lum sum to get me off their books.

 

[MossRoad]

Actually, it’s $1.8 million, and I just found out that the buggers won’t let me take it as a lump sum.

Are you talking about an actual pension plan, or a 401K type plan?

 

[riptides]

My companies all froze their pension plans. So when the time came to mutually depart, I ended up taking lump sums. I ended up putting the lump sums in a 401k, and even with the current market turmoil of the last 12 years, have made out better than the defunct pension plans.

 

[MossRoad]

My companies all froze their pension plans. So when the time came to mutually depart, I ended up taking lump sums. I ended up putting the lump sums in a 401k, and even with the current market turmoil of the last 12 years, have made out better than the defunct pension plans.

My last employer offered both a pension and 401K when I started there. Many folks thought if they had a pension, they didn't need a 401K. I contributed 15% of my income to the 401K from the first day I was eligible. Sometimes they matched 50%. Sometimes 25%. Sometimes not at all. But I kept contributing. I had it in very aggressive funds, as I was young when I started.

They froze the pension after I'd been there 19 years. I stayed for a total of 30 years. So 19 years of pension and about 28.5 years of 401K.

Talking to some folks recently that stayed with the pension only and didn't start the 401K until the pension was froze. The pension did not do nearly as well as the 401K. By about half.

When they let us all go after my 30 years, they offered me a lump sum on my pension, which I took. And I rolled my 401K into my current employer's 401K program. Between my pension lump, my 401K, my wife's 401K and her pension roll over, we'll be fine. Any Social Security we'd get would just be extra. We should both retire in about 4-5 years.

 

[ultrarunner]

How common is a pension that pays that much? That's $60k/yr. I've never worked at a company that offered one, nor have I ever earned even close to that amount in any year. I would imagine only a very select few get that kind of retirement income.

My classmates in police and fire are doing very well…

One of my friends retired Oakland Police Department at 52 with 180k annual pension with lifetime medical… got bored and went to work for Sheriff starting another pension.

Of my 12 LEO friends none are under a 100k annual and all started drawing in their early 50’s

They were making more retired than I working…