Pension vs Lump Sum

[GreeneHunter]

Opinions ?     A few years ago I retired with the choice of Pension vs Lump Sum !  I had quite a few co workers retire around the same time frame and  there was always a discussion on " what's better " !  I know quite a few individuals whom chose the lump sum and retired prior to 2008 and deeply regretted it , It took roughly 7-8 years to get back to where the lump sum started out at . Meanwhile those whom chose a pension - naturally - their pension stayed the same the whole time . I leaned towards the pension and have no regrets !  Anyone ? 

[phade]

It will always be a math exercise specific to the circumstances.

[Zag]

Agree with Phade, every pension plan is different and every participants different, single married, if nys pension there is the pop up option. Really would need to know alot more info other wise know one can rightly give you good advice. Take fellow workers opinions with a grain of salt, everyone's has different feeling when it comes to money. My suggestion would be to meet with a Financial Advisor and run your situation past him.

[Deleted Account]

11 minutes ago, GreeneHunter said:

Opinions ?     A few years ago I retired with the choice of Pension vs Lump Sum !  I had quite a few co workers retire around the same time frame and  there was always a discussion on " what's better " !  I know quite a few individuals whom chose the lump sum and retired prior to 2008 and deeply regretted it , It took roughly 7-8 years to get back to where the lump sum started out at . Meanwhile those whom chose a pension - naturally - their pension stayed the same the whole time . I leaned towards the pension and have no regrets !  Anyone ? 

My dad had this dilemma a few years ago. The way he figured it is that he would be in his 80's by the time he drew enough pension to match the lump sum. I hope he's wrong, but he said he doesn't want to count on making it that long. He took the lump and invested it.

Certainly pro's and con's to both....

Edited March 30, 2020 by Splitear_Leland

[Jeremy K]

If I'm into my retirement age I would probably lean towards the consistancy of the pension. I'm overly cautious about money though. 

[squirrelwhisperer]

Pension is great if you live for a long time. Once you die, the pension dies with you. If you take the lump sum, you can invest it, grow it, and have something to leave behind. 

[meateater]

its best to talk to a financial advisor when I retired in oct. I actually started in march to plan and get all my ducks in order before I put in my papers including  getting a financial advisor and for me how much does the medical goes up when I retire. See most people to day in the pvt sector have no pensions and if the did the companys offered a lum sum you  either take the cash or roll it over to your 401k ,which my wife did w/ her company that was the choice she was given. See it cost money to manage a pension and of course offer medical which I pay $460 month for plus co-pay and deductibles and co- insurance  AND of course out of net work. When I retired I rolled over my 401k to and ira w/ my advisor but im like all of us am not a fortune teller and cant predict the future . Also I had stock with my company discount stock program I had for years we bought stock @ a 10% discount i was offered either take the money or it goes to common stock and  lose a lot of money while I took the money and got hit for taxes $4100 to the feds I had to tap my ira to get the money to pay the feds. I told my financial adivisor mark take the taxes out so I took out extra to pay the tax . I  told him, Mark this is crazy I gotta pay tax on money to pay tax . talk to a good financial advisor the most important thing

[meateater]

12 minutes ago, squirrelwhisperer said:

Pension is great if you live for a long time. Once you die, the pension dies with you. If you take the lump sum, you can invest it, grow it, and have something to leave behind. 

no most companies offer  pensions that offer a pop up or you have to have your spouse sign off on leaving them nothing or 5% 25% 50%or 100% and it had to be notarized NO WAY IN HELL MY WIFE WAS SIGNING ANYTHING.  So I had to leave her 50% of what I get and my monthly pension went down to reflect on what I left her 

[Einsamer Krieger]

I took the pension after twenty-years in the military, money is always on time each month.  Second pension after twenty years in Law Enforcement, monthly, right on time.   The Lump Sum, never works out,  too easy, too fast, goes too easily, not to return.

[Lawdwaz]

3 minutes ago, Los Lobos said:

.   The Lump Sum, never works out,  too easy, too fast, goes too easily, not to return.

In this day & age, lump sum is going to be tough to make work.  Low interest rates will have you going backwards PDQ.........Years ago, lump sum could certainly work (and I know a few that took it) for people but the "sure thing" of a monthly pension check from .gov is a no-brainer for most today, depending on the size of the lump. 

 

[farmer 52]

I have a teamster pension, we didnt have a lump sum option.2 or 3 years ago they took 29% of it, we had no option on that either.

If I had a choice I would definitely take lump sum.Invest wisely with a reputable advisor, take a monthly check,whatevers left when you expire your wife or kids get,monthly pension checks stop when you become room temp.

1 bird in hand better than 2 in the bush

[Lawdwaz]

8 minutes ago, farmer 52 said:

I have a teamster pension, we didnt have a lump sum option.2 or 3 years ago they took 29% of it, we had no option on that either.

If I had a choice I would definitely take lump sum.Invest wisely with a reputable advisor, take a monthly check,whatevers left when you expire your wife or kids get,monthly pension checks stop when you become room temp.

1 bird in hand better than 2 in the bush

Then there's the pensions that got raped by their management.......SNAKE EYES!!!!!

[Zag]

23 minutes ago, farmer 52 said:

I have a teamster pension, we didnt have a lump sum option.2 or 3 years ago they took 29% of it, we had no option on that either.

If I had a choice I would definitely take lump sum.Invest wisely with a reputable advisor, take a monthly check,whatevers left when you expire your wife or kids get,monthly pension checks stop when you become room temp.

1 bird in hand better than 2 in the bush

Yep, not all pensions are guaranteed to stay the same, thanks for sharing farmer. I also know a teamsters retiree who's monthly about was reduced quite a bit. Do not make choices without speaking to a reputable advisor.

[BizCT]

It will always be a math exercise specific to the circumstances.

Plus one. Would need way more financial data to make the appropriate decision.


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[farmer 52]

6 hours ago, Lawdwaz said:

Then there's the pensions that got raped by their management.......SNAKE EYES!!!!!

Would that be the same as Social Security being fleeced by other sectors of the government.

[GreeneHunter]

I just posed the question due to the Market being Topsy / Turvy the last few days ! I'm already drawing two pensions and working on a third before I call it quits . I have plenty of family whom will never get the Pension  option only 401K' s - Lump Sum -  , the thought of them buying an annuity just for stability is scary ! I worked in one place and the 403B adviser made the statement that for a small fee they would get me a more managed account with a possible better return , I asked the question " So the Fee comes out of the Gain and if no Gain No Fee ? " ( rude of me isn't it ) to which the advisor says " no it doesn't work like that " !

[Nomad]

10 hours ago, squirrelwhisperer said:

Pension is great if you live for a long time. Once you die, the pension dies with you. If you take the lump sum, you can invest it, grow it, and have something to leave behind. 

Not always true , I took 75% pop up . If I die my wife continues to get 75% of my pension , that option  cost me a few grand a year , if she dies first my pension “ pops back up “ by that  few grand .

Now I could take up, to 25% of my pension in a plop ,  only 8% do according to the state , I had little reason to  as we have enough to pass on as it is ,and reducing my pension by 25% was not something I was interested in .

Everyone is different, other sources of income , investments, will they work a side job ,age ,health and on and on .

Good luck 

Fees kill your return , you can loose six figures to fees long term .

 

Edited March 31, 2020 by Nomad