Did you take the monthly pension (aka annuity) or the lump sum?
I'm guessing that asking for "years of service" and "retirement age" might be TMI but appreciated if you are willing. Of course, asking people not post opinions or politics is probably out of the question too.
Lastly, I know this is off topic so "Lighten up, Francis".
@3sad. Under normal circumstances your assessment would be good. However, you missed something. The 20% lump sum valuation increase that you mentioned as being required for an outside annuity to match the ford pension s already there. In fact, lump sums are now 25% overvalued due to year old interest rates being used in the calculation.
I took the annuity for multiple reasons. The biggest reason in the game of retirement is to convert your financial assets into a stream of income. When ford pays the lump sum, it’s based on corporate interest rates. To purchase an annuity from an insurance company the ford lump sum would need to be 20% larger because it’s based on government interest rates that are lower. Ford pockets the 20% difference.
The next reason was to build a 4 legged stool for finances. Pension, social security, pre-tax savings, and after tax savings make up the 4 legs. The pension and social security cover almost 100% of our monthly income NEEDS for life. (Yes the pension loses value over time but SS gets COLA increases). Over time, the risk from financial events (think 2022 stock market collapse) that can severely impacted your financial life for all of retirement does decrease. So my risky money that can grow/decline based on what the market does can cover all the WANTS and I sleep very well.
The last reason is taxes which are at historic lows and due to rise in 2025. All that pretax money will push you into higher and higher tax brackets for life when the RMD’s kick in at age 72.
Lump sum takers need to keep in mind that ALL financial advisors make more money when the Assets Under Management increase be it 0.5% to 1.5% annually. They will always look out for themselves and recommend the lump sum. After all, 1.5% of $1M is $15,000 a year in their pockets and taken right off the top of your funds.
Maximizing your potential return also maximizes your risk to a permanent reduction in lifelong income that will be with you through all of retirement. I took risk off the table and built a solid 4 legged still.
A small history lesson. Thirty years on from its all-time high, the Nikkei Stock Average is still languishing about 40% below the peak of 38,915 scaled on Dec. 29, 1989. The Japanese stock market's uphill climb to regain lost ground is the longest in the history of any major economy. The stock market does not owe you a retirement. It is there to fund a business. Period.
@isa+1iChNXqp Yes, the contribution of 1.5% is after tax. People can take it if they want, but the smart thing to do with those funds is to roll them into a ROTH IRA.
Decision: Pension/annuity. Minority view I see. Seemed right for my specific situation and age. I agree lower risks / lower returns...clichés can be true. I do like the monthly check coming though, all at Ford's responsibility to send. Pension funding is good at this point and PBGC payments would cover my pension 100% if Ford fails, at least for the next 25 years according to some research.
Over 23 years in when I was SISP'ed this past April; I took the lump sum due to several factors: (1) knew with the interest rates raises the last year, payouts would be lower, (2) wanted the extra money from the 1.5 % contributary factor of the pension (fun fact - that is not taxable, so if you retire and take the lump sum, you can use that money right away tax free), and most importantly (3) don't know that status of Ford for the future, some would rather have my money today than hope I get all of it tomorrow. Knew some neighbors that worked at GM during the 2008 bankruptcy, and they lost 50% of their pension.
29 years, going to take lump sum after I meet with my financial advisor today.
30+ years took the lump. Did not want to leave anything for them executive bonuses.
Age: 62. Years: 32. Lump sum. Ran the numbers and believe can earn higher return than what is implied in pension annuity.
Age 55: 30 years; lump sum
Age 55: 33 years; lump sum
Age: 60. Years: 29. Pension: lump sum.
29 years, 59 age, lump sum.
My hubby took the lump sum. We gave it to our financial guy to invest. Not quite ready to retire yet. Didn’t want ford to have our money so we took it out along with his 401k.