Lump sum or annuity? And if you are retired, have you found caution-points on either?
15 replies (most recent on top)
Mobil did not have an oppressive forced ranking yearly rigged popularity contest so nobody actually took that full retirement at 50. EM culture inspires people to leave at 55 with 25% penalty.
Before Exxon acquired Mobil, you could retire in Mobil with 100% of your pension at age 50 no penalty.
EM wants to reduce headcount, so instead of annual PIP which destroys morale, just set minimum retirement age at 50 and 0% early retirement penalty. Morale improves and the target group of over 50 exits happily.
@a9 With national debt at 40T, the odds of deflation is pretty low. Take a look at Japan, they have been stealing from their retirees for decades.
@by was it discounted because you didn’t make it to 55?
@gw Completely agree that this makes no sense. 5% discount per year taking before 60yo is, at max, 25% at 55yo. Where did anyone lose another 15% based upon the interest rates?
@by… please explain how you lost 40% of your lump sum due to interest rates when the rates have not increased that dramatically…..
There is no right or wrong answer. It all depends on your circumstances, tolerance for risk and desire for a stable income stream and a multitude of other factors.
But sometimes I wonder of some (not all) who take the lump sum, if they are so good at investing why did they stay so long with XOM?
I hope to have to make such a decision. In my early 40’s and making it to 55 seems harder each year. Tough to not drop in the annual assessment process.
All depends on the discount rate.if you take the lump sum you lose a lot. I lost 40 percent of my lunp sum because of the intrest rate. The rate is high right now.
You should consider the overall tax implications. Why worry about 'hurting' XOM by taking an annuity, which is taxed as regular income? Also no adjustments for inflation.
Assuming you have 401k pre-tax and Roth, along with savings to tap into, you're much better off rolling that lump sum into a 401k pre-tax. You should consult a financial advisor, but the tax aspects should not be ignored.
@a9 they’re not writing you a monthly check, they purchase an annuity and never think of you again
Thinking perhaps annuity.
Plenty in 401k for funny money.
Spouse isn’t great with investing, so also need some way to make sure they have a constant paycheck after I pass….though recognize maybe that means taking lump sum and purchasing an annuity for them. Thoughts?
I don’t trust financial advisors past my ability to sense-check their recommendations ….which means lump sum may become more and more risky as I age and lose mental clarity or, again, am out of the picture.
The pension does worry me if I want to start working again. Seems to put some ‘option’ in the company’s hand if they find out and think my new job is too close to my previous Job con job. Hard to know if that is really a risk.
And like the prior poster….don't mind thinking about living a long life and pulling from pension for many many years. That would be the best case scenario.
You can pass on the lump sum to your children or anyone else when you die. Not the annuity. The annuity stops with you and your spouse when you die.
@OP I’m seriously tempted to take the pension. Why? First, because they don't want me to. After 25 years of service at Exxon, and with longevity running in my family, I love the idea of making them pay me for another 35, 40, or even 50 years. Can you imagine? A pension guarantees lifetime income and provides a hedge against deflation. I know deflation is rare, but with AI potentially driving down the cost of goods and services, who knows what the future holds? Retirement also brings geographic freedom. I could live somewhere beautiful and inexpensive, downsize, get by with one car instead of two, or robotaxi ..and reducing costs considerably. Meanwhile, my 401(k), real estate, and other investments can help hedge against inflation if things go the other direction. There are risks either way, but the thought of forcing Exxon to send me a check every month for the next five decades? I have to admit, that's pretty tempting.