If there's no Cost of Living Adjustment on the monthly annuity doesn't that make an easier decision to take the Lump Sum?
Basically the first check received will have the greatest purchasing power and each subsequent check will be worth less and in 24 years will have 50% less purchasing power at 3% inflation.
Is my thinking straight on this?
Any additional thoughts on the subject that I may have overlooked?
Insurance company annuities are an option. Keep in mind they are not guaranteed with the exception of a period certain option in which case your payments will be less. The at&t annuity is guaranteed up to a maximum of $4000 per month (not sure of exact dollar amount) by the pension guarantee Corp.
The purpose of the PBGC is to ensure that corporate pension obligations will be honored. In the event that a company's pension plan encounters financial difficulty in paying pension benefits to former employees, such as when a company declares bankruptcy, the PBGC will make the payments promised by the plans.
You could take the lump sum and buy an annuity as one option for fixed income that may even allow for the leftover inheritance. You would have to work with a fiduciary to try to determine the best option for you.
@119XQJwj-1zyi
FYI, my pension and social security add up to $4589 a month. I retired as a Comm Tech. Add in the IRAs for my wife and I and other investment income and we live comfortably in retirement. You may believe it or not but it’s the truth.
In our home there is no nest to pass a lump sum down too. Other family will inherit from other sources of our income, but an Annuity flanked by two Social Security checks will pretty much keep us from touching most of the principle for years.
Now keeping in mind that once you hit 70.5 years of age you are required to take RMD’s and taxed accordingly, which could place you in a higher tax bracket, like it or not! On the other hand, if I, or my spouse live past approx. 20 years (into retirement) we surpassed what a lump sum would have paid and avoided the concerns of market risk altogether.
It’s a personal choice....choose wisely
For many it all boils down to if you think you can invest or pay a financial planner to invest your lump sum and that will give you an annual return that will result in more than what your pension would be without requiring an ambitious annual return (high risk). If the numbers indicate you will need a relatively high rate of return you are opening yourself up for a lot of risk when you probably want to minimize your risk as much as you can in retirement unless you have other sources of incoming coming in (besides Social Security).
Retired last year and elected the annuity. I already had a significant nest egg (IRA, Company 401K, and personal savings). Having an annuity income as a portion of your retirement portfolio is well suggested by the financial retirement planning community, especially for those with no pension at all.
There is no right or wrong answer, and depends on your own situation, especially if you have heirs to consider.
At age 50, 18 yrs of service my annuity is $1500/month. at 55 it will be $2000/month. I am a low level manager. Of course taking at 65
FWIW: Last year I retired as a Comm Tech after 51 years of service and my monthly pension is just a bit North of $4,000.
I have over 20+ years as FT (cable maintenance) and my projected lump at 30 yrs. is about 200 thousand. Worked a lot of OT too, that’s how much the company has changed on retirement benefits. I also have 401k but there is only a 50% to 60% match on $65 @ week match. It doesn’t add up to the older benefits. Discounted & given stock is also gone except for executives. I’m thankful for what I have but workers wages & benefits have been in reverse for awhile across the country
Once upon a time the company shared the profits with all employees. The difference now between executives & all other employees is staggering. This is a corporate America issue not just AT&T
Director of what? Traffic. Craft guys have been getting those kind of lump sum and pensions for decades. Problem is most think they hit the lottery and buy cars and boats. They fail to realize that money has to last the rest of you and your wife’s life. With all the crooked financial guys out there it is a risk. I also chose the annuity. I also got a nice boost to my 401k with the Ameritech stocks of the 90’s.
Absolutely true. Started at 25 years old. 35 years service. Cable maintenance. Started collecting at social security at 65. Also took a sipp. As a director you should be aware of that this is not only true, it’s common. Most who left with me took the lump of $500k and panicked when it lost half. Some even returned to work. I worked hundreds of hours of overtime each year and also worked the evening shift which paid differential. The overtime raises social security and the differential raises pension. I worked hard mostly inner city.
2200 is very possible for folks with 30-35 years in. I had comparable numbers as a low level manager.
To the guy who is getting $2200 a month in the annuity - you're dreaming....you must have been a VP or above for LOTS of years. I worked for AT&T for 20 years, 10 of those as a Director and when I left (yep, i left), my payout would have been $850/month.....and you say together with social security you're pulling in $4400 a month...you must have been paid A LOT to have $2200 a month in social security. I don't believe a word of this.
Took the annuity. I don’t think I could have produced the $2200 a month that I receive if I took the lump without dipping into the principal. Once that happens the calculations change and the questioning begins. With the pension and social security I received $4400 a month. Add in $1500 a month from my 401k which is a 4% draw that enables it to still earn a small amount. I’m happy knowing I have nearly $6000 a month of safe income with a 50% survivor benefit. I need about $3000 a month and have the 401k and Roth for immediate cash if necessary. Btw my brother retired from gm and has never missed a check even through gm’s bankruptcy.
I think one thing no one has brought up is if you die before you start collecting is it better to have your money within the att pension or in an IRA or other external investment fund
I took my lump sum in 2011 when surplused, it has almost doubled.
@1ggu OP here. I did the math and I would have to generate a 5.5% from the lump sum a year to equal my monthly annuity payment. That is probably doable with a mix of equities, bonds, RIETs and cash averaged out long term without moments of panic (like December 2018).
Yes.....I'm in my very late 50s and the surplus target seems to be getting larger on my back by the day and these questions and decisions will have to be made soon by me and my age peer group.
For younger individuals that may read this, live below your means and save in that 401k...It Works!
It seems to have been quiet the past few months in regards to surplus (management) and maybe we make it through the holidays stress free. Good luck to all Union and Management
If you think a company can’t rob the pension fund when they go into Financial trouble you’re in dreamland! Just ask the United Airline pilots from years ago...their pension was robed from the company and many had to return to work to survive! Plus with a lump sum you can reinvest it before tax’s and you make the profits, not the T making holding on to your money in a annuity.
It’s a cash value pension. So it’s not subject to being underfunded, because it’s a pay as you go. It is already funded. The good it’s save the bad is it is the same as cash going to an annuity that doesn’t increase with inflation. Not sure what the b–ching is about, we are very fortunate to have one. The newer hires don’t get anything more than the same 401k match we get. And be glad 5 years into retirement you find out your pension was underfunded and they cut you off.
You mean some people take the monthly annuity? Really?
I agree that there is a guarantee by the PCGB but have you not read how it is barely floating. There is a good chance of a big reduction in your amount, read about how well it is funded. Possibility it wouldn’t survive an AT&T bankruptcy because of the size.
I know that the (do nothing) congress would maybe get involved. How long are you willing to wait and be made somewhat whole? Ask the farmers how long it’s taken to get any storm relief money.
“I’m not leaving my retirement fate to the same id-ts that have me questioning it in the first place” seems like a bad reason to reject the annuity. Your pension is insured by the Pension Guarantee Benefit Corp similar to your bank acct and the FDIC. If ATT went under, my pension wouldn’t grow but i wouldn’t lose it either
So do a partial lump and the balance in annuity payments so as not put all your eggs in one basket and to help protect yourself from your own investment decisions and the vagaries of the markets.
Additional thing to factor in . . . . the annuity is for life. Unlike your lump sum which can run out of steam down the road.
Here's what my Finance guy told me when I asked the annuity vs lump sum question.
Look at what you will bring home with the annuity. Now take a lump sum, throw it into some investment vehicle and calculate how much return you'll need on that to match or exceed what you'll get from the annuity.
If the number is doable ( Eg: A sane rate of return ) then the choice boils down to how safe you feel with taking an annuity from a company that's trying it's d*mndest to k–l itself.
On the other hand, if your calculated rate of return is a ludicrous number, now the decision becomes a difficult one. ( Because you're not likely to achieve said number )
Personally, I don't care what the math says. I don't trust AT&T now and I'm certainly not going to trust them to do the right thing with pensions a few decades from now. You all know as well as I do what the first thing is on the chopping block if / when a company declares bankruptcy.
I'm not leaving my retirement fate to the same id–ts that have me questioning it in the first place.
I will take the Lump Sum with zero regrets.
No cost of living adjustment to the monthly sum, either. It shouldn’t factor into your decision. To give yourself a rough estimate of which is better, open up excel and enter the monthly sum into a couple dozen rows and do some totals. Can you do more with the lump sum like payoff a mortgage? Are you doing a survivors benefit? How much of the lump sum would you lose in income taxes?