For those looking to retire within a few years and considering the lump sum, the interest rate becomes very important. Where do you see interest rates going?
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PBGC will publish their November interest rate summary around Nov 15th. It will be based on corporate bond rates during the past month of October. To make it even more confusing: the rate in the November summary will be applied to December. And that rate, published for December, is the rate that Verizon East will use for all pension commencements made in 1Q 2020. That being said, it is not a done deal that the PBGC will be 0.00 for those commencing pensions in 1Q 2020. You have to wait until mid November to find out. (Bond rates did remain low in October, I am projecting a .25% pbgc for 1Q 2020 for VZ East). Verizon West works on a three month rate lag, and rates change monthly, not quarterly. ie) November pbgc is .25%, so that is now published for VZ west February 2020 commencements. October pbgc was 0.00, to be used by VZ West For January 2020 commencements. VERY CONFUSING, be careful what you hear or assume. I am a financial professional with much Verizon pension experience.
I only used Verizon stock as an EXAMPLE of being able to make more than 4.5% a year investing the lump sum wisely as opposed to taking the annuity. You're making my point
That's not investing, that's speculating. Go to any financial site, do a chart comparison of Vz vs an S&P500 index. Total returns over the past 5 years: Vz 24.32%, S&P500 53.33%, more than double! And, with far less risk, since the S&P fund is well diversified.
Any single company, no matter how great, can fail, miserably. Look at MCI and Worldcom. Look at GE - over 100 years super reliable dividends, now a total wreck.
Go read John Bogle's books, learn about investing, not speculating.
" If you invested 100% of your 401K in Vz stock, you’d be a complete fool. "
Hmmm... well Verizon isn't going out of business... and it's been providing a 4% DIV for years... which you can continue to collect if you have the balls for price fluctuations.
Here's an example for folks that retired in 2010 with a 500k Lump, 2 yrs after the crash
Tossing 100% in VZ stock would have scored you a 34k+ yearly Div right off the bat.
The yearly DIV has gone up every year since then,,, that same untouched stock would now provide a $47K+ per Year income.... and that $500k initial Lump Sum would now be $1,152,000+ just in time for required min withdraws at 70 1/2... while still continuing to collect DIV every year... with only a 0.0034% expense fee, plus $25/yr account fee. Still want to call them a r—d???
I've collected every DIV since late 2017... Lump value is up 38.5% since the day it was deposited.
I trade back and forth between VZ stock and the Money Market Portfolio. 2 or 3 times a year... VZ swings $3-4 very predictably... hits a high... sell it, collect 1-2% while you wait for it to drop 5-10%, then buy it back. Live only on the DIV.... When market turns or makes you nervous, move back to the MM and ride it out. You may not get super rich, but you won't go broke and you'll be miles ahead of the Pension Annuity. And if you kick off... your wife or kids still get the entire balance.
Never move to a "bond" fund as Fed rates are rising...
Depends on your outlook and "discipline"...
If your the type that looks at the lump like hitting the lottery, and plan to by a new car every 6 months, plus a boat, RV & house by the ocean the 2nd you retire... then you should probably stick with the annuity.
If you invested 100% of your 401K in Vz stock, you’d be a complete fool.
Again, there’s no way you’re going to get 4.5% per annum RISK FREE over the next 30 years.
Besides, as history has shown time and again, when Joe Sixpack gets a large sum of money, he has no idea how to manage it. Shady “advisors” and relatives will be swarming, boats, RVs, vacation homes are suddenly “affordable”, etc. He’s broke in five years.
Just take the annuity, unless you’re extremely knowledgeable about investing, such as a Boglehead.
Best of luck getting a guaranteed 4.5% return over the next 30+ years? Buddie, people don't invest money in CD's anymore. As an example, If you invested 100% of your 401k in Verizon stock, you'd have made 13.10% . You're proving the "Lump sums are for the financially unsophisticated" guy correct
This site created bullet pionts and distroyed the rate list in the previous post... hopefully the dash allows this to post correctly
_1.00% January - February 2015
_0.50% March 2015 **** (1 month only)
_0.75% April - June 2015
(Dec '15 Fed rate raised +0.25%)
_1.25% July 2015 > March 2016
_1.00% April 2016
_0.75% May - July 2016
_0.50% August - November 2016 *** (4months)
_0.75% December 2016 is 0.75%
(Dec '16 Fed rate raised +0.25% again)
_1.25% January - Feb 2017
(Fed Raises rates twice)
_1.00% March - July 2017
_0.75% September 2017
_1.00% October 2017
(Fed raises rates in Dec '17)
_0.75% November 2017 - March 2018
(Fed raises rates 3 more times)
_1.00% April - May 2018
_1.25% June - Nov 2018
(Fed raises rates again & promised it was last one)
_1.50% Dec 2018 - Jan 2019
_1.25% Feb 2019 - April 2019
_1.00% May - June 2019
(Fed lowers rate to 2.25%, despite steady growth)
_0.75% July 2019 and begins steady decline to 0.00 in October 2019**
"Nor does anyone really know if PBGC rates could go below 0, and even if it can go negative,"
FYI for those who think the PBGC "might" go Neg... it won't... Here's a little recent history.
Fed Funds rated went to 0-0.25% Dec 2008 & remained there until Dec 2015 when it was raised to 0.5% & raised again to 0.75% in Dec 2016.
From Feb 2009 thru Oct 2011 the PBGC rates were between 3.00 & 2.25% despite the Fed rate being effectively 0%. And between 2012-2015, the PBGC rates bounced around between 2.25% - 1.00%, with a few stray drops to 0.75%... Fed rate was still 0% throughout. The previous low points fell between 2015 & 2017... Listed below.
- 00% January - February 2015
- 50% March 2015 **** (1 month only)
- 75% April - June 2015
(Dec '15 Fed rate raised +0.25%)
- 25% July 2015 > March 2016
- 00% April 2016
- 75% May - July 2016
- 50% August - November 2016 *** (4months)
- 75% December 2016 is 0.75%
(Dec '16 Fed rate raised +0.25% again)
- 25% January - Feb 2017
(Fed Raises rates twice)
- 00% March - July 2017
- 75% September 2017
- 00% October 2017
(Fed raises rates in Dec '17)
-
75% November 2017 - March 2018
(Fed raises rates 3 more times)
- 00% April - May 2018
- 25% June - Nov 2018
(Fed raises rates again & promised it was last one)
- 50% Dec 2018 - Jan 2019
- 25% Feb 2019 - April 2019
- 00% May - June 2019
(Fed lowers rate to 2.25%, despite steady growth)
- 75% July 2019 and begins steady decline to 0.00 in October 2019*
Don't look a gift horse in the Mouth... PBGC = 0% is as good as it gets.
I posted the above so you can see how the PBGC can jump on a dime, and has little to do with where the Fed Funds rates is... Fed Rate was effectively 0% from Dec 2008 to Dec 2015, yet the PBGC only hit 0.50% 1month during that entire time... and only 4 more months during 2016. Don't expect it to stay at 0.00% for more than 1 month... and consider it a gift if it does.
Best of luck getting a guaranteed 4.5% return over the next 30+ years. Not a chance.
"Lump sums are for the financially unsophisticated"? lump sum at 800k+ making 4.5% = 36k. 50% survivor annuity = $33,720. The annuity will equal the initial lump sum after 23.75 years of retirement. on top of that the 750k+ in the 401k if you played your cards. I will take the lump sum any day
Met with advisor, handle a very large ammount of vz retirees, VZ rate of 0.0 is in effect for Jan, as far as another interest rate drop, maybe dec as presumed, will push up lump sum again, for next Q ..jan feb mar 2020 ( if it happens) because Gatt rate effect. But 0.0 verizon is offering will never go neg along with fed rate cuts if they in future drop into negative. Co factually its lowest is 0.0 for vz. After 0.0 fed rate , and goes negitive will have little to no effect on gatt. So another fed cut in dec will help one more time evidently. Even tho VZ is offering 0.0 for Jan 1st reflection, vz will honor the gatt when and if fed cuts again up to 0.0 themselves , negitive rate wont matter.
For those looking for eisp, same guy that told me in June he " feels so.ething in Novenber, 3rd week" still holds that feeling as of yesturday..
Also anyone looking to leave and get lump sum, keep in mind if paperwork not filed by 10th of any month, lump wont appear until month after next..example, file 12/11, will be in account 2/1....12/9 be 1/1.
Possibly not trusting Verizon or that it is guaranteed to the amount they’d get just taking a cash balance.
Lump sums are for the financially unsophisticated. Vz will purchase the annuity from an insurance company, then they’re out of the picture. It is very much guaranteed for life, based on the strength of the insurance industry, not on Vz.
Have any of you people actually met with an advisor or do you look for answers here?
”Not sure why anyone would consider lump sum vs lifetime guaranteed income via annuity. ”
Possibly not trusting Verizon or that it is guaranteed to the amount they’d get just taking a cash balance.
The article posted gives a statistic that 21% of people who take a lump sum are broke within 5 years. This is an improvement over the stat released a few years back that said said 40% are broke within 5 years.
@11pABfbI-1lne
See the following article "Lump Sum vs. Regular Pension Payments: What's the Difference?": https://www.investopedia.com/articles/retirement/05/lumpsumpension.asp
Interest rates is the least of Verizon worries. That network is in a death spiral with no one to drive the train.
On PBGC website, they posted this Note with the latest rates: *Because the 4022 immediate lump sum rate for October is based on August corporate bond rates and those rates reached historic lows, the October immediate rate has decreased to 0.00%.
That would mean that next month's rate which impacts Feb 1 commencement, would be based on September corporate bond rates. But good luck trying to find where or what that source is exactly. Nor does anyone really know if PBGC rates could go below 0, and even if it can go negative, no one knows if VZ pension formula would calculate negatives or if the lowest is 0.
This is all historic territory, and I don't trust anyone, not even VZ Bens reps, to understand these "what if" questions. Will just have to wait til the 15th of each month to check on new PBGC rates, and 1st of each month to check VZ lump sum estimator. I left in June, but take it one month at a time to determine when I will commence my pension.
If I were considering retiring within the next few years the absolute first place I would look for financial advice and or any information of any type would be on the layooff dot com/verizon. This has been more reliable than the liberal media or the right wing media for that matter. Here you get finger on the pulse reliability that I would with out a doubt look to for any type of life altering decisions.
At least one more cut by end of year.
That's a good question. Does a neg rate give you a higher lump sum than a zero percent rate, or is zero the best you can get for your lump sum computation?
Rates r heading dow .quarter point drop end of months and hopefully some more cuts if Powell gets his head out of his a– ...
god bless TRUMP!!. But I am curious what happens to our lump sum buy out if rates go neg like the rest of the world.does it keep going up