I heard the lump-sum is dropping. Is this true?
19 replies (most recent on top)
The reason this happens is because the lump sum payout is generated to reflect what would be paid out over the lifetime of an annuity. Most lump sums work this way. So when interest rates go up, the lump sum drops because the interest rate raises the value of the annuity. when the interest rate goes down, the lump sum goes up because the interest rate causes the value of the amortized annuity to drop. The adjustment is made in order to have the lump sum reflect the actual value of the annuity which would be paid over the life of they payments in a lump sum amount.
As others have said interest rates are determined by the Feds not the company. It's always been this way this is nothing new. This is why tenured retirees who had the defined benefit plan prior to 2013 will need to make a decision before 12/1 of this year on whether to retire.
They should get rid of the pension a d do a better 401k match. The pension is garbage
I’ll give credit where credit is due…some very accurate responses to the OP. That’s said…why is the OP so lazy they can’t do their own research and rely upon responses from posters that are 99% wrong. OP…you got lucky with your laziness this time. Rotsa Ruck
Important to understand that this applies to the Defined Benefit Pension plan that was sunset in 2013. Those benefits were essentially frozen, with the Cash Balance plan introduced. All employees can model the impact to their pension on the Good Life website. The key August IRS pension rates will publish in the next 10 days. From there, the company will provide a communication with various scenarios.
Giving the increase in interest rates in the last year, you can expect to see a significant decrease in the lump sum.
Not unique to Allstate. The government sets the rates.
https://www.cnbc.com/2022/06/21/how-rising-interest-rates-affect-pension-lump-sum-or-annuity-decision.html
Some great comments here that explain how this works year to year. Thanks to those who posted real info and were not just taking pot shots and trolling!
Correction- the interest rate that is declared will apply for lump sum payments 12/1/22-11/30/23. Rates can change each year but it looks like the trend will be increasing rates which will lower lump sums in most situations
Lump sum payments have an inverse relationship to interest rates that are usually announced by mid September each year. That will apply for lump sum payouts starting 12/1 to 1/30/23. Each year a new rate is declared. Allstate has no impact on the rate. Rates were at an all time low in 2021 which caused lump sum payouts to increase. Please note that interest rates have no impact if you annuitize your pension. May see some older employees leave by 11/30 to take advantage of the lower interest rates declared last September
I’m d-mb and don’t know what this means, can someone explain?
Accurate.
Yes it is. I just spoke to my financial advisor today and she confirmed it.
Yeah it's real, didn't think I had it but I do
The details of the Allstate lump-sum can be found in the Summary Plan Description. Here is the link for anyone who is interested: https://blog.techstaffer.com/allstate-summary-plan-description-pension-information
Why haven't I heard about the lump-sum?
Actually, there is a lump-sum if you were hired by Dec 31st 2013, and vested for five years of service. Additionally, it is going down due to rising interest rates.
Haven't you heard? Tom Wilson is absorbing the lump sum into his corpulent mass
There is no lump sum.
bullsh-t