Is it really worth while taking lump sum for Legacy T folks?
Is not it better to go for the guaranteed annuity and don’t worry about the interest rates?
15 replies (most recent on top)
I plan to take the lump sum and pay off my house. That will free up more $$$ than the monthly annuity and have some other benefits.
" If it's such a bad deal to use the annuity why was this ever a choice instead of a better 401k match?"
The 401k product wasn't approved by congress until 1981; pensions were the only product and not all companies had them. Then it took a really long time for the acceptance of 401k - with or without a match.
What do you mean about them losing money? The pension is fully funded, so it shouldn't matter if everyone gets their full annuity. It's not like the company can take the money back from the pension fund, can they?
In response to:
"No offense but wouldn't it make more sense for ATT to end the annuity pension plan and roll all of the lump sums into your 401k, since new employees can't get the pension anyway?"
Not really. From a business perspective it makes more sense for them to pay annuity because there is a chance that you may pass away long before they start losing money.
Any recommendation on wealth management company? Who are you using to manage your retirement and is their fee worth it?
No offense but wouldn't it make more sense for ATT to end the annuity pension plan and roll all of the lump sums into your 401k, since new employees can't get the pension anyway?
" If it's such a bad deal to use the annuity why was this ever a choice instead of a better 401k match?"
Well, it's a historic relic of days gone by, when companies primarily used pension plans for employee's retirements, before the 401K plans came and supplanted them in the 1980's.
We talk about pensions around here as if they're still a "thing" everywhere.
They're not.
In fact they're no longer a "thing" here if you're non- bargained and hired after 2002.
" Then market plunges (like 2022) and you will lose 30%. "
Typical short-sighted observation by an uninformed and poorly educated doofus who probably has all of this money in CD's.
Yes, it's been a brutal time for the market the last year and a half or so. Yes, portfolios are down some 20- 25% or more.
They were down more in 2008 when everyone thought it was the end of the world and then went on the longest bull run in history, up over 300% over the next 12 years or so. Folks not that bright (like this guy) probably panicked by realizing their losses at some point when they were way down, and not benefitting from the historic rally that followed. In fact, I see that comment all the time here and elsewhere ..." lost most of my retirement in 2008 market crash..." or something to that affect. How is that even possible unless you did something colossally ill advised?
The market will come back. Look at history to guide you. And don't be a doofus.
Yes, you can take lump sum and invest it. Then market plunges (like 2022) and you will lose 30%. But, if you hope you have longevity gene and you will surpass 90, you may be better with annuity. Your rate of return (even with inflation) will be better than investing lump sum, which may be gone when you hit late 80s.
If it's such a bad deal to use the annuity why was this ever a choice instead of a better 401k match?
Take the money and hit Atlantic City. You will come out way ahead.
What was said before, the annuity does not take in consideration inflation, which will eat a large chunk of your monthly check. With the lump sum you can invest it how you want, leave all to your spouse or kids upon your death, etc.
I much prefer the lump sum. That way I have control over my money.
do the math and find out the interest rate assumed in the calculation...
Just something to think about, if one has some life changing event, cancer, going blind, what ever.
Lump Sum, you can spend the $$ as you please, while you can still enjoy it. You can knock a think or two off your bucket list.
Monthly, well you just got to live out with what you got coming and no more.
Guaranteed Annuity???????
Once you die your spouse/partner only gets half. Once your spouse/partner passes then the pension stops... nothing to hand over to your kids/family/friends.
Also, annuity does not increase with inflation, which means that your $3,000 a month will be worth a lot less in 10 years (using $3000 as an example).
With your lump sum you can invest that money and have more flexibility on what you can do with it. You can add anyone as your beneficiary should you pass and they will get the entire amount.
Just something to think about.