Can anyone explain why we lose 2-3K a month in the pension after 55? Is that legal, I have lost almost 150K in the past 3-4 years how is that possible?
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The peak amount you can get is when your time and age hit 90. After that your lump sum starts to go down
Is OP union? If so as @bin says. If the OP is management with a frozen pension, working more doesn't increase the monthly pension, but increasing age works against you in the same way (less months of pension expected when converted to the lump sum). Under age 55, there is a reduction in the pension amount and thus the lump sum
From what I hear most people want the lump sum to have their money out of concern the monthly payments would end or be reduced at some point somehow.
@bin: That was a very good explanation and entirely correct. I’m retiring soon so I pay attention to all that type of info. I’m surprised that so very few of mr co-workers even know that as of now in the contract there is a choice between lump sum and annuity. They only ever look at lump sum numbers without realizing the monthly amount only ever goes up.
Simply put they do not owe you a lump sum. They do however owe you a lifetime monthly amount based on years of service and the pension band you retired at plus whatever additions stipulated in the contract such as on call or night differential bump ups etc. When one opts for a lump sum it is valued at what that monthly amount is worth as a single payment. The value varies by the ones age, the current interest rates. Contractually we get the winner of the three indices used by companies to quantify annuity values. As of late the PBGC has been the winner although historically the GATT tends to win. Age work against the formula, tenure works for it. Once one hits 55 the power of tenure in the formula starts to lose out to age. It is totally legal because if you take the pension each month you work increases what they owe you monthly, only the buyout goes down. It makes sense you effectively will live one less month therefore one less month of payment they owe you. If you work long enough you could halve what your lump is or worse. The sweet spot is two or three years either side of 55 depending on tenure and market conditions.
Rising GATT (though that should similarly affect <55)?
Frozen mortality rate that’s not current (though that should similarly affect <55) ?
I don’t really know to be quite honest.
Talk to HR.
BTW, you have not “lost” 150k in the past 3-4 years if you are a participant in the 401k, where there’s a match, and stocks have performed well (though the last few months, the Market’s taken some gains back). And, you’ve been paid for that 3 - 4 years work, possibly with OT from time to time, and paid time off via vacation, holidays, sick time, etc...You’re estimate of $150k loss may be inflated by not considering these other factors?
Good luck amigo. Peace!
Are you talking lump sum? Apart from any rate changes, the lump sum is approx. equivalent to an annuity that provides you monthly (say) payments for the rest of your life. As you get older before starting, the expected number of payments decreases so the lump sum needed to cover this is less.
As trump said: 'We’re going to win so much, you’re going to be so sick and tired of winning'