Pension Plan Question

[skives]

My employer sent out a letter informing me that they intend to transition the pension plan to an insurer at the end of June 2024. My pension at the company has been frozen for like 12 years now. I know my monthly pension benefit online says it will be $179 a month so there's not much in there.

My question is in the letter the company sent out it says in August and September of 2024 I will receive information about my benefit options, which can include a lump sum, rollover to a 401k, or have an annuity purchased to receive future monthly payments. Which option here makes the most since? I am thinking of just having it rolled over to my 401k that I have had at the company for 24 years now.

[kork13]

How much is the lump sum? As long as it's reasonable amount, I'd definitely go with the 401k rollover. Hopefully they're offering at least ~$30k ... But that's a bit of a WAG, so have someone smarter than me run a proper reverse growth analysis with your actual numbers to make sure it's a fair offer.

[skives]

How much is the lump sum? As long as it's reasonable amount, I'd definitely go with the 401k rollover. Hopefully they're offering at least ~$30k ... But that's a bit of a WAG, so have someone smarter than me run a proper reverse growth analysis with your actual numbers to make sure it's a fair offer.

Don't know the numbers yet. Looks like I will know in August or September. I assume the lump sum will be the amount rolled over to my 401k if I do that option?

[kork13]

Don't know the numbers yet. Looks like I will know in August or September. I assume the lump sum will be the amount rolled over to my 401k if I do that option?

Ah, I missed initially that the offer hasn't been given yet. But yes, that's what I meant.

As I understand it, the annuity option would basically just replicate the $179/mo? I would just prefer the cleanliness & control of having it in your own 401k, rather than a peanuts monthly payment from a random insurance company.

[skives]

Ah, I missed initially that the offer hasn't been given yet. But yes, that's what I meant.

As I understand it, the annuity option would basically just replicate the $179/mo? I would just prefer the cleanliness & control of having it in your own 401k, rather than a peanuts monthly payment from a random insurance company.

Yeah I figured having it in my 401k would out perform the annuity anyway (unless it is a low ball lump sum) since I am only 40 and wouldn't take the annuity until at least 60 if not later.

[Drake3287]

Yep, I'd pick the 401k. An annuity is seldom a good way of going.

[skives]

Information came in today. My monthly annuity would be $179.20 and the lump sum offer is $6,910.13. The lump sum seems like a low ball offer unless it’s taking into account that I have 20-25 of investing it.

[Like2Plan]

Information came in today. My monthly annuity would be $179.20 and the lump sum offer is $6,910.13. The lump sum seems like a low ball offer unless it’s taking into account that I have 20-25 of investing it.

In order to compare, you should check to see much it would cost to buy an annuity on your own to give you 179.20/month.

Here is an annuity calculator that might give you an idea:
https://www.schwab.com/annuities/fix...ity-calculator

Here are some other considerations:

Is your pension covered by pension benefit guaranty corporation?

https://www.pbgc.gov/

Is there a COLA on your pension?

Does the lump sum continue to earn interest while the pension is deferred?

Are you already eligible to receive the annuity or would that be in a few years when you turn a certain age?

I'm not sure how soon you would be getting the annuity, but even now--$179.20 probably won't make a huge difference in your retirement income compared to other sources. If your annuity is a few years off, it will be further eroded by inflation.

[LivingAlmostLarge]

I think it looked like using my age 45 and you are similar I guess in 20 more years then lump sum is $10600 from the calculator.

Personally I'd take the lump sum to have control over jt

[VanessaKruze]

If it were me, I’d probably roll it into my 401(k) too. I’ve got a 401(k) that I’ve been contributing to for years, and keeping everything in one place makes it easier to manage. Plus, you’ll want to compare the fees and investment options of your 401(k) with the annuity or lump sum options they offer.

[myrdale]

Your question is interesting.

Are you still with the employer?

Assuming so, I am confused when you say the pension has been frozen for 12 years. Does this mean they stopped allowing you to contribute to it 12 years ago or that you chose to stop paying into it?

Assuming you're still with the employer, is the lump sum the same amount as what you can roll into the 401(k)?

If you're no longer with the employer, I think you'd do better to roll it into your own IRA, rather than leave the money with them.

I am more hesitant at the thought of an annuity than I am of a pension... but I guess they are more or less the same thing?

Are you married or have kids you want to leave the money to? If you died in a bus crash next year with the pension or annuity, can this be left to them or does it just evaporate?