Contributors to this thread:
I just turned 60 and am thinking about taking a pension from a company that is no longer around. I could take a reduced annuity payment now and dump it into an established fund every month or wait 5 years and get the full benefit payment at 65. Thinking I might be better off waiting and using it as an income supplement. Any thoughts?
I took my pension at 55. I had a choice of full benifits at 60 or 5% every year prior to 60 with elibility at 55. My desision was made by the toughts of,do I want the extra money now, while still being young and being able to enjoy things that may not be possible at a later age. I am 58 now and have no regrets. I guess alot depends on your health and your finacial situation. My pension is basically fun money for my wife and I so I am happy to enjoy it now. The 25% I lost really wont hurt me in the future. I worked as a carpenter for 35 yrs and not once had a lay-off or lack of employment. My body paid hell for it and at 55 it was time to start enjoying life. just my situation, maybe not for all.
KPC is probably right...my buddy always says "do it while you can- Dont wait too long to do what makes you happy"
I think I'll be taking mine early. My full age is 65 but I'll be retiring before that. It all depends on your financial situation. In my mind, you get to a point were time is worth more than a few more percentage points.
MF - I had the choice of a lump sum now (I am 52) or to wait. I chose to wait, but it might have been different if they offered it at 60.
Also, if you do the math, In my situation it will take 12 year of full benefits to make up the difference of the 5years I am receiving early. That puts me at almost 70years old before I accually start to see a lose. If you do any investing, that time frame becomes much longer. Again I guess it all depends on your situation.
""I just turned 60 and am thinking about taking a pension from a company that is no longer around. ""
First thing I would want to know if the pension would still be there in 5 yrs.
Xtrout, that's what I'm trying to figure out, how far out before I am losing money by taking it early. I'm still waiting on the figures, it has to be mailed. No doubt it will be there. It's with a major US company. Thanks all.
I changed jobs from a company I had only been at for 7 years. My pension was around $18K. Having been diagnosed with Parkinsons's last fall, I cashed it in (Uncle Sam loved me), but now I have some $ to travel while I still can.
Find a good financial adviser. Most larger Credit Unions and Banks have them on staff. I would avoid self employed financial advisers as most are excellent but if you get a piss poor one you loose. My question also will the plan be around in 5 yrs and if so will it be payable? Life is too short to mess around and attempt to get a couple extra points in your retirement funds. We can't come back to correct our mistakes.
Sheep, Run with it, run hard and play hard. People are sitting around believing "well , when I retire I will have.." Nobody is guaranteed anything tomorrow leave alone in 5 or 10 years. A guy told me a long time ago " when I die and everything I possess had been changed over tot he kids I am going to dig a financial hole so deep with all this plastic in my wallet a fire engine ladder couldn't get me out. I am not going to sacrifice anymore and I am going to spend it like there is no tomorrow, because one day, there will be. Where I am headed they can't break a fifty nor can they come to collect it but I will have had my fun. I have been screwed me my whole life between insurances, politicians and taxes to name a few now I am holding the screw driver". Some people realize the finality of moving on and taking their turn at bat.
The Rock
I took my retirement after 37 years and 100% vesting. I knew the company was going to be sold and they offered me a bail out. I could have gotten more money per month if I took the total figure they offered but I opted to take a little less per month to guarantee my wife would continue getting my retirement if I died before she did. I am glad I did what I did and don't know how I ever had time to work. I was on call 7 days a week 24/7 for many years so getting out was great for me. I did have five weeks of vacation and could actually take off any time I wanted and didn't have to check with anyone. I had great people working for me that could handle any thing that came up.
And some people want to make sure their family is taken care of should they die.
Don't forget to factor inflation into your plans. With inflation compounding , your monthly cash requirements will not be the same as they are currently.
You wouldn't go to a financial website to ask hunting questions, would you?
Matt
"You wouldn't go to a financial website to ask hunting questions, would you?"
I did, and I got a buck! :^)
Sorry...Joey made me say that.
Awwww Dave......figured you go with...."I did, and got lots of doe!"
:-)
I'd take "free" financial advice any day from successful individuals over the internet versus advice from "professionals" who have a financial stake in whether or not you invest with them. You do know how they get paid right (it's from you, one way or another)? If you want advice on cars, I doubt anyone would advise soliciting the advice of a used car salesman. Financial planners, I wouldn't view any different, but that's me and I am cynical. I'm sure there are great ones if you have decades to invest.
Major US companies go bankrupt with some regularity and default on their obligations. The 1st thing I'd look at is how solvent the pension actually is and who has the money. hopefully it's an independent 3rd party who is solvent, otherwise you could be at risk.
Can you roll the pension into another retirement account (such as an IRA) without paying tax and penalty at present time? That would give you more control.
I would take it and put it to where you have control, however and wherever that is is your call.
I guess the question is: what investment engine(s) will give you the same growth as deferring and taking the full benefit in 5?
Ask yourself what you want the last 20 years of your life to look like and work from there. I retired 2 years ago at 56 and am loving every minute of it and I don't have a pension. Sound investing starting at the age of 15 made it possible. I wanted to have fun before I was too old to do anything . my youngest starts college this year so we will be living in Maui 6 months or more starting in 2018. My most pressing goal is to be tan for an entire year and and be a decent surfer at age 60.
Whitey,
Why'd you wait so long? ;-)
Matt
If we knew in advance how long we would live, we could make better decisions on this retirement issue.
The hell with waiting until you're retired..... Make the most of your life and do awesome things now.
Big Bear, The best advice yet by a long shot. Don't wait. Who the hell cares about playing shuffle board on a cruise ship, about the only thing you can do? Wait too long and more than likely you are going to be on more medications than schizophrenic patient at a Black Sabbath concert. That will be a new experience all right. Do whatever you can when you can do it and feel the sensation now, because doing it later will never be the same as doing it now. That's life and there is no getting around it.
The Rock
"Life is not a journey to the grave with the intention of arriving safely in a pretty and well preserved body, but rather to skid in broadside, thoroughly used up, totally worn out, and loudly proclaiming -- WOW-- What a Ride!"
One of my life mottos.
Matt
WHAT K Cummings Said!
This is the rest your life. Get professional ADVICE!
"Find a good financial adviser. Most larger Credit Unions and Banks have them on staff."
I wouldn't go near a bank or a credit union to get a financial advisor. In my 42 years of experience as a CFP, lots of the folks who can't cut it with the best professional financial consultant companies then get hired by banks and credit unions.
I'm sure there are some good advisors in the banks and credit unions, but good luck in picking one.
Remember, anyone can call themselves a financial planner, financial consultant or financial advisor. It means nothing!
Get a professional such as a CFP who has been properly trained, has the credentials, who is bound by an Ethics Code to always put the client's interest first! You also want someone with experience. Ten years as a minimum and 20, 30 or 40 years is even better.
Check out anyone and everyone you consider hiring on FINRA's 'BrokerCheck' to see if they've had an regulatory issues, fines, sanctions, etc. If they do, RUN! Don't Walk, RUN away! You want someone with a spotless record, and I mean spotless!
ben h,
"I'd take "free" financial advice any day from successful individuals over the internet versus advice from "professionals" who have a financial stake in whether or not you invest with them>"
What utter BS!
The 'professionals' you bash get 90%+ of their clients from referrals from existing clients who have hired them and who have taken their advice. They give those referrals because they are very pleased with the advice they received from a professional.
Most "Successful people" gained their wealth by building their own businesses, yet have NO FREAKING CLUE about how to advise other people on how to invest.
I've been on the Board of Trustees for a hugely successful NGO with some very successful fellow trustees.
Yet even though every one of them became successful by building some amazing businesses, and despite all of them being good and honorable people, not one of them had a clue about the proper way to invest OTHER PEOPLE'S MONEY!!!!!!!!!!
Thanks again, only online in work.
A CPA or I'm assuming a financial adviser should be able to do an analysis for you showing the financial aspects of taking the money now or waiting based on present values. As far as investing, that's tough one. I like to look to see if they consistently beat the earnings of Vanguards Index 500 fund and total Stock Market fund over a five and ten year period with the same risk level taken. If they have then they are worth looking further into.
Mint,
"As far as investing, that's tough one. I like to look to see if they consistently beat the earnings of Vanguards Index 500 fund and total Stock Market fund over a five and ten year period with the same risk level taken."
I have several issues with that statement:
1. It assumes a broad, exclusively large cap portfolio is suitable for the person, which may not be the case.
2. It assumes the person won't panic (as far too many do), when the broad market gets clobbered, as it did in 2001 - 2002 and as it did again from late 2007 to March 9, 2009.
When people panic, they bail out and it takes a long time for them to get over their fears. By the time they do, the market has likely recovered all of it's losses and then some. "Buy High, Sell Low" is a really bad way to invest!
The client's portfolio should be built around his or her specific needs, goals and situation, not the other way around!
3. The first and foremost rule of my business, as KPC will attest, is to "Know Your Client." Doing that takes time and lots of discussions. Done properly, a good advisor will end up knowing more about the client's finances and attitudes about goal setting, risk tolerance and financial and personal objectives than the client himself does.
4. I will not take a new client until and unless I can get all of the information I need in order to make the proper recommendations for HIS situation. Every person is different and 'one-size-fits-all' strategies are inappropriate and dangerous. In addition, I will not take a client on unless he understands and is comfortable with the two promises I make regarding what will happen if he invests in the market. These two promises are as follows:
"I PROMISE you that from time to time, the market will scare the living daylights out of you. It will drop significantly and every guru, buddy and most of the media will tell you it's going to get a lot worse. That's just the way it works and it's not my fault." ;
and,
"I PROMISE you that from time-to-time, the market's going to soar and you're going become giddy and 'irrationally exuberant.' That's also just the way it works and I will have had nothing to do with that, either."
"It's perfectly OK and human to feel those emotions. It's just NOT OK to act on them. Because if you do, that's the best way I know of to ensure you'll fail to meet your investment objectives."
5. The S&P consists of the 500 largest companies (by market cap) in the country. No mid-cap, no small cap, no international, no fixed income, and no alternatives. In addition, while that index has 500 large companies in it, the results of the index are driven heavily by the largest 50 companies, which have a larger combined market cap than do the other 450 companies combined. Thus, investing only in the S&P 500 gives a person a very limited and non-diversified portfolio.
6. I'm not a big fan of passive investing (i.e., buying index funds), because the evidence is overwhelming that GOOD active investing, which some fund companies do while many don't, absolutely destroys passive (index fund) investing, and it's not even close.
