Pension

[Rafiki31]

I have an old pension from a utility job I used to work. I took an early retirement package and moved on. My husband is very afraid that by the time I reach the age to claim my pension it will be gone. Underfunded, the company will go bankrupt or some other issue. Should I take it now and run with whatever I can get from it? They've offered money to cash it out before. I know no one can say for sure, but I keep thinking one bird in hand is better than 2 in the bush. Pensions seem to be going the way of the dodo. I'm in my 30s now, so there's a lot of what ifs that could happen. Any advice? Anyone know anything about pensions?

 

[Judique]

I have an old pension from a utility job I used to work. I took an early retirement package and moved on. My husband is very afraid that by the time I reach the age to claim my pension it will be gone. Underfunded, the company will go bankrupt or some other issue. Should I take it now and run with whatever I can get from it? They've offered money to cash it out before. I know no one can say for sure, but I keep thinking one bird in hand is better than 2 in the bush. Pensions seem to be going the way of the dodo. I'm in my 30s now, so there's a lot of what ifs that could happen. Any advice? Anyone know anything about pensions?

What is the age that you can start collecting it? What is the cash out versus what you would collect monthly?

 

[DebbieB]

Do you have a job now that you can collect from?

 

[ilovemk76]

I have an old pension from a utility job I used to work. I took an early retirement package and moved on. My husband is very afraid that by the time I reach the age to claim my pension it will be gone. Underfunded, the company will go bankrupt or some other issue. Should I take it now and run with whatever I can get from it? They've offered money to cash it out before. I know no one can say for sure, but I keep thinking one bird in hand is better than 2 in the bush. Pensions seem to be going the way of the dodo. I'm in my 30s now, so there's a lot of what ifs that could happen. Any advice? Anyone know anything about pensions?

I would always take a lump sum and invest it myself.

 

[Jeff_G]

I would find out if your pension is covered under the Pension Benefit Guaranty Corporation. Find out the funding level of the pension, strong pensions are funded at 80% or higher. If it is down in the 60% range I would be worried.

I would weigh out what you would get now by caching out vs leaving it in and taking it later. Dont forget about taxes if you take the lump sum now, can you roll this into a tax sheltered retirement account?

On top of all of that you need to run the number on taking the lump sum vs the annuity option. If you were retiring today you look at the annuity provided by the pension and compare that an annuity you can purchase on your own with the lump sum.

Do you have other retirement savings, is this pension just gravy on top?

 

[kymom99]

Years ago I worked at Kmart part time while in college. Those were the good old days because I actually accumulated retirement funds. A few years ago I got a notice that since the account had such a small amount in it, I would have to take the money or I could roll it into an investment account. If you take the cash, you will lose a lot to taxes.

 

[MillauFr]

I would always take a lump sum and invest it myself.

You would have to run some numbers first to determine if that was a wise move. There a numerous factors that have to be considered prior to determining which is the best route. On our pensions at the State of Washington the lump sum amount is a terrible option and you have to make in excess of 12% to come out ahead taking the lump sum amount. That is a no brainer to take the monthly payments.

 

[tvguy]

I would always take a lump sum and invest it myself.

There is a whole of of crystal ball guessing involved, but given that the OP is in their 30's, the lump sum before and more importantly, after taxes can't be much.

My mom had an option of taking $2,500 lump sum before taxes out of a pension from her first job, or $175 a month pension for life starting at age 62. She took the pension option, and 35 years later when she retired, the pension plan was still there. 27 years of monthly payments netted over $50,000. With great investment advice, she MIGHT have done better with the roughly $1,500 she would have gotten after taxes, and maybe not.

 

[barkley]

the other thing to look at is what benefits may be available to you at a later date by virtue of remaining a part of that retirement/pension plan.

if you did enough time to be potentially eligible to a pension you are likely 'vested'-and vesting, depending on the way the utility's retirement plan was set up when you joined can come with some nice benefits. while many pension plans through government agencies or utilities have in recent years changed, many from several years ago come with medical and dental insurance as soon as the former employee reaches the minimum retirement age. so even if a person plans on working long after age 50-if the minimum retirement age for that utility was 50 when you joined it, you may be eligible to not only your pension but yourself/spouse/dependent's health and dental insurance w/a large portion paid by the utility.

 

[ilovemk76]

You would have to run some numbers first to determine if that was a wise move. There a numerous factors that have to be considered prior to determining which is the best route. On our pensions at the State of Washington the lump sum amount is a terrible option and you have to make in excess of 12% to come out ahead taking the lump sum amount. That is a no brainer to take the monthly payments.

You are betting on the pension to still be there. I am betting on myself.

 

[puffkin]

With a utility, its pretty safe that the money will still be there. I would not take a lump sum on that as there is pretty low risk. If it was a private corporation, I think there is much more risk and I would look at how much you lose and the tax implications of taking the lump sum now and investing yourself.

I work for a utility (sadly no pension for me as they stopped them years before I started) but we are so heavily regulated and watched like a hawk that our pensions are safe for those who were grandfathered in.

 

[eliza61]

How long where you there? If you weren't there for a very long time then it's probably not much.
What will the taxes going to be for taking an early but out?
Losing 1/2 the value without good investigation is not what I would do.

 

[MillauFr]

You are betting on the pension to still be there. I am betting on myself.

Sure that is a consideration I definitely took into account. If I was in Illinois I would be concerned that I could take a big haircut in retirement. Luckily for me Washington State is one of the best funded plans in the country. The negative is that the retirement benefits are far interior to private companies in our area. We have no retirement medical and the contribution amounts are rather high in comparison to the benefits. The positive is that the tax burden in Seattle is relatively low.

 

[chloelovesdisney]

I invested the money, I didn't trust that my previous employer would still have it a few decades later to pay out.