Lump sum or monthly premiums? Anyone else concerned about this....
Possible Downside
One downside of monthly pensions is that an employer could go bankrupt and find itself unable to pay retirees. Certainly, over a period of decades, that is a possibility.
The US Pension Guarantee Benefit Corp, part of the federal government, insures pensions, but only to a limited amount. If you take the annuity option & MRO fails to fund its pension fund, for whatever reason, you may not get all you think you should. You should note that MRO has already reneged on its retirement health insurance benefits for those retirees on Medicare.
This is an important decision, you should seek the advice of a professional in whom you trust, should you opt for the unity option.
Maybe this is different for legacy folks, but isn’t the “pension” just a contribution fund?
Be careful following financial advise on this forum. Get professional help if you need it. Yes, pension funds are somewhat insured by the federal government but only to a point, and that insurance is complicated and difficult to understand. If Marathon did default on annuity payments, you almost certainly will only receive a portion of your annuity payment from the government insurance program.
Is this a serious question? Lump sum, get some financial advice, please!
You’d be a fool not to take the lump sum. The fact that marathon is what it is now should give you enough reason to not leave your money in their control to decide who manages the pension. Take your money and control it yourself. Or hire your own broker to help manage.
As the previous poster said: normal pensions are in a trust.
The recipient gets a guaranteed monthly payment and the pension fund is responsible for managing the underlying investments (in theory this includes responsibility for any losses). Pension funds are also insured by the Feds (again, in theory, if the pension fund runs into trouble, the Federal insurance kicks in to cover the loss). In other words: You still get your pension check.
On the other hand, lump sums aren't insured. The retirement cash is paid upfront to you and you assume all risks including investment losses.
People good at managing money (and I mean you really are good at it, not “I think I’m good”) might benefit by taking the lump sum. A good investor could theoretically get a better rate of return over time than the pension fund. BUT… that better return comes with risks… such as a market meltdown (like now) followed by a sudden need for cash (medical bills for example). Such a scenario could leave you short on funds early in retirement. In truth, this is or something similar is a more likely downside than bankruptcy of the formal pension fund.
Check with a good fiduciary financial advisor (not just some broker who’s trying to get a commission by selling you investments or annuities). They can help you evaluate your options and make the best choice for you.
In my own case, I'm pretty good managing money, but I still plan on taking the monthly pension when that time comes. I view it as a risk management issue. I'm already assuming certain risks by managing my 401K and after-tax savings. The monthly pension option and Social Security will add different risk profiles. Overall, that should minimize adverse impacts to my retirement income.
Pensions are put in a trust, which should be fully funded. Think like 85% go for the lump sum. Gives you more investment options