I'm leaning towards taking the one time lump sum option and rolling into an IRA. The pension, stops after you pass away, and your heirs get none of it, not the case with IRA. And the payout and compares, they are much the same. Too much negative talk about the pension fund itself, and I don't trust AT&T to do the right thing down the road. Change my mind.
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It all depends on your specific situation, time horizon, and risk preference. Seeking professional financial advice is recommended.
However, in my case, my opinion is the view that generally, it is better off to roll the lump-sum out into an IRA where it can be invested in such a way to be relatively "safe", yet also diversified enough to maintain at least a growth to stay ahead of inflation/cost of living...
While it's great to watch the monthly credit accruals when you are an employee, once you are off the books, the pension to me was nothing more than a savings account, and I still had 10+ yrs to go before retiring.
Annuities can work, just be aware there are many, many flavors of annuities and they can be confusing and have hidden costs and are often expensive compared to a well constructed diversified plan.
Whatever you do, please don't be the richest person in the cemetery. My advice would be roll it into IRA and control your own destiny.
I agree with previous post. Go to a financial consultant and discuss your entire situation. Your goals, family situation, debts, etc. He/she can set up a detailed plan. Don't trust your hard earned $$ to a blog post. I transferred my pension and 401K 6 years ago and with the help of a CFP, I am doing fine.
ALWAYS take the lump sum. If a financial advisor tells you to take the annuity, it’s time to find a new financial advisor!
What happens to your pension if you retire today but don’t collect pension until a future year, but you die before that date? Do you lose everything or does the pension (lump sum) go to heirs?
@uwn+16hL6Lyx - I don't think you can take "partial" lump hence the reason it is called "lump".
Remember that the annuity payment never increases, so in effect, with inflation, it's buying power will decrease each year.
Your lump sum is based on interest rates - The lower the rates are, the more your lump sum is worth. The 2020 lump sum is based on historically low interest rates from Nov 2019 and the Nov 2020 rates (used for 2021 lump sums) is on track to be even lower (meaning even higher payout). Take the lump sum and roll it directly into an IRA. Think about yearly conversions to Roth if you want to leave your heirs a gift. With new IRS rules, your heirs will be forced to take payments over 10 years which could force children to collect inherited IRA income just when they're at their peak earning years....Pay down those taxes as a retiree when they're low and give your heirs a tax free inheritance.
I Took the lump sum....rolled into IRA....why let the company make money on your pension? Plus monthly never goes up that’s all you will ever get....lump sum you can leave to anyone you wish it’s your money!! Just my 2 cents :)
Here's my advice. To cover your bets, I would do a partial roll over into an IRA, while keeping the rest in Fidelity and taking half pension. If you die early (knock on wood), your dependents or "heirs", will still get half of what you are worth. If you live to a long 80+ years old (hopefully), then you are still have your partial pension, and IRA doing it's thing, taking out annual distributions.
Take the lump. Roll it in to an IRA with a fiduciary financial advisor.
I would need to live over 22 yrs with the annuity to break even.
Not a chance I'm willing to take...nor do I trust the company to keep the pension fund solvent.
I took the lump, get a monthly check from my IRA, and don't need to be concerned about what the company is going to try next.
Cut ties..walk away.
I am sort of a Dave Ramsey disciple. He says ALWAYS take the lump sum if it's an option, and roll it into an IRA where it is invested in good growth mutual funds.
You're going to make more while you're alive and when you're dead. S&P 500 return has averaged about 11% return since it's inception, it should not be difficult to beat the rate of return used to calculate your annuity payment...6-8%. When you croak, your heirs will of course receive all of your assets.
Lump.
If T actually has the money to pay you in the future it will be made worth less by inflation and there's no prospect of getting a raise on your monthly payment.
Just another thought on legacy planning if you have kids or grand-kids, encourage them to get some earned income and then start a custodial Roth IRA which they can convert to a regular Roth IRA when they reach age. If you can afford to gift to them all or some of what they contribute to the Roth out of their earned $ then it may make it an easier idea to sell. Then you may not need to be concerned about passing a part of your estate to heirs - they will be building their own net worth and when they retire will likely be multi-millionaires.
https://www.nerdwallet.com/blog/investing/why-your-kid-needs-a-roth-ira/
I retired last year, almost 63 now. Divorced with adult kids. Didn't take my pension yet. My lump sum is a lot. I am tempted to take it now but I will hold off until mid 2021, do the rollover IRA and invest it very conservatively. I won't touch it until age 72. My kids can inherit it if I pass before then. If I was married, I would take the annuity. I am never getting married again lol. I think marital status and your health are reasons to take lump or annuity. I am healthy but with Covid, anything is possible.
Anonymous message boards are a terrible source for information this important.
You can access free financial planning advice through Fidelity as an employee, or you can seek paid advice from firms like Edellman Financial or Garrett planning network.
Only a qualified planner looking at your entire situation can help you make the best decision.
As much as I would love to take monthly what equals around 5.35 % guaranteed for my particular pension ... I will take the lump. I have to live 20 years to break even and hope I will, just don't know what kind of a mess AT&T will be by then or what nearly illegal tactics they will use to shaft pension holders! They obviously cannot continue to operate as they do now with no direction and remain reliable.
this is problems i will never have to deal with thank god
You're leaving out too much info. Age? Savings? Current Health? Smoker? Married? etc.
The younger and healthier you are, the more likely your better off with the Annuity.
Regardless! this is your pension "INCOME" to last the rest of your life! and possibly your spouses life. Legacy planning is usually factored using discretionary money/insurance.
The decision will depend on whether or not you need the income. Also, the T pension plan is not only well funded but backed by PBGC, and pays more than insurance company immediate annuities (which are not backed by PBGC).
Check out this site, https://www.immediateannuities.com/
Financial planner rule of thumb is 6%. i.e. multiply the annuity monthly payout x 12 then divide by the Lump sum. If it's around 6% then take the annuity.
You can also sell your pension as one lump sum. It's called a Reverse Pension, and it is not a scheme to try to steal your pension. I've been around the block a few times. And if I felt this was a scam, I would not recommend it to old timer boomers like yourself.
We are a company being managed into the dustbin of corporate history . Take your lump sum and don't look back !
It's a bet on whether or not you think you'll die earlier or later than average and/or you want to manage that money. Only you can answer these questions.
Also, I thought I saw that there were various survivor annuity options (e.g. 50%/75%/100%). Should double-check that.