At least with inflation rising, interest rates will start to fall which will increase lump-sums. With inflation at 6%, rates are down .4% in the last 6 months. Obviously inflation has its downsides but it should provide some extra money for those retiring next year!
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The Federal Reserve RAISES interest rates to fight inflation. Inflation doesn't raise retiree's standard of living, it destroys it.
Fidelity uses: https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates
Not: https://www.irs.gov/pub/irs-drop/n-21-62.pdf
Please see:
https://www.irs.gov/pub/irs-drop/n-21-62.pdf
Are the published numbers on page 2 (which have been online for a week or two) a different thing that what Fidelity will use for 2022 lump calculations?
Legacy T rates for November will be similar to what October rates are. Give or take. What happens in 2022 is anybody’s guess but the trajectory seems to be higher. Bottom line: if you’re on the fence about retiring and are taking the lump sum do it by years end
I am confused and I am also not an expert, But on the T plan rates are lower now that 2 years ago. If I look at the 10 year Bond rates have come down 50% over the last two years and the inflation rate has tripled from 2% to 6%. Just in the last week 10 days rates dropped big time after the inflation news.
https://example.com/3pTquFq YCharts 10 Year Bond
Rates are going up soon to help curb inflation
Peeps. The Bell South pension is different than the Legacy T and SBC pensions. Sounds messed up but higher interest rates result in a higher annuity payout.
You're very. very confused.
My lump has taken about a 25K hit compared to last year using October rates. November’s are not in yet so I’m unsure what one poster meant by November’s 2021 rates being higher then October’s. November rates are due in on the 17Th. Those will be used for all of 2022. The segment rates are affected by interest rate changes but there really have not been any recently, and are also based on corporate bond yields. Don’t expect any drastic change either way compared to Octobers
Rates are going up so the pension lump sum will be smaller to produce the expected annuity
I'm an employee in small town Kentucky, and I'm no expert on interest rates, but I was reading the local news and this seems to say the exact opposite of what OP is claiming: https://www.wrde.com/story/45452631/att-pension-lump-sums-and-stocks-hit-by-surging-inflation
We are heading for a period of stagflation. Imagine little economic growth, double digit interest rates, high unemployment, and shortages. Getting raises quarterly wasn't enough to keep up with the inflation. If you wanted to buy a house hopefully came with a mortgage assumption. Gas lines. If you weren't around for the Jimmy Carter error, you might want to read up on it. For those of us that lived through it, it was really ugly.
OP needs to do some research, OP is way off on how it works. Not an opinion - fact
To the original poster:
How do you come up with the logic "with inflation rising, interest rates will fall".... Rates have been kept artificially low to stimulate the economy which is now overheated. Rates are going to go up - likely announced by the Fed at 2PM EST today (it's 1:15PM now) and rates for 2021 are already way higher than Nov 2020.
FYI: I was laid off in 2020 after 35+ years. I modeled my pension based on 2019 rates after my layoffs. When the Nov 2020 rates came out, my lump sum pension took about a $125,000 boost. Woo hoo - grabbed it on January 1 and won't look back...and realizing if I had gone for the annuity that the amount I would be receiving would already be 7% less due to the Bidenflation we're undergoing with more reductions in 2022 to come until inflation gets under control.
I really don’t understand those of you that fret over these minor changes in interest rates one way or another. Relax. You’re going to be ok.
Yes, @dvf is right, as the minimum present value segment rates for Nov 2021 go up compared to Nov 2020 the lump in 2022 will go down compared to what it would have been if taken in 2021 which was based on the lower Nov 2020 rates.
The total lump and minimum present value segment rates are inversely related.
But, that doesn't necessarily mean you "lose" overall. If your total lump goes down by $25k in 2022 compared to 2021 but you save a ton for retirement next year, you might come out even at the end of 2022 or maybe a bit ahead ... just depends on your personal situation.
WTF are you talking about. Look here: https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates
The Oct numbers from 2021 are higher than the Nov 2021 numbers for all three. So assuming the trend is the same for the Nov 2021 rates, your lump will be going down and inflation makes the Bidumb bucks worth less. Double wammy.
So you are dead wrong I D I O T.