Wait until January if you're planning to take the lump sum. Why? The IRS just released August Segment rates. Finally, after 2+ years, the lump sum value will go up (after Dec-1, 2024).
Ford takes the August IRS rates to recalculate the lump sum value. I expect a bump up in value of about 4-5% once the calculator has been updated.
Check out the calculator and let us know how much in % did it go up for you.
I have a 32k increase at 4.02 % change
I also found out that the IRS segment rates are based on a 2 year average yield of high quality corporate bonds. Anticipation of interest rate cuts factored in to the corporate bond yields. This is one of the reasons that the 30 year mortgage decreased even before the 0.5% interest rate.
This is the reason that August IRS segment rates went down even before the September cut.
Also fair to conclude that the lumpsum will be lot higher if you retire in January 2026 due to anticipated rate cuts over the next several months
@3ons+1uE6c3ry - thank you for reporting the increase. Is it fair to say it is about 4% ?
Just fyi. The August segment rates changed some from last year so when I run the lump sum calc it increased by like $30k.
My hope is a lot more cuts by Aug 2025 so I'll retire in Jan 2026
Too bad potential retirees don’t play attention, hopefully they will ask a knowledgeable person. One key point to understand is the length of each segment rate. It is not too difficult recreate the lump sum payout in an Excel spreadsheet based on the three segments.
But if you’re taking the monthly pension check, then none of this matters. I heard that about 40% take the monthly pension. 2022 was an exceptional year for the lump sum.
I have not decided which is better. There are pros and cons to both options.
The segment rates might have changed from August 2023 to August 2024 as per IRS tables.
However the impact of 0.5 interest rate cut is not factored in August 2024 tables. How can it be factored in August 2024 when the interest rate cut happened in September 2024?
This means that you need to wait for the August 2025 segment rates and retire only in January 2026 to get the full impact of the 0.5 interest rate cut and any other cuts that may happen until August 2025.
There was a webinar today for potential retirees . I do not believe they were knowledgeable enough to explain things very clearly and most probably gave wrong information
thank you @2mwf+1uE6c3ry. i mistakenly thought it was the fed interest rate , which in august,hadn't changed but the segments did.
thank you very much!
@2eib+1uE6c3ry - No, lump sum is calculated from IRS segment rates. Here is the link:
https://www.irs.gov/retirement-plans/minimum-present-value-segment-rates
Ford uses the August segment rates to calculate the value (along with life expectancy data, etc.). For all of 2025 retirements, Ford uses the August 2024 published data which just came out.
By the way, you can go back in history and look at the August 2023, 2022, 2021, etc. to see how it changed year over year. The lower the % number, the higher the lump sum.
but isn't the august 2024 rate what it has been and was just dropped .50 in september so you'd have to wait until jan 2026 to get the new rate?
Reddit is the best place for retirement advice (kidding of course).
A financial advisor that you pay a fixed amount (not a % of your net worth) is a good next step. Good luck.
Also, you may want to check this online tool: https://www.boldin.com/
ROFL
Yeah, go to Reddit for retirement advice.....
November 2022 retiree here. If you are retirement eligible, you can plan the timing to your advantage. Unless you just want out, maybe work longer if you are planning to take the lump sum to get the benefit of potential improvements in the lump-sum. I know, easy for me to say since I retired after almost 35 years and invested smart the last two years. Worst case scenario, you get offered a package and can still retiree. Retiring after January 1st makes sense to get all the holidays. Us Nov. 2022 folks had no choice but to retiree because the new lump sum rates started December 2022. Glad to read some potential good news for a change. All the best...
@ 1dlw+1uE6c3ry - Retire when it is financially feasible. I suggest you visit Reddit retirement subgroup.
As I don’t have the pension plan, 14 years with ford, is there any good timing or suggestion on when to retire? Or Thanks
@lwr+1uE6c3ry - you are 100% correct. OP was technically right but didn’t explain it well. There is no point in retiring in mid December, as you can enjoy all the free paid holidays. Retire Dec. 31 and the effective date Jan 1, 2025. Thus the new rate.
The people who retired in Nov 2022, avoided 20% reduction and another 9% reduction the following year. If you’re one of them, consider yourself very lucky. Not only you avoided the reduction but you also increase your lump sum if you invested in the market.
Your retirement can only start on the 1st day of the month. Any retirement after Dec 1 2024 will result in a retirement start date of Jan1 2025 where the Aug 2024 rates will apply.
You can delay the lump sum so you could work till July 31 2025 and start retirement on Jan1 2026 and get another bump as rates are probably on their way down. You might get a package too...
For all the did not take advantage of retiring in 2022...We avoided a 20% decrease by starting retirement on Dec 1 2022 or for some of us on Sep 1 2022.
From my understanding, Ford uses the August 2024 rates for any 2025 retirement.
You could still retire in 2024 BUT to get the Aug 2024 rate you would need to delay your lump sum payout until 2025 (you can defer up to 180 days)
OP- I think you are wrong here.
You have to wait till December 2025 to take advantage of the new rates.
Whatever the rate that existed in August 2024 is the one applicable until November 2025
For sure, and if you are released, do NOT file for retirement until after December 1. Waiting for 2+ months will be worth it.