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Anyone take the Annuity

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This is a great conversation and clearly relevant for many of us. I too am struggling with the decision and have always been told by execs at Merck close to retirement to take the lump for the same reasons mentioned here - control. I think I would always be nervous that leaving it with Merck is risky and every time a bump happens to the company I'd be worrying if I'd be paying for the bump out of my pension (or lack of same should they dissolve). It is indeed backed by the government, but is I read today that coverage is limited to $60K/year.

I am not too savvy from an investing perspective and have simply always put everything into the 401K. As such, I would need to trust a financial planner to manage the lump/IRA etc (which in itself is scary). As suggested here, many FP will guide you towards a lump as they want control of the $ (and management fees). I agree that a fee-only FP would likely provide the best guidance.
 




Anonymous said:
This is a great conversation and clearly relevant for many of us. I too am struggling with the decision and have always been told by execs at Merck close to retirement to take the lump for the same reasons mentioned here - control. I think I would always be nervous that leaving it with Merck is risky and every time a bump happens to the company I'd be worrying if I'd be paying for the bump out of my pension (or lack of same should they dissolve). It is indeed backed by the government, but is I read today that coverage is limited to $60K/year.

I am not too savvy from an investing perspective and have simply always put everything into the 401K. As such, I would need to trust a financial planner to manage the lump/IRA etc (which in itself is scary). As suggested here, many FP will guide you towards a lump as they want control of the $ (and management fees). I agree that a fee-only FP would likely provide the best guidance.
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If you take the annuity your fortune is still attached to Merck. The lump sum frees you from the uncertain future. Be careful with financial planners. Some will churn your account for their benefit or put you into items that generate him or her a commission and not nessiseily be in your best interest.
 




Want to add some clarity on management fees. You can roll your lump sum pension, or 401K into a traditional IRA. There shouldn't be any management fees unless you have a low balance. It basically is a brokerage account where you and only you make and take action on investment decisions. The only fee should be the trading commission fee which is $7.95 per transaction at Fidelity, and $8.95 at Charles Schwab. The other type of account you can roll both into is called a "managed account" which means you are allowing them to entirely manage your investments within the predetermined investment bucket you have agreed to be in. For example, if you tell your broker you want to be in a conservative bucket, the managed account will follow that direction. It will never be invested entirely in equities as this is outside the bucket guideline. I have my entire lump in a managed account IRA at Schwab and my 401K went into a Fidelity traditional IRA. So I can trade freely with the Fidelity account, and I let the professionals handle the managed account. Fees are usually 1% of the value of the account, but charged Quarterly. Fees are based on the opening balance of the account you create. For example, I pay less than that in my managed account due to the amount of money I have at Schwab. You can go on there web site to see the fee schedule. THE DOWNSIDE.....is I can't touch my pension until 591/2 as I'm 57 and it rolled into a traditional IRA account. If I took the annuity, I would have started collecting at 55.
 




Legacy SP here. I have 20 years in and raised my hand, thank goodness. You can go to the retirement benefits website and plug in various numbers as to when you want to retire. It will give you various scenarios and you do have the option of a split meaning you can split your retirement benefits 50-50 between annuity and lump sum or 100% annuity. My financial advisor said the 50-50 was the best choice if I couldn't take it all. Other posters are right, you can invest it yourself, have control and leave it to your heirs. That's what I'm going to do! Oh, retirement is wonderful!!!!
 




Anonymous said:
This is a great conversation and clearly relevant for many of us. I too am struggling with the decision and have always been told by execs at Merck close to retirement to take the lump for the same reasons mentioned here - control. I think I would always be nervous that leaving it with Merck is risky and every time a bump happens to the company I'd be worrying if I'd be paying for the bump out of my pension (or lack of same should they dissolve). It is indeed backed by the government, but is I read today that coverage is limited to $60K/year.

I am not too savvy from an investing perspective and have simply always put everything into the 401K. As such, I would need to trust a financial planner to manage the lump/IRA etc (which in itself is scary). As suggested here, many FP will guide you towards a lump as they want control of the $ (and management fees). I agree that a fee-only FP would likely provide the best guidance.
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My thoughts were take the annunity for secure income and use the 401K for growth...it give 6% return which I we can easily live off of and use the 401k for legacy to kids...it makes the most logic to us... I know there is something to be said with $800,000 in your pocket..., but a few mistakes and we might not be comfortable any more... I don't feel comfortable trading with scottrade for my retirement, I do for one growth account...
 




Agree on taking the annuity if you also have separate 401K.

The amount of money you would need to safely generate (in a bank, or in a declining equity or bond market) the annual annuity benefit is HUGE,... Companies have abandoned traditional defined benefits pension plans because of the Federal Reserve's prolonged policy of near zero interest rates.

As to safety, generally upon retirement companies purchase an annuity (providing the specified defined benefit to the retiring employee) from a highly rated insurance company.

Finally, make certain to elect a reduced annuity payment to your surviving spouse.
For example, elect survivor's benefit of two thirds +/- of the original named beneficiary's monthly pension.
 




Anonymous said:
Agree on taking the annuity if you also have separate 401K.

The amount of money you would need to safely generate (in a bank, or in a declining equity or bond market) the annual annuity benefit is HUGE,... Companies have abandoned traditional defined benefits pension plans because of the Federal Reserve's prolonged policy of near zero interest rates.

As to safety, generally upon retirement companies purchase an annuity (providing the specified defined benefit to the retiring employee) from a highly rated insurance company.

Finally, make certain to elect a reduced annuity payment to your surviving spouse.
For example, elect survivor's benefit of two thirds +/- of the original named beneficiary's monthly pension.
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I believe Merck is self - insured with the medical benefits and possibly with the annuity. Therefore the annuity continued payouts depends on Merck's financial future. Is there any company that you would like to be attached to for possible 30 years? Another option is to take the lump sum and buy your own annuity with a major insurance company. That is if you can get the same return as the company annuity.
 




#20 I am not sure but you may want to read the fine print--I raised my hand over 1 1/2 years ago as a legacy SGP and the only options were for an annuity, period-no 50-50 and this was after over 35 years---the annuity has worked out fine as long as one is in seemingly good health and qualifies for Medicare---Fidelity seems to be a strong contender in the financial market but I do long for the days when we were advised by Vanguard-- Insurance is about 260 per month and I was able to pick my own dental via Met Life for about the same as I was paying via Merck--after driving approximately 1.25-1.5 million miles during these years retirement seems like a breeze--peace and may the wind be at your back!!!!!
 




Anonymous said:
#20 I am not sure but you may want to read the fine print--I raised my hand over 1 1/2 years ago as a legacy SGP and the only options were for an annuity, period-no 50-50 and this was after over 35 years---the annuity has worked out fine as long as one is in seemingly good health and qualifies for Medicare---Fidelity seems to be a strong contender in the financial market but I do long for the days when we were advised by Vanguard-- Insurance is about 260 per month and I was able to pick my own dental via Met Life for about the same as I was paying via Merck--after driving approximately 1.25-1.5 million miles during these years retirement seems like a breeze--peace and may the wind be at your back!!!!!
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Another legacy SP here...the only option I had was annuity.
I have a nice size 401K, so I wasn't that upset about not having the lump sum choice.

If you miss Vanguard, you can roll over your 401K. You do not have to stay with Fidelity.

I had 27 years with SP/Merck. As far as the medical and dental go, I pay 375 and 56 per month (vs. 58 and 16 when I was working). So, big difference there. Curious how you were able to pick up Med Life for the same amount that you were paying when you were working.
So, big difference there.
 




Anonymous said:
Legacy SP here. I have 20 years in and raised my hand, thank goodness. You can go to the retirement benefits website and plug in various numbers as to when you want to retire. It will give you various scenarios and you do have the option of a split meaning you can split your retirement benefits 50-50 between annuity and lump sum or 100% annuity. My financial advisor said the 50-50 was the best choice if I couldn't take it all. Other posters are right, you can invest it yourself, have control and leave it to your heirs. That's what I'm going to do! Oh, retirement is wonderful!!!!
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Where is the retirement website that you reference? Can you tell me where to find this please.
 




Anonymous said:
Where is the retirement website that you reference? Can you tell me where to find this please.
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I been a sails rep fer over 28 years and am hopping for this 551 you speak of. Things whent south once we got the eyepad in fielled sayles. Figure I would take the lump and move on maybe even put a new roof on my mobyle home or get a doublewide. I ain't no finnancial xpert but the lump is the best way to deepart. Got my fishin pole ready, cooler ready 2go and have a doughboy picked out at walmart. Waitin for harr to give us the fi fi one paperwurk, had a good kareer here at Murk but tyme for many lifers to get retyrement.
 




Anonymous said:
I been a sails rep fer over 28 years and am hopping for this 551 you speak of. Things whent south once we got the eyepad in fielled sayles. Figure I would take the lump and move on maybe even put a new roof on my mobyle home or get a doublewide. I ain't no finnancial xpert but the lump is the best way to deepart. Got my fishin pole ready, cooler ready 2go and have a doughboy picked out at walmart. Waitin for harr to give us the fi fi one paperwurk, had a good kareer here at Murk but tyme for many lifers to get retyrement.
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Regrettably, CIO just announced that there is no 551. He received confirmation from the head of HR. Hand raiser memo still in place though
 








Keep in mind that the lump sum is based on average life expectancy which is about 79 years old. If you have good genes and expect to live well into your 80s, the annuity is the better way to go, esp if you go with the survivor option. Financial planners almost always recommend the lump sum because they may more $ in fees. Keep it in mind when you weigh the options
 




Post 34....there are no fees at most large brokerage houses of opening an account. In fact, you can actually get a bonus by opening an account! Schwab and Fidelity will give you up to $2500, depending on the rollover amount, just for opening the account. Also, if you take the lump, and decide anytime afterwards it's not right for you, take the amount left and buy an annuity at any insurance company.
 








Anonymous said:
Post 34....there are no fees at most large brokerage houses of opening an account. In fact, you can actually get a bonus by opening an account! Schwab and Fidelity will give you up to $2500, depending on the rollover amount, just for opening the account. Also, if you take the lump, and decide anytime afterwards it's not right for you, take the amount left and buy an annuity at any insurance company.
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Anyone who puts a lump sum pension in a Fidelity or Schwab account without fund management is a fool. Just ask the retirees who left just prior to the market crash in 2008. Many lost a 1/3 or more of their lump sum and had to return to the work force. With regard to buying annuity with the lump sum - again, if you plan to live past the normal life exp, you are losing out. Merck loves it when people take the lump sum!
 




Anonymous said:
If you want no control, no COLA, and no chance of earning more than the annuity amount, by all means, take the annuity!
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If you call speak with an independent financial advisor with no income potential on your retirement, you will find that most recommend the annuity. The COLA is insignificant if you have 20+ years at Merck when comparing the diff in cash you receive with the annuity vs lump sum.
 








Anonymous said:
For people that have been fortunate to have retired with over twenty years at Merck, have you heard of many people taking the annuity? It seems most have taken the lump sum. My planner speaks highly of the annuity amount relative to the lump sum.... I plan to retire in a year and am leaning toward the monthly annuity. Have other saving over the years , just my Spouse and me. Both are in good health.. I feel like I am the only one not going for the lump sum...have you had co workers that have taken the annuity?
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Of course your planner speaks highly of an annuity because he will make more if you go this route. Danger…….annuities have all kinds of rules and regulations, not to mention fees. Plus, you are giving your hard earned money to someone else to "manage" (for a steep fee of course). Hands down, I would take the lump sum and invest it on my own. If you feel you need the "advice" of someone, then hire someone hourly. Remember, fees DIRECTLY impact how much you end up with in retirement. Some of the lowest, best performing funds can be found at Vanguard. Some of the lowest fees in the industry. Of course financial planners will never ever send you to Vanguard. Why? As an ex-financial planner told me, when I asked him to invest in a certain Vanguard fund "I can't put the money with Vanguard because they don't pay me. I won't make any money". He was trying to send me into a "great fund" that performed ok, but had a 5.75% front load fee and high annual fees. It told me all I ever needed to know about the usefulness of financial planners. Most of the financial planning they do is for themselves, which is why they LOVE to sell annuities. Take the lump sum! You earned the money, why should a planner get a big chunk of it?
 




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