Anyone take the Annuity

[Anonymous]

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?

Are you talking about the Merck annuity or the insurance company annuity? The lump sum has to be managed therefore the planner has incentive to suggest you take the lump sum so they can benefit from fees.

The annuity from Merck might not be a bad choice. In fact some people including myself believe we and the world could be in the stage of deflation not inflation where prices continue to fall for many years into the future. If this is correct the Annuity will make a lot of sense. Remember Japan has been contracting for over 20 years. Europe is not doing well as well and China will eventually implode in many areas.

It is a difficult choice but you need to talk to professionals. I am leaning towards the Merck annuity especially if you ave other funds i.e. savings and 401K that are significant.

Either way it is a difficult decision to make.

 

[Anonymous]

I agree its a difficult decision to make. Everyones case if different. I looked at the two options and came up with a break-even point. If I took the lump sum, I would need to earn 6% on investments to equal the annuity monthly payout. You need to run that comparison yourself as your figures will be different than mine. I retired 2 years ago and I'm very glad I took the lump. Also, if I die, my wife gets 100% of the lump sum I took. If I had of taken the Merck single life annuity, she would get zero. If I was comparing it to the annuity that had survivor benefits of 75% or 50%, the comparison with the lump would mean I would need to generate about 4% in the lump investments to break even. Big decision, but weigh take a look at all the scenarios. Also, it was mentioned above that a CFP recommended the annuity. I have 3 CFP's and they all said lump. Each persons financial status is different.

 

[Anonymous]

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!

The first thing my Fidelity rep wanted to do is to have me roll all my lump sum and 401K into an annuity. The thought of never be able to manage it was too alien to me. Instead I invested in a balanced, low-risk, moderate growth portfolio. YTD it has grown 11%. Nothing to write home about and not too bad either.

 

[Anonymous]

Excellent topic. My adviser is also very high on the annuity from Merck. I think most of the other people hawking retirement plans really want me to take the lump sum as this gives them more money to manage. I am fortunate in that I have a sizable 401k. My logic is as follows: I plan on taking the annuity with a 75% survivor benefit for my wife. I plan on structuring my life to basically live off the annuity payment. This leaves the 401K as "extra" money. I agree that the annuity is not inflation indexed, but for me, when Social Security kicks in, that would cover any future money needs. I'm not too worried about leaving my kids lots of money, if I die, as long as my wife is ok. If I take the lump sum and pool all of my money into one bucket, I will worry much more about what the market is doing. And remember, that the S&P500 in 2000 was -9%, 2001 -12%, 2002 -22%. If you retired just then, your nest egg takes a big hit. Certainly it could recover over time, but if you are withdrawing at the same time, this becomes difficult.

 

[Anonymous]

Retired as hand raiser at 65 with 18 months severance which carried me over to Medicare during severance period. Opted for annuity as mentioned by others at a 50/50 rate since life span for males is less than females. With 30+ years at retirement my SSI and monthly annuity checks total is over 5G per month clear. At this point I probably will not need to take payments from 401K until near the mandatory with drawl period of 70 YOA. As long as you have no outstanding large bills ( house payments, cars etc. ) this I believe is the way to go. If given the chance to hand raise at any time in your 60s I would highly recommend such action

 

[Anonymous]

Excellent topic. My adviser is also very high on the annuity from Merck. I think most of the other people hawking retirement plans really want me to take the lump sum as this gives them more money to manage. I am fortunate in that I have a sizable 401k. My logic is as follows: I plan on taking the annuity with a 75% survivor benefit for my wife. I plan on structuring my life to basically live off the annuity payment. This leaves the 401K as "extra" money. I agree that the annuity is not inflation indexed, but for me, when Social Security kicks in, that would cover any future money needs. I'm not too worried about leaving my kids lots of money, if I die, as long as my wife is ok. If I take the lump sum and pool all of my money into one bucket, I will worry much more about what the market is doing. And remember, that the S&P500 in 2000 was -9%, 2001 -12%, 2002 -22%. If you retired just then, your nest egg takes a big hit. Certainly it could recover over time, but if you are withdrawing at the same time, this becomes difficult.

I am in a similar situation and am plannining on the annuity and using the 401kmonies for the growth...totally aggre with your logic...

 

[Anonymous]

Excellent topic. My adviser is also very high on the annuity from Merck. I think most of the other people hawking retirement plans really want me to take the lump sum as this gives them more money to manage. I am fortunate in that I have a sizable 401k. My logic is as follows: I plan on taking the annuity with a 75% survivor benefit for my wife. I plan on structuring my life to basically live off the annuity payment. This leaves the 401K as "extra" money. I agree that the annuity is not inflation indexed, but for me, when Social Security kicks in, that would cover any future money needs. I'm not too worried about leaving my kids lots of money, if I die, as long as my wife is ok. If I take the lump sum and pool all of my money into one bucket, I will worry much more about what the market is doing. And remember, that the S&P500 in 2000 was -9%, 2001 -12%, 2002 -22%. If you retired just then, your nest egg takes a big hit. Certainly it could recover over time, but if you are withdrawing at the same time, this becomes difficult.

I am in a similar situation and am plannining on the annuity and using the 401kmonies for the growth...totally agree with your logic...

 

[Anonymous]

Yikes, all this conversation is making me even more confused, just when I had planned on the lump sum. I have 2 planners coming up with a game plan for me. One is a broker I already use at Morgan Stanley, the other is one from the local Fidelity office. The Fidelity guy really thinks the Merck annuity is a great way to go but also understands my concern about control and the fact the annuity does not adjust for inflation over the years. I meet next week with the Fidelity guy for his final game plan, where 1/2 the funds to into an annuity to give me a pay check every month and 1/2 goes into a conservative growth fund. This is just all so confusing and such a hard decision cause there is no going back.

 

[Anonymous]

Curious to hear what kind of monthly annuity amounts we are talking about. Mine would be $4500. & change. How about you?

 

[Anonymous]

Curious to hear what kind of monthly annuity amounts we are talking about. Mine would be $4500. & change. How about you?

Mine is quite a bit more than yours. This is why my decision is so hard!!! It is a nice security blanket to know you are getting that every month, but my gut still says to go with the lump sum and make sure it is invested right.

 

[Anonymous]

Mine is quite a bit more than yours. This is why my decision is so hard!!! It is a nice security blanket to know you are getting that every month, but my gut still says to go with the lump sum and make sure it is invested right.

So your lump sum must be close to $2,000,000?

 

[Anonymous]

Invest or annuity.? both aren't bad options...the best thing about an annuity is that it is automatic and pretty much guaranteed 98.999% safe..I also know that the older you get the less excited about going online to 'manage' your money becomes less exciting..

As for investing,,this is really the building growth phase, this is easy part and plenty of folks would luv to take (I mean earn) your money by growing it more...the tough part of planning is when you start deducting (rule of thumb is around 3% deduction burn rate to avoid running out of money but with lots of what ifs)... insure companies know when you're going to die and thats why there still in the game with annuities..do your research.

 

[Anonymous]

So your lump sum must be close to $2,000,000?

Those who have been with the company for 30+ years before retiring or being forced out usually accumulate about $500K of lump sum plus whatever they have in the 401K. If you are old enough you will get SS too. I have many friends in this situation. Financially they are okay. Most were savers to start with. But the way Merck sent them off was, well, very unpleasant.

 

[Anonymous]

Those who have been with the company for 30+ years before retiring or being forced out usually accumulate about $500K of lump sum plus whatever they have in the 401K. If you are old enough you will get SS too. I have many friends in this situation. Financially they are okay. Most were savers to start with. But the way Merck sent them off was, well, very unpleasant.

It is not the company it was for many reasons, and that is just one of them...

 

[Anonymous]

Amazing that there is such a wild and crazy disparity between the people who have been here a decade or more and the ones who have less than the mere 10.

Seems bizarre that the gossip of cutting those approaching a mere 10 is a big cost savings. The truth is that people at 5-10 years have a pension the size of a peanut. Folks who can't afford to be cut.

Cost savings would need to address the ones who brag about a few hundred thousand or more that can be generated only with with a range of whopper years in...Got 35 years in? These are members of the gold brick brigade.

 

[Anonymous]

You can take lump sum and invest it more safely then the annuity... The annuity is not close to 99.98% safe as your rely on Mother Merck.. OR you can invest it for a greater return.. Taking the lump leaves it open for you to decide and change as you please.

Plus if you do not use the entire lump sum over the course of retirement, you can pass the remainder down to your children. Not the case with annutiy

 

[Anonymous]

No Longer Offered!! I just contacted HR and they told me it is no longer available!! WTF!!!

 

[Anonymous]

If You Have a Company Pension, Consider Retiring Today

http://www.foxbusiness.com/2014/09/23/if-have-company-pension-consider-retiring-today/

...And with interest rates at historic lows, there will never be a better time than right now to get the most out of that lump-sum payout. Not only that – and this is what your employer really doesn’t want you to know – retiring and collecting a lump-sum payout now could protect you from seeing your pension blow up if the plan becomes underfunded in the future....

 

[Anonymous]

If You Have a Company Pension, Consider Retiring Today

http://www.foxbusiness.com/2014/09/23/if-have-company-pension-consider-retiring-today/

...And with interest rates at historic lows, there will never be a better time than right now to get the most out of that lump-sum payout. Not only that – and this is what your employer really doesn’t want you to know – retiring and collecting a lump-sum payout now could protect you from seeing your pension blow up if the plan becomes underfunded in the future....

true in some aspects. However you must realize renew it will go up if you retire five years from now and take the annuity there is some relationship to life and longevity versus the annuity.

 

[Anonymous]

Those who have been with the company for 30+ years before retiring or being forced out usually accumulate about $500K of lump sum plus whatever they have in the 401K. If you are old enough you will get SS too. I have many friends in this situation. Financially they are okay. Most were savers to start with. But the way Merck sent them off was, well, very unpleasant.

If you have been with the company 30+ years, you should have WAY more than $500K in your lump sum. Even my Fidelity guy told me the pension was one of the reasons my head was on the chopping block.