Lump sum/pension decision

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This is a great question, and after some quick math, this is what I concluded.
My situation with slightly rounded numbers:
They are offering me $100,000, or $640 / month if I was single, or $600 / month if I am married.

First, if I was single the math goes this way:
$100,000 / $640 per month = 156 payments /12 months = 13 years then I am on extra money. When I die, it is all gone and nobody else gets any money.
$640 per month X 12 months = $7680 per year.

Second, if I was married, which I am, goes this way:
$100,000 / $600 per month = 166 payments / 12 months = 13.8 years then we are on extra money. If I die, my wife only gets $300 per month until she dies and then nobody else gets any money.
$600 per month X 12 months = $7200 per year.
$300 per month X 12 months = $3600 per year.

If I take the whole $100,000 as a lump sum and do a direct roll over to my self directed IRA at Schwab, I decide when I will begin to receive the money and pay no taxes until that time. Meanwhile, I am going to invest it in the S&P 50 ETF SPY. Morningstar shows a 10 year history of 7.5% growth.
$100,000 X 7.5% = $7500 per year.
No matter who dies first or when, we still have that $7500 and when we die, we still have the $100,000 to pass on to the kids. Plus, in our case, we do not need the money until I am required to begin mandatory withdrawals at age 72, about 10 years from now. Based on the "Rule of 72" which all investors must know, that $100,000 at only 7% will DOUBLE to $200,000 before I begin to withdraw money.

It is true that the market goes up as well as down, but over the long term, it goes up.
Which plan do you think I an going to take?
 






Anonymous said:
This is a great question, and after some quick math, this is what I concluded.
My situation with slightly rounded numbers:
They are offering me $100,000, or $640 / month if I was single, or $600 / month if I am married.

First, if I was single the math goes this way:
$100,000 / $640 per month = 156 payments /12 months = 13 years then I am on extra money. When I die, it is all gone and nobody else gets any money.
$640 per month X 12 months = $7680 per year.

Second, if I was married, which I am, goes this way:
$100,000 / $600 per month = 166 payments / 12 months = 13.8 years then we are on extra money. If I die, my wife only gets $300 per month until she dies and then nobody else gets any money.
$600 per month X 12 months = $7200 per year.
$300 per month X 12 months = $3600 per year.

If I take the whole $100,000 as a lump sum and do a direct roll over to my self directed IRA at Schwab, I decide when I will begin to receive the money and pay no taxes until that time. Meanwhile, I am going to invest it in the S&P 50 ETF SPY. Morningstar shows a 10 year history of 7.5% growth.
$100,000 X 7.5% = $7500 per year.
No matter who dies first or when, we still have that $7500 and when we die, we still have the $100,000 to pass on to the kids. Plus, in our case, we do not need the money until I am required to begin mandatory withdrawals at age 72, about 10 years from now. Based on the "Rule of 72" which all investors must know, that $100,000 at only 7% will DOUBLE to $200,000 before I begin to withdraw money.

It is true that the market goes up as well as down, but over the long term, it goes up.
Which plan do you think I an going to take?
Click to expand...

You can choose the option to have your pension passed on to your wife or your children(see section regarding additional survivors). Not drawing from that lump sum until age 72? Sounds like a big delayed gratification to me. People die all the time in their early 70's. You could well be dead by then. Live it up, brother!

The lump sum makes sense to me, too. That's what I'm going to do.
 






Anonymous said:
You can choose the option to have your pension passed on to your wife or your children(see section regarding additional survivors). Not drawing from that lump sum until age 72? Sounds like a big delayed gratification to me. People die all the time in their early 70's. You could well be dead by then. Live it up, brother!

The lump sum makes sense to me, too. That's what I'm going to do.
Click to expand...

Not a delay in gratification. I have lots of other investments. I will not need it until then.
In the Old Days (1970's), we would say pharmaceutical sales is a great job that gives you time to get rich in other areas. And we did. I don't mean to brag, it's just the way it was. I no longer recognize the new industry or how people are treated. By the way, I still own my company stock and have bought more in my private account. The company may no longer be fun to work for, but their stock is a rocket.
 
























Anonymous said:
A lump sum is considerable less than what you will be paid if you way until you retire. That's why they want to pay it out.
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If you wait until you retire you are not taking advantage of being able to invest that money at a potentially higher rate of return. The question you need to ask yourself is whether you can do better than their rate of return in those years before you retire.
 






Anonymous said:
Does not work for me...I am keeping my pension....with 8 years to retirement...my lump sum is 400,000....my pensions is 68k per year.....
Click to expand...

You are dead wrong, and not making any sense at all. Your 400k (IF THATS TRUE) would be around 700k in 8 years @ 7.5% growth. Based on my info, they ammoritize based on monthly payouts of 7.5% for 30 years. I assume this is done for everyone, meaning that you max monthly would be about 48,000 per year NOT 69,000 per year. At 69,000 per year, your money would run dry in 17 years,

Now all of this said, I worked at Roche for 12 years, until recently and was always above rep level job band. I am around between 45-50 years old, and my buyout is only 75K. I do understand that my buyout is smaller because it has many more years to grow, but even accounting for that, your payout implies a far more aggressive contribution to the plain.

The bottomline is that unles you have worked with the company for darn near 40 years, there is no way in hades that your pesnion contributions to date are 400K. STOP LYING! Geez!
 






Anonymous said:
A lump sum is considerable less than what you will be paid if you way until you retire. That's why they want to pay it out.
Click to expand...

Not really, because if they dont give it to you now, they invest it and pay from the new balance. So, the 50k they are offering today, will be 200k in 18 years just from compounded interest from their investing at 7.5%. They are saving on administrative costs. If you live more than way more than 30 years beyond retirement (95 years of age) you could cost them money, most will not live that long, thus the company could make out; its all balanced.

Your current value will likely at double every 9 years. The choice here is whether it doubles in the hands of Roche, or you chance that you can double faster while under your own control. Also, if you control it and die ALL of the money will go to your heir. If the company controls it you will have to accept a reduced pension in order to leave 50-75% to your benficiary.

There are pluses on both sides.
 






Anonymous said:
You are dead wrong, and not making any sense at all. Your 400k (IF THATS TRUE) would be around 700k in 8 years @ 7.5% growth. Based on my info, they ammoritize based on monthly payouts of 7.5% for 30 years. I assume this is done for everyone, meaning that you max monthly would be about 48,000 per year NOT 69,000 per year. At 69,000 per year, your money would run dry in 17 years,

Now all of this said, I worked at Roche for 12 years, until recently and was always above rep level job band. I am around between 45-50 years old, and my buyout is only 75K. I do understand that my buyout is smaller because it has many more years to grow, but even accounting for that, your payout implies a far more aggressive contribution to the plain.

The bottomline is that unles you have worked with the company for darn near 40 years, there is no way in hades that your pesnion contributions to date are 400K. STOP LYING! Geez!
Click to expand...

I started with the company in 1978 the year I graduated from HS and went to college part time at night...I worked for the company for 34 years....I was a director at the time of layoff...Roche provided the amounts I would receive for a single annunity at age 60.

I am not lying you dumb piece of shit....I met with a Fidelity advisor...and was told they couldn't even come close to my pension.

And that 700k would give me an income of $28,000 per year vs 68k...based on the 4% recommendation for withdrawing on your 401k
 






Anonymous said:
I started with the company in 1978 the year I graduated from HS and went to college part time at night...I worked for the company for 34 years....I was a director at the time of layoff...Roche provided the amounts I would receive for a single annunity at age 60.

I am not lying you dumb piece of shit....I met with a Fidelity advisor...and was told they couldn't even come close to my pension.

And that 700k would give me an income of $28,000 per year vs 68k...based on the 4% recommendation for withdrawing on your 401k
Click to expand...

So if you've got everything figured out, why are you bothering the rest of us with your posts? Take your filthy language,your pension and go away and be miserable someplace else.
 






Anonymous said:
You are dead wrong, and not making any sense at all. Your 400k (IF THATS TRUE) would be around 700k in 8 years @ 7.5% growth. Based on my info, they ammoritize based on monthly payouts of 7.5% for 30 years. I assume this is done for everyone, meaning that you max monthly would be about 48,000 per year NOT 69,000 per year. At 69,000 per year, your money would run dry in 17 years,

Now all of this said, I worked at Roche for 12 years, until recently and was always above rep level job band. I am around between 45-50 years old, and my buyout is only 75K. I do understand that my buyout is smaller because it has many more years to grow, but even accounting for that, your payout implies a far more aggressive contribution to the plain.

The bottomline is that unles you have worked with the company for darn near 40 years, there is no way in hades that your pesnion contributions to date are 400K. STOP LYING! Geez!
Click to expand...

You don't know what you're talking about Sparky. I know people with just 30 years getting a 400K lumpsum, and the 69K per year does add up. 34 years and only 400K is because the guy was working out of HS as a janitor or something. Someone with 34 years at a higher pay level could have probably 600K or more for the lumpsum. And where ever you get your 7.5% info?
I worked for less than 12 years, am around your age range, and my payout is well over 100K.
No one is lying here you just aren't as smart as you think you are.
I'm taking the lumpsum and don't need to get anywhere near 7.5% to beat the pension.
 












Anonymous said:
Better go back and look again. Companies don't pay pensions amounting to a yearly return of 17%.
Click to expand...

So you take the 68K and divide by the 400k to get 17%, and call that a "yearly return"?
I took my yearly pension amount and divided by my lumpsum and got 16%
Are you just making stuff up calling the 17% a yearly reurn? You didn't even consider years in your math. That online MBA wasn't what you expected Sparky.
 






Anonymous said:
So you take the 68K and divide by the 400k to get 17%, and call that a "yearly return"?
I took my yearly pension amount and divided by my lumpsum and got 16%
Are you just making stuff up calling the 17% a yearly reurn? You didn't even consider years in your math. That online MBA wasn't what you expected Sparky.
Click to expand...


Math-boy,

Show us all your numbers so we can check your math. You'll find you don't know what you are talking about.
 












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