Near retirement/over 50 MUST READ!!!

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Anonymous

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If interest rates climb, the lump sum on the annuity goes DOWN! Does anyone know by how much? With each percentage point? Will you retire early just to get a higher pension payout? Serious replies only.
 




This government site has helpful calculators - including one for rising/falling rates. Google 'interest rates and pension payments' to read business articles about it but DO NOT make a lump sum decision without an investment advisor - preferably one who works on a percentage basis versus a transactional one. Check the AARP site for help with that (I'm not joking).

http://m.pbgc.gov/pages.html?jsp=wr&lp=pages&url=http://www.pbgc.gov/prac/interest.html

Good luck!
 




Anonymous said:
This government site has helpful calculators - including one for rising/falling rates. Google 'interest rates and pension payments' to read business articles about it but DO NOT make a lump sum decision without an investment advisor - preferably one who works on a percentage basis versus a transactional one. Check the AARP site for help with that (I'm not joking).

http://m.pbgc.gov/pages.html?jsp=wr&lp=pages&url=http://www.pbgc.gov/prac/interest.html

Good luck!
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Don't forget to factor in how the Social Security offset and early retirement penalty will affect the lump sum payout.

Good Luck!
 












To anyone in this situation, please start your research now, BEFORE you get offered the package (even if you're hoping for it). This is an extremely complex area of personal finance and either the jubilation of being freed from Merck early or the sting of being shown the door will invoke a powerful emotional reaction. These decisions need to made with a clear head and with knowledge of all possible scenarios.

It's easy to say 'FU Merck, give me my money!' but be sure you have an impartial view or advisor to be sure you maximize your payout. Making a mistake in this area will be devastating as you are likely not to either participate in another pension if you continue to work or make up lost ground through earnings or investments.
 




Anonymous said:
To anyone in this situation, please start your research now, BEFORE you get offered the package (even if you're hoping for it). This is an extremely complex area of personal finance and either the jubilation of being freed from Merck early or the sting of being shown the door will invoke a powerful emotional reaction. These decisions need to made with a clear head and with knowledge of all possible scenarios.

It's easy to say 'FU Merck, give me my money!' but be sure you have an impartial view or advisor to be sure you maximize your payout. Making a mistake in this area will be devastating as you are likely not to either participate in another pension if you continue to work or make up lost ground through earnings or investments.
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What's the chances of losing what you have by keeping it in the regular company pension?

Will the company really collapse causing us to lose it all? I think that would need to happen...

I always play things safe....in this case I don't think you can buy an annuity for life anywhere with a transfer of the payout.....

If I'm wrong chime in..
 




A few points I can add having just gone through this...

- I was let go at the end of 2011 @ age 55. Interest rates were still going down at that point. The payout was growing at a rate of approximately 14%/yr until the rates turned (stopped or started to go back up) at the beginning of this year. You should be able to use the planning tool on the Merck website to run estimates when the rates change every quarter to determine the effect on your payout. But remember, even if your payout estimate starts going down, you are still adding service time if you are still employed. You'll have to figure out if the tradeoff makes sense at some point.

- I had decided to take a lump sum payment when the interest rates turned and have done so. As others have said, if you don't understand the system, talk to someone who does. There is a lot of online advice on whether to take a lump sum or hope the current management keeps a pension system in place. It really depends on your family and financial situation. It's an important decision you should fully understand.

- I have little confidence current management will maintain the status quo on pensions. Seeing other Fortune 100 companies offload their pension obligations to insurance companies must look good to Merck, which hasn't had an original idea in quite some time. When the quarterly numbers don't look good, some consultant will recommend changing the pension system. Someone will get a Divisional Award for saying yes. I swear they don't understand they are pissing in their own pool.

- If you still think the pension system will remain solid for that 'rainy day', just know that in the less than 2 years I've been retired, Merck has eliminated retiree dental coverage, and instituted management fees on 401k plans that are left with Merck post-retirement. Nickel-and-dime stuff compared to the pension obligations, but they will run out of nickels and dimes at some point unless some products start coming out of the pipeline.

Choose wisely...
 




Great points #8. Since you have retired Merck has changed the pension formula significantly and will complete the transition in 2014. I'm not sure what it means to those who have left but for those evaluating leaving between now and then, it's another wrinkle to consider.
 




Anonymous said:
What's the chances of losing what you have by keeping it in the regular company pension?

Will the company really collapse causing us to lose it all? I think that would need to happen...

I always play things safe....in this case I don't think you can buy an annuity for life anywhere with a transfer of the payout.....

If I'm wrong chime in..
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i worked for another large pharma until i 'retired' last year. My understanding is that under the ultimate disaster scenario that Merck's pension funds are completely depleted, the feds step in. The max annual payment under the feds would be around 55k / yr. So, if your pension is for more than that, you lose that.

More likely scenario would be that Merck adjusts or sells its pension plan to another institution before the feds step in.

I totally agree with others that this is an area you need to to get personal professional financial advice. It depends on so many factors such as your health, spousal situation, family situation, SS, etc.

Good luck.
 








It is just like the lottery; take the lump sum and take it out of Merck post retirement. The lump sum enables more to invest with greater rate of return and you will have a nice inheritance for your heirs should something happen to you. People at other companies who cannot choose the lump sum wish they could. Believe me I know.
 




I concur with this post on taking the lump sum if offered the opportunity and rolling it over to an IRA. By doing this, you avoid income taxes and any penalties. I had this opportunity and took it because I wanted to be in control of my retirement nest egg, not Merck. I don't know if things have changed with the pension, but if you opt for that route, it used to be should you die, your spouse would only receive 50% of the payout. You should double check but that was the primary reasons I opted to take the lump sum. Also, who knows what the company's plans are for the pension system and if Merck will transition to a 401K program. As for investment management costs, if you can find a financial planner whose fees are 0.5-0.9%/year of your holdings, that's a good guide. Anything over 1%, you're paying to much. I've invested through a trust whose management costs are on a sliding scale depending on what return and what my holdings accumulate. last year I paid 0.7% with an 12% rate of return. Plan on living on 4-4 1/2% of your retirement funds per year if you don't want to outlive your money. I took social security early as I don't have confidence in that system either. If you do the calculations, you'll find that the break even point on taking SS early (ie 62) vs. waiting 'til your 67 is approximately 15 years. In other words, if you retire at 62, it won't be until your 82 that you would have evened out the disbursement from SS by waiting 'til your 67. Good luck to all those who are facing this dilemma.
 




You need to be a wealthy person to take ss at 62....because you can only make 14K a year salary in another job without a big ding of giving back the money!

Who can live on 1000 a month ss and 14K more a year?! Unless you've been here years and have a big pension you just cant do it...you really must try to work as long as you can and take ss at 66,67 or 70. My goal is at least 80 workin' and goin' strong!
 




http://www.pensionrights.org/publications/fact-sheet/should-you-take-your-pension-lump-sum

Here is a site that will help delineate various reasons as to why a pension may be of value to some folks. I received a package in December 2012 and as a former SGP employee we did and will not in the future have the option of a lump sum payout. As stated by many, I would have preferred the lump sum payout but at least I was able to gain some solace after reading this. Also do not forget that many states tax Social Security and your pension will be taxed by both state and federal governments. Medical will run you a little over $ 200/month for 2 people and you can pick up your own dental via Met Life for around $ 65/month. About $ 10 more a month than you pay now. If you are under 66 YOA you can earn 12,800 dollar on SSI before you have met your limit for the year and after that it doesn't matter
 




Anonymous said:
You need to be a wealthy person to take ss at 62....because you can only make 14K a year salary in another job without a big ding of giving back the money!

Who can live on 1000 a month ss and 14K more a year?! Unless you've been here years and have a big pension you just cant do it...you really must try to work as long as you can and take ss at 66,67 or 70. My goal is at least 80 workin' and goin' strong!
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Not too long ago, I heard somebody say "70 is the new 65." Seemed to me to be true. In my if I'm lucky, case 70 might come and go, and I'll still be working. Only good thing about that is I'd be beyond my Full Retirement Age and ss wont care how much money I make.
 




Anonymous said:
Not too long ago, I heard somebody say "70 is the new 65." Seemed to me to be true. In my if I'm lucky, case 70 might come and go, and I'll still be working. Only good thing about that is I'd be beyond my Full Retirement Age and ss wont care how much money I make.
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The trick will be finding a job someone 70+ can do. Wal-Mart greeter? That's about the only job I see SS aged folks doing now and there aren't enough Wal-Marts for everyone over 70 to be employed by.
 




Thank you so much for all of the great advice. This is a helpful way to get information - so sick of the folks that whine and complain on this site. Everyone at Merck should be grateful they still have a job in this economy and do the best they can. Btw, Schering folks do not get the option of a lump sum? Is this true?
 




Suze Orman says to take the SS at 66 or 70 mainly because people are living so much longer and one receives a lot more vs 62. As for myself will get out at 62, take SS at 66 and not touch 401K money until 70. That is my plan but I am single and will do what I want when I want. Companies are opting out of the lump sum because they do not want to put out the large amount period. And the rate things are going in this world probably some need to borrow from Peter to pay Paul.
 




Anonymous said:
Suze Orman says to take the SS at 66 or 70 mainly because people are living so much longer and one receives a lot more vs 62. As for myself will get out at 62, take SS at 66 and not touch 401K money until 70. That is my plan but I am single and will do what I want when I want. Companies are opting out of the lump sum because they do not want to put out the large amount period. And the rate things are going in this world probably some need to borrow from Peter to pay Paul.
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A lot of people without pensions at all or only a few crumbs of a pension are being forced into taking the SS at 62 and facing the penalty for working...its all about their need for money. They get whacked big time. Personally I don't know anyone who could delay using 401K till 70..That's wild...reserved for the Richie Rich crowd...

The crappy economy and not being able to get a job if you're over 55 or 60 is real...I'm
seeing highly skilled and educated people of these age ranges hitting stone walls. No job. Jobs are going to the kids...often less qualified, cheaper candidates who work a few years then move on......
 




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