Personal Finance (Not Investing) • Lump sum or monthly pension. Please advise

Thankyou, this is so helpful. My understanding is that this pension plan penalizes you for taking pension before age 65 so its a percentage of the full amount (hence the $1800 is just 2.6% return).

There are no medical benefits included in this pension plan. Yes, I will get social security. No, I'm not intending to go back to work. I've had my full of corporations.

I'm 51 and single, ... have the option to take either $1800 monthly pension for the rest of my life starting now, or a lump sum of $468K (one time offer). ... [or] If I start at 65 the monthly pension is $6500.

I agree with PVW above that there's an error with the "starting now" pension amount. It produces only a 2.1% (male) or 2.6% (female) return on the $468,000 lump sum. The age 65 pension produces a more reasonable return: 4.3% (male) or 4.9% (female). But this is still low for a non-COLA pension. I'd take the lump sum.

Code:

Cell  Item (on "Alive" sheet)  F3  Table - Pers 1          Cohort1970  ------------------------->  H3  Sex - Pers 1                     M        F         M        F  I3  Age Years - Pers 1              51       51        51       51  I5  Years - Delay                    0        0        14       14  N1  Amount - Pers 1              1,800    1,800     6,500    6,500  N4  Discount Rate - Single      2.114%   2.608%    4.347%   4.885%  N5  Present Value - Single     468,000  468,000   468,000  468,000

Calculated with my Longevity Estimator Excel workbook using the SSA 1970 Cohort Life Table.

Statistics: Posted by dkcali — Sat Jun 01, 2024 12:42 am — Replies 12 — Views 1066

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