Pension Lump Sum Buyout – Trick or Treat?

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  • Why are people receiving letters offering them a lump sum pension buyout option?
  • What are the pros & cons of taking the lump sum vs. the lifetime guaranteed pension payments?
  • Will people be forced to take the lump sum or otherwise lose their pension?
  • Is this only affecting people with pensions?
  • What should they do if they get a letter?

Have you received a letter?

  • A few of my clients have recently received letters from their pension offering them a lump sum option.
  • This is because of the low interest rates and the concern these companies have with providing benefits to individuals that are living longer.
  • Choosing which option depends on many factors (risk tolerance, other retirement income, etc.) and should be carefully decided, as it has long term repercussions. Congress recently passed a law that you can’t take a lump sum AFTER you’ve already begun receiving payments.
  • We don’t know how long the interest rates will be low, but we expect it will be for a while.
  • Individuals that have annuities are also beginning to receive these letters, as insurance companies don’t want to take on the long term liability of payments.
  • It’s critical to read the paperwork thoroughly to ensure you understand all your options and especially the timeframe to respond, which usually has a fairly short deadline.

 

Keep an eye on your mail and the minute a letter arrives give me a call so we can discuss your options.