re: Pension or Lump Sum?

I guess you can tell I'm more of a 'bird in the hand' type guy. Knowing that a check will show up in the mail every month could help me sleep at night. I just worry being too conservative with put me in the poorhouse in 20 years if inflation cuts my pensions buying power to 25%

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What if the market corrects a year after I retire? What if it stagnates for 6 years? What's a 'wise' investment?

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Well, then you can never retire because that is always a risk.

Why not manage the risks you can manage? And I can manage the risk of my own money. A life pension (while very generous) is like someone paying you "rent" for your being alive. Like some allowance from a father-figure.

Is your pension backed by PGBC?

Either way, I would expect your company to likely buy out your pension in the very near future if you choose the pension anyway. Most companies are going that route.

$60K on $1MM is a 6% guaranteed distribution, which is pretty high. Usually when we are discussing pensions, or "guaranteed" income, it's better to compare to an asset of similar risk. So what level of treasuries would you need to generate that type of income? Let's assume treasuries are paying 3% for an easy round number. This would mean you would need a bond portfolio of $2MM to produce this type of income. Do you have a Social Security benefit? Let's assume you do and it is $30K per year (it's likely the benefit for you and your spouse is greater), that is another $1MM in treasuries.

So you have equivalent of about a $3,000,000 treasury portfolio. And now that you have another $1MM to invest, even if you had it 100% stocks you would overall only be 25% in stocks and 75% in bonds. So you can be very aggressive and have this stock portfolio have a great chance to grow to a legacy you could leave your family, or help hedge for the unknown, long-term care, illness or whatever.

Just make sure the that pension benefit is for the life of you and your spouse.

If you are interested in a more detailed calculation, find a good advisor to help run some scenarios in retirement planning software.

Edit: Want to clarify that you may not want or need to invest all of the extra $1MM in equities, but the point is to show that you could due to all the mailbox money you have coming in.

One other consideration...get your benefits department with your employer to run some "what if" scenarios around interest rates and your pension. As rates rise, your lump sum will decrease making the pension option more attractive.

Are you planning on retiring as soon as you take the pension? If not, I'd take the lump sum and invest it for 3-5 years while continuing to work. At that point you should have a good amount of buffer built up. Put a good bit on your newly made money in cash or something safe like a CD.

$60k pension on $1 mil lump sum though as said is a 6% return which is great. I'd agree with the above that even if you don't take it now, they may force a buy out at some point as that's not sustainable.

Think about it this way OP. You could put $1 mil in a 2.5% CD and it would last you around 17 years. So you'd be 77.

Don't forget that even if you have to use some of your $1 mil principle to get to that $60k, anything you have left over will be better than your pension.

You need to meet with a CFP or an Advisor that focuses on Retirement. This board will tell you that you should not pay someone and just put it in Vanguard/Fidelity ETF. This is probably the largest financial decision you and your spouse make. If you were to take 6% in a dropping/bear/recession market, the risk to the portfolio can be devastating. A thorough evaluation of all your assets- retirement and non-retirement- can help you come up with strategies you may have not considered. Even if you decide you do not need a financial advisor to manage your assets. I would meet with one to have them draw up a financial plan.

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Let's pretend I have the option of taking a 60,000 year pension or a 1 million dollar lump sum. The $60K is guaranteed for 5 years but will pay for the life of me or my spouse. The pension advantage is that there would be a steady income for 'life.' Of course, if I take the pension and my wife and I expire at an early age, then my daughter ends up with nothing instead of 'something.' with the national debt what it is and the interest rates becoming the size of Defense budget, I'm worried about the future market correcting/stagnating for a long period of time. BUT, I'm also worried about hyperinflation if we print money to pay our debt. So, locking in on a pension that would never change might bite me in the arse in my later years. How about it, guys? I'll have to make a decision in the next 1 or 3 years. Loved to hear MT opinions.

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I'd suggest that you compare the distribution structure that you're being offered in the pension to a similar annuity product. You can't really compare the pension (annuity) distributions to bond or equity returns, because some of what you'd be getting would be a return of principal, not just a return on principal. Apples and oranges.

Also, you'd want to do a deep dive on the financial health of the company's ability to pay this pension longer term. Is the pension plan fully funded or underfunded? I had an issue a few years ago when a company I had a pension with imploded. It's just something to look at. There is the PBGC, but it's not as cut & dried as it could/should be.

Just do some homework and make sure that you're comparing apples to apples when you compare distributions across plans. And since you have a likely heir (and this thing dies with you and/or your wife), that may figure into your decision too. That wasn't a consideration for me, but I still opted for a lump sum and rolled it into an IRA. Right or wrong, I preferred to control my own destiny.

Lump sum no question

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Okay, you take the bird in hand that could correct by 33% (like in 2008) over a sure 60K no matter what?

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Given your age, if you had a pro handle the money for you I doubt they would expose you to that much volatility. They would probably set you up in a fairly conservative portfolio designed to produce usable monthly income for you.

IMO, you invest with risk before you retire. When your retire, that is when you divest from the risk because you are no longer in building mode.

Every situation is different and if you don't "need" the money, the more risky portfolios might still be a good option.

Figure out what person or entity you would use to manage this for you if you choose the lump sum and listen to their preliminary plan suggestion. Then make a choice.

People are concentrating WAAAAAY too much on the income portion. As I said, put this in a 2.5% cd and it lasts 17 years. It’s not just about the yearly salary. When he dies, there’s nothing left in the pension. You can’t leave out the fact there is possible $1 mil or at least a couple hundred $1000 left with the lump sum.

Also, OP said he was 60. I would personally invest it for 5 years while working a little. Then at 65 or 67 if you have a big crash or whatever, you fully retire. At that point hopefully it’s 1.25 or more mil. Now you invest it conservatively and live a happy life.