a. This is a tax matter. Tell us about the taxation of the lump sum.
b. The trouble with lifetime annuity payments: if you need to go on Title 19 (in your late 80’s for example), the annuity income is lost ... if you do not have a spouse. So, a fixed term annuity with larger payments is often a better choice.
c. Long-term care planning is what is crucial. How does this fit in with your plan.
The only real currency is the calorie!
Calories cover both heat and nutrition....
Get an EBT or SNAP card and use the damned thing to prep, that is the only damned way.... Use the rest of your money for survival food. create a “alternate economy” based on barter and claories....
Use the socialist pukes own tools as a tool against them! While we still have access to them!
Lead and brass are getting ready to escalate. I already have a stash and added to it today at my neighbohood sporting goods store.
There’s another important factor: How reliable is the payment for the rest of your life? Companies that go into bankruptcy have been allowed to renege on pension obligations. If that’s a concern, it’s an argument for taking the lump sum.
Another argument is the one you note, that continued deficits/quantitative easing/the printing of more money/other government policies will inevitably lead to hyperinflation (eroding the value of your fixed payments) and, because of crowding out, skyrocketing interest rates (increasing the return you could get on your lump sum). My problem with that prediction is that I’ve been hearing it for almost a decade now, ever since Bush broke his father’s record for biggest single-year deficit. If someone in your position back then had ignored these warnings (many from conservative economists) and had bet against inflation, he would have come out well ahead.
Welcome to the club.
If it is a bad deal, reject it.
The offer I got undervalued the pension by 50% by my calculations. So the offer was not a serious offer.
I valued my offer by using Fidelity to compare.
To obtain the same pension that my company has already ‘promised’ me, I would need to give Fidelity $109K right now to reproduce that deferred single life annuity.
My buyout offer was only for $71K.
This buyout would be subject to a 20% witholding and a 10% tax penalty unless it is reinvested.
They also offered an immediate single life annuity of about $369/month for life.
Fidelity said I would need to give them $91K right now to obtain such an annuity. So while this deal is substantially better than the lump sum offer, it is still not equivalent to the existing pension value.
We are going to have to make that decision in the next few months. One of the advantages would be that we could leave the money to our children, instead of none of the pension. Would love to hear how others are making the decision.
How will I survive? How about form a mosque? (I may even include a trade union front to get my hand up that skirt at the same time) I’ll be allowed to craft strategy in secret, avoid objectionable realities, plunder without the law coming after me, obstruct, lie, commit felonies, fraud and employ some gungho bad asses to stand around with AK47’s and look tough to make sure the gullible oafs stay in line. I’ll start by finding a few really lowdown hispanics and get them strong arming their barrio bloods, telling them their recent vote for Obama came with a price. 400.00 gringo dollars or we turn them over. I’ll print small laminated membership cards with a Union no. - that’s all they’ll get for 400.00 clams. Then they’ll be told to show up each week and pay dues. I’ll wear a turban and sunglasses and paint my skin a really weird color of brown. When asked questions I will scream and wave a scimitar in one hand and a Ruger in the other. I will be rich and powerful.
So your question is whether or not you can find something that will pay you about 7% forever. That puts you into something like KMP, a pipeline partnership. They currently pay about 6%, but increase their dividends each year. The last few years, it's increase only 2% or so, but over the last 10 years it doubled (avg 7% or so).
The question is, what risk is greater, inflation or doing your own investing?
I think inflation is a big risk. One way to fight that is to save part of your pension payment. But even saving that in a "safe" interest paying account won't beat inflation right now, much less what is coming down the pike.
My choice was to pull what cash I could out of my pension, and look for ABCD investments, Anything Bernanke Can't Destroy.
Seekingalpha.com has some dividend oriented contributors, like Dividends4life or David Fish that have good articles on the why & how of dividend growth investing.