I'm retiring at 60 should I take a $500,000 Lump Sum or pension option? | Retirement Income Planning

I just turned 60 working in the Oil & Gas industry and I'm about to retire, I have the option to take a lump sum payment or a pension option that will give me a monthly paycheck. Which should I take? If I take the Lump Sum option will I be jeopardizing my retirement peace of mind? Will my Pension be taxed as normal income? In this video, Jessica Cannella will answer all of your questions on the hot debate of lump sum vs pension.
Survivorship Series: click2retire.com/survivorship...
Annuity Education Path: click2retire.com/annuityeduca...
00:00 Our General Question
00:24 Houston’s Hot Question
01:04 Defined Benefit Pension Plan
01:55 Lump Sum Vs Lifetime Annuity
02:20 Speaking to a Financial Advisor
02:41 Your Decision is Irrevocable!
03:35 Holistic Approach
04:31 Payout Options
05:30 Pension and Flexibility
06:55 Benefits of a Lump Sum Payout
08:00 Lump Sum into an IRA
08:42 Pensions are Taxed as Income!
09:55 Your age and Lump Sum
11:00 Spousal Election
11:45 Survivorship Series
13:05 Lump Sum and Peace of Mind
13:19 PBGC
14:49 Fixed Index Annuity and Lifetime Guaranteed Income
16:13 Let Us Set Up your Retirement Plan!
Do you need a Retirement Success Plan that goes beyond allocating funds to truly fit your needs? We can help you create a retirement life plan customized for your retirement vision and legacy. Call us at [phone] or fill out this form for a free consultation: click2retire.com/lumpsumorpen...
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More about Jessica Cannella, Co-Founder and President:
As the Co-Founder and President of Oak Harvest Financial Group, Jessica’s mission is clear. Educate, inspire, and financially prepare couples and individuals to enjoy a fearless and fulfilling retirement. With almost two decades of experience in retirement planning, Jessica’s objective is to alleviate the stress around investment management and financial planning.
#retirementplanning #investmentmanagement #jessicacannella

[@miken7629]

I took the lump sum because it becomes part of my estate when I die. If I die with a pension, it becomes pension fund managers profit. Amazing how long stocks have done well and pension funds remain underfunded, yet pension fund managers are billionaires. Fees are where real money is made.

[@JB-lc2fn]

So did I.Cheers

[@plumber1227128]

Simple fact is, I trust neither the employer nor the banks/markets. Gold, food and ammo please!

[@ro6384]

" If I die with a pension, it becomes pension fund managers profit." -- no it does not, it goes into the pension pot and gets paid out to other pensioners. all of this is built into the calculations of everyone's payout. in the end, that does not matter to you - but then on the other hand you are dead so who cares anyway.

[@Sonny0276]

Great Video. Thank you for posting.

[@jhors7777]

Thank you for posting this helpful video!

[@OakHarvestFinancialGroup]

Glad it was helpful!

[@barbiec4312]

I love listening to a smart woman talk to me about money. More from her please.

[@richbrake9910]

Haha. It sounds like you think she is rare.

[@dennisbolender7327]

Very well presented, seemed to cover all the bases. Thanks.

[@OakHarvestFinancialGroup]

Thank you for your support! We appreciate that you enjoy our content. Feel free to click the link below to speak to one of our advisors if you have any questions: click2retire.com/lumpsumorpension

[@christopherhennessey8991]

Mine was a state pension and there were two options :defined benefit pension plan,and the investment plan. There was a DROP plan, aka a 457B deferred retirement option program,offered to those in the pension plan. I stuck with the pension plan which I claimed upon retirement at 55 ( I’m a retired RN) and claimed Social Security benefits at 62. A nice final lump sum of DROP money and unused time :sick ,vacation ,extended illness, and comp time in addition to the monthly pension which comes with a 3% annual COLA.Worked out well for me.

[@kenfrank2730]

My pension plan had a DROP option, which I took. Now that I'm retired I receive my monthly pension money and monthly DROP money. But in 3 years the DROP money will run out. At that time I'll start receiving my SS money. Right now I'm getting $8200/month, or $7400/month after taxes are taken out. When the DROP money ends and SS begins I will be making a little more than that. Worked out well for me too.

[@striperkid]

A divorce and remarriage made that decision for me. My ex gets a slice of my pension yet the new wife gets nothing so, I'll take a partial lump sum and invest it for the new wife.

[@jasonkatada1583]

Some city pensions have both, can take a % lump sum and pension for life.

[@shallyshedrak4905]

Thanks for sharing awesome tips! I'm financially free and currently growing a solid retirement plan. It takes a positive and consistency to learn new things, unlearn the old habits is important to get a mentor/coach to lead you all the way.

[@larriveeman]

i have a federal pension which covers all my expenses including health insurance, as a federal retiree we still pay the same premium we paid while working, not touching TSP/IRA, wife also has a small fed pension, taking SS at FRA as I don't need it, wife will take it next year

[@TheFirstRealChewy]

They killed the concept of a pension at my company a year or two after I joined, so I got grandfathered in. That was the good news. The bad news is that its going to pay peanuts. I'll take the lump sum when the time comes.

[@M22Research]

Helpful discussion, but when making the decision whether to take the lump sum or keep the pension annuity, why no specific discussion about how to evaluate the actual lump sum *amount* vs the otherwise promised monthly pension payment? So, as an example, would it be wrong to take that $500,000 lump sum, grow it by some conservative market rate, say 6% for every year until the year the pension would commence paying out. Then multiply that balance by a "safe" withdrawal rate to yield a "pension payment equivalent". To keep the example simple, assume you're retiring next year, so no investment growth on the lump sum payment. Using the common 4% withdrawal rate from retirement funds rule (go lower if you want it to be more conservative), 4% of $500,000 = $20,000/year or a $1,667 "monthly pension payout equivalent". If you're close to retirement and the promised monthy pension payout is dramatically higher than this estimated "monthly pension payout equivalent:, it might taper your desire to take the lump sum. Especially if you tend to be a risk averse person.

[@M22Research]

In the context of the total funds you have saved for retirement, another way to evaluate a pension promise would be to look at that future promised monthly pension payment and divide the commonly used 4% withdrawal rate into the annual total of those future promised pension payments. As an example, if your company has promised to pay you $4,000/month as a pension, 12 x $4,000 = $48,000. Divide $48,000 by 4% (0.04) = $1.2 million. That $1.2 million amount would be the equivalent total retirement funds you'd have to save to generate $48,000 of annual income. (Of course, if you're far from retirement, you need to consider the impact of inflation.)

[@randy74989]

It all depends and understand most monthly payments are from an annuity issued by an insurance company your company paid to open up your annuity. So, the liability becomes the insurance company's and NOT the company you worked for.

[@derrickmaxwell8163]

Hit 200k today. Thank You for all the knowledge and nuggets you had thrown my way over the last months. Started with 14k in June 2022

[@jbarrett8292]

I work for a large HMO and they do offer the annuity with death benefits. They offer a 5,10,15 and 20 year life annuity to a beneficiary of your choice to receive the same pension amount the employee would have received. Of course it is a bit less than a single life annuity with no designated beneficiary, but it is offers a great peace of mind that if one passes away someone will benefit from that pension. Thus it makes it more difficult to make the decision between a lump sum and life time annuity pension.

[@angieharris8015]

You must work for Kaiser, like I did. Several of my former coworkers took theirs, early! Two of them did so to buy their first house. Fortunately, I will have a second pension, so I think I might take out the lump sum from Kaiser too.

[@danasimmons2513]

A CFP advised me to take the lump sum, but sure I agree. I did the math, 305K divided by the annual payout 100% survivor option of 23,412, I came up with 7.67%. Where can I get this on the market? Thoughts, is it good?

[@ro6384]

ERROR - some pensions have COLA, so the monthly payment will NOT stay the same. My pension has COLA on about half the payout.

[@OakHarvestFinancialGroup]

Thanks for bringing this to our attention. There are some pensions that still include a COLA (Cost of Living Adjustment); however, like the dinosaur, this benefit is slowly moving towards extinction. For the majority of corporate pensions our client’s bring to us, COLAs have become a thing of the past. We make every attempt to provide both accurate and informative videos. Nevertheless, we appreciate your comment. Be sure to subscribe to our channel if you haven’t already so you will be reminded of new content.

[@jimmcparland8702]

She completely mistated the PBGC pay out. The amount she quoted is the maximum per year NOT the entire sum

[@christopherhennessey8991]

Don’t forget to mention the rule of 55 which may apply. Pay 20% federal tax off top,lessening tax burden come filing time.

[@jimhoge3252]

To me the lump sum payout was more attractive because I didn’t want inflation risk of pension payments for hopefully 30+ years

[@OakHarvestFinancialGroup]

Thanks for sharing your perspective, Jim!

[@richbrake9910]

If you have a spending problem like most people, take the monthly check.

[@toddmaniatoddmania9844]

What’s this “spending problem” that you’re alluding to?

[@BarnabyBarry]

Tell your kids to get state jobs in California (CALPERS) and work for 30 years and make around 80-150 K USD annually for life (no need to take a lump sum)

[@joe92]

That'll stay solvent for sure

[@Darth_Sidious_66]

That's where I want my kids to go, California. Low cost of living, low crime, low taxes, and solid leadership at the helm. Oh wait, wrong state, what was I thinking?!

[@BarnabyBarry]

@@Darth_Sidious_66 after they get their pension they can move to Thailand like I did or a cheaper state

[@edhcb9359]

The ONLY reason an employer will offer you a lump sum buyout is to save themselves money in the long run. So as long as your health is decent the answer is pretty simple.

[@M22Research]

"save themselves money", yes, but most importantly, they wish to transfer the market risk (of their pension investments and funding growing enough to cover the annuity payout) from themselves to their employees.

[@johnristheanswer]

Always do the opposite of what the big companies want.

[@edhcb9359]

@@M22Research Also known as “saving themselves money”.

[@donhgr]

If your company is a utility company or railroad always take the pension

[@JB-lc2fn]

If you and your wife pass after 5 years the money is gone.Depending on the interest rates I’d take the lump sum.I took the money.Basically 22 years of pension upfront.Cheers

[@chgone5034]

She is a sales person for private annuity with your lump sum payout.

[@OakHarvestFinancialGroup]

Hello @chgone5034! Each person's situation is unique. Annuities are one tool that can be used as part of an overall portfolio strategy and may or may not make sense for you. Please call Oak Harvest if you need help with retirement income and tax planning. Thanks for watching.

[@tonioyendis4464]

Take the lumpsum & run!

[@rajvo7406]

Who's yhe black girl from google curiosity ad?

[@OakHarvestFinancialGroup]

Hi @rajvo7406, we're not sure what ads you may have seen while watching - every ad is different and assigned by youtube based on the viewer. Take care!

[@DDD-um5co]

OR You Can ROLL Your Job Pension Fund INTO a Self-Directed IRA & Participate In Different Investment Vehicles Through That Self-Directed IRA.... 🙄 Through a SELF DIRECTED IRA, You Can Be a Bank 🏦 By Private Lending, Property LOANS, BOND, Stocks, ETF's, Mutual Funds, Different, Notes, Ect.... Remember, An On The Job Pension Fund Is Controlled by THAT Particular Company You Work For, & IF You Pass Away Your Family Won't Get The FULL Pension.... & IF, There's Children That Belongs To The Deceiting That's UNDER 18 Years of Age, They're Going to Get a Check Until They're 18 Years of Age.... THEN After that, The Payments WILL STOP Completely & IF By Chance They OVERPAY You AFTER Your 18th Birthday They WILL Be Coming AFTER You for Those Overpay of Money💰 NO- Matter WHAT.....