Tag Archives: lump-sum buyout

Life Strikes Back: BrewDog’s Lump Sum Update

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One great thing about taking a break from blogging is that once you start publishing again, people who missed your regular updates contact you with words of thanks and encouragement. Such was the recent case with BrewDog. You might remember him from Pension Series Part 19, in which I helped him analyze his annuity vs. lump-sum options connected to a small defined benefit pension from a previous employer. He recently sent me a note thanking me again for the help I lent him nearly five years ago (wow, how time flies)! In his polite email, BrewDog also provided an update on his lump-sum decision. Spoiler alert, he took the cash and forwent the annuity.

BrewDog taking the lump sum wasn’t a big surprise. He was leaning in that direction when I initially helped him. However, the ultimate reason why he took the lump-sum and some of the lessons he’s learned since are worth considering. They include the importance of:

  1. making a correct survivorship decision if you take a pension annuity
  2. directing your lump sum into a tax-efficient investment vehicle
  3. having a clear investment strategy for a lump-sum

If nothing else, I encourage everyone to read the first lesson learned. It’s an important one for any pensionable worker who decides to take an annuity over a lump sum because sometimes life intervenes in unfortunate ways. As for the rest of the lessons, they will help guide anyone who’s got a lump-sum decision similar to BrewDog’s. Regardless of whether you take the lump sum, internalizing the points stemming from his choice will help you make a well-informed decision. And, as I’ve pointed out numerous times, helping you make well-informed pension decisions is what this blog is all about! Continue reading →

Why I’m Offering Paid Pension Analysis Services

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Pension Analysis Services

I made some subtle changes to The Golden Albatross webpage the other day. First, on the home (aka splash) page, I added three paragraphs under a subsection called “Services” that briefly describe the paid pension analysis services I now offer. Those paragraphs also quickly explain why I’m charging for services. Second, I created a permanent page called Pension Analysis Services, where I provide an in-depth explanation of the range of services on offer. I also explain the technicalities of how hiring my services works.

In case you don’t want to click away, here it is.

Since “what I offer” got a web page, I wanted to circle back with an article about “why.” By doing so, I will have a permanent explanation for anyone who asks, nested under the “what I offer” page. More importantly, I want to explain “why” because paying me pension analysis is a marked departure from the original intent for The Golden Albatross website. In all, I provide five solid reasons, which I list below.  Continue reading →

The Pension Couch: A Lump-Sum Offer Mystery

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As the title of this Pension Couch post suggests, I help solve the mystery behind a lump-sum offer for a reader. I decided to code-name that reader Charleston because I have relatives who live in South Carolina. As with all Pension Couch posts, most of this article is made up of my lightly edited email to Charleston. In that email, I analyzed her two options: either take the lump sum or stick with the pension annuity. The wild card that makes this article different from my other lump-sum articles is that her lump-sum offer was from what’s known as a church pension plan (aka church plan).

I’ve never written about a lump-sum offer from a church plan. Actually, I’ve never written about church pension plans full-stop. Moreover, while I discuss them in this article, I don’t go too deep. I’ve made a note to write a post on church plans for the Pension Series in the future, though, because they’re an important topic. In the meantime, all you need to know is church plans don’t have to abide by the US’s Employee Retirement Income Security Act of 1974 (ERISA). For those of you unfamiliar with ERISA, it is the “federal law that sets minimum standards for most … retirement and health plans in private industry to provide protection for individuals in these plans.”

Since church plans in the US don’t have to follow the federal minimum standards, their inner workings are somewhat opaque. This opacity can create some severe pension safety concerns for plan members. Moreover, it also turns out the lax rules governing church plans impact how these plans can calculate lump-sum offers. Therefore, the mystery in this story isn’t a “who’s done it?” but a “how was it done?” Continue reading →

The Pension Series (Part 23): Organizational Culture and Pension Signals

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The Long Road to Pension Signals

I struggled with categorizing this post. It’s ultimately about the importance of pension signals that companies and organizations broadcast to their workers. For that reason, I made it a part of the Pension Series. However, I meander through several (somewhat funny) stories, and explain the importance of organizational culture, prior to arriving at pension signals. As a result, I could have placed it in my Life and Money section. In any case, if you don’t have the time to read my well crafted narrative, no worries, just skip to the last two sections. You’ll miss a lot of the context, but capture the main points. On the other hand, if you have time to take the long road to pension signals, please read onwards … which is actually downwards. Continue reading →

The Pension Series (Part 21): Lump-Sum Buyout Offers

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Grumpus the Prognosticator

Considering that I’m publishing this article during the COVID-19 Pandemic, I want to take a few paragraphs to acknowledge that these are troubled times without turning this into an article exclusively about the pandemic. As COVID-19 causes mass lock-downs and lay-offs all over the world, it’s forcing people to examine what their jobs and careers mean, especially if they no longer have one. Looking past the immediate onset of events, many are also questioning what employment will look like in a post-pandemic world with no vaccine close at hand. On the surface, then, it seems like an awkward time to publish an academic study of pension lump-sum buyout offers, which many people associate with the retirement end of a pensionable career.

Lump-sum buyout

Let me look into my crystal ball. I hope we can look back in a year and say I was wrong.

However, if the economic impact of the pandemic continues to suppress interest rates and cause significant amounts of market volatility, or a prolonged bear market, it will weaken many pension funds, similar to 2008 and 2009. Some will even enter the dreaded death spiral that I covered in Part 20 of the Pension Series. Under these circumstances, I’d expect lump-sum buyout offers to proliferate as pension funds de-risk to shore-up their finances. The two main methods for de-risking are lump-sum buyout offers and the same sort of Pension Risk Transfers (PRTs) I examined in Part 14 of the Pension Series. Therefore, it’s reasonable to assume that with more lump sums on offer more employees will take them, especially if they believe their pension funds are in the type of trouble I outline in Part 1 of the Pension Series.

Continue reading →