Life Strikes Back: BrewDog’s Lump Sum Update

Posted on 23-April-24 by Grumpus

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:

making a correct survivorship decision if you take a pension annuity
directing your lump sum into a tax-efficient investment vehicle
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 →

Death Binder 2.0: The Pensioner’s Edition

Posted on 06-March-22 by Grumpus

A New Hope … For Time to Create a Better Death Binder

Young kids fractionalize your free time as a parent, making long-term projects difficult. That may sound ironic coming from an early retiree and pensioner like me, but it’s nonetheless true, especially during the summer holidays. As I pen this post, it’s February, and we’re nearing the end of summer in New Zealand (NZ). The kids recently started their new school year, which is great because my family and I were busy with all the fun things that typify the NZ summer lifestyle for the six preceding weeks. This includes going to the beach, road-tripping, camping, hiking, kayaking, bike riding, summer football (i.e., soccer), and rock jumping into emerald pools of cold mountain river water! Needless to say, all that fun didn’t leave much time for the long-overdue transformation of my original death binder into a pensioner’s death binder. Continue reading →

The Pension Series (Part 11) : Pension Lump Sum Case Study — Updated

Posted on 13-November-19 by Grumpus

Substantive Revision

This is a substantive revision to the original Pension Series Part 11 article I published on 18 JAN 2018. I updated this article because I have a new method for calculating the Total Dollar Value (TDV) of pensions that do not possess a Cost of Living Adjustment (COLA). The new method is far more accurate than the old method, so I am updating all articles in which I used the old method. That said, the new formula didn’t change the results of this case study because the estimated value of the pension annuities on offer increased vice decreased. As a result, the new method only strengthened the recommendation I made for the ChooseFI listener to concentrate on comparing the difference in value between her $75,740 lump sum offer and the lifetime annuity starting at age 60.

Any additions I made to the text are in blue. Sentences from the old version of this article that discuss my old TDV method are ~~struck through~~. I only used the feature a few times in the text, mostly to replace the old TDV steps with the new. As a result, the article itself remains fairly coherent. Continue reading →

The Pension Series (Part 5): Survivorship (Updated)

Posted on 16-January-18 by Grumpus

Substantive Correction

This is an updated version to my article originally posted 04 October 2017. This version includes a substantive correction. The previous version of the article failed to accurately describe all the calculations required when comparing a pension with an inflation-linked Cost of Living Adjustment (COLA) to life insurance. I noticed my omission today and reworked the affected paragraphs. I also took the opportunity to clean up some grammar. You will see substantive changes noted in red text. I believe the changes make the comparisons between life insurance and survivorship more competitive.

The incomplete calculations I described in the previous version of my article appeared weighted towards survivorship. That was not my intent. Since the intent of the article changed, and I believe in full disclosure with my readers; I felt this mistake warranted a revision with new publish date.

This is a first for me in the blogging sphere, although in the military we routinely strive for this level of transparency when an official report, memorandum, or instruction contains a major mistake. The primary purpose for issuing a correction is to prevent anyone from acting on erroneous information. It’s also important that the historical record reflect accurate information. I’ve decided to hold myself to the same standard on this blog.

As a result, I advise anyone who read and used the methods described in the previous version of this article to read this update and adjust your calculations accordingly. While I apologize for the inconvenience, and always strive for 100% accuracy in my articles; I would remind everyone I’m not a professional. Nor am I considering your case specifically. No matter how comfortable you are with your retirement numbers and plan; it’s always best to run your them by a professional like a fee-only Certified Financial Planner who adheres to the fiduciary standard. Again my apologies.

KJH, we honor the fallen in the Grumpus Maximus family.

Death Sucks

In late Summer 2003, a member of my unit and one of its seasoned mentors was killed in the early days of the Insurgency in Iraq. We were both part of a tight-knit group of young officers that worked and played hard. While I would not have called him a close friend, many in our group did, and I often sought advice and guidance from him. His death was a blow to everyone in our group and the unit as a whole. Nothing was the same after it. Most of us were not prepared mentally and we all took it personally. Each of us dealt with his death in our own way, and I am sad to say it splintered the group in ways I never could’ve foreseen. Continue reading →