Mature Life Features

. . . to remember you,

borrow some money from them.

Don’t Choke on Pension Lump Sum

A couple we know lived through a lesson for all of us when the topic of pensions arises. The question focused on was whether they should take their pension cash with them when they retire or leave it with the company so they can receive monthly payments during their senior years.

They worked for different companies but both retired before the traditional 65-years-of-age so they could travel and enjoy life and living while they were still mobile and in relatively good health. They agreed that the wife would take her money and her husband would leave his with the firm because the total was much bigger and offered a much-more substantial monthly income.

They reached their decision after contacting a financial advisor to see what opportunities were available for investing the lump-sum pension check while still having money available for travel or medical expenses. They had set aside a sizable kitty over the years in bank certificates of deposit to cover day-to-day expenses until they could draw Social Security benefits.vEvery facet of their financial lives had been probed and programmed.

Except for one drastic occurrence.

Shortly after the husband quit working, a couple of deaths in the families that owned the controlling interest in his former company suddenly made it easy prey for a takeover. This resulted in a split in ownership/management philosophy. After a rapid series of internal battles, the company was sold. The new owners divvied it up into a handful of several divisions and sold each piece by piece.

And through all this, the original company pension was defunded and disappeared. The golden years planned by the couple were turned to trash.

This story is not to be taken as an endorsement of taking out retirement income in a lump sum. It does shine light on one of the perils of walking off the job without such an enticing check. A MetLife study revealed that one out of every five retirees who did leave the job with a lump-sum retirement payment spent it all in less than six years.