Keep track of your pension!

Regardless of the state of the investment markets, it's wise to keep track of your pension (if you are lucky enough to have one). Many states are far behind in funding state pensions and corporate pensions may be at risk during this severe recession and corporate bankruptcies.
More than 100 multi-employer pension plans covering 1.4 million participants are underfunded by $56.5 billion and could fail in the next 20 years. (Thanks to WSJ Ask Encore columnist Glenn Ruffenach, 6/8/20). Sobering!
Read your "Annual Funding Notice" to asses the status of your pension. As of May 2020 Trump's Labor Department has ruled that your pension administrator no longer has to mail you a copy (as previously required). The info will be online, placing the responsibility on you.

You could also read and monitor your plan's Form 5500 which is available online at the Employee Benefits Security Administration: Go to: https://www.dol.gov/agencies/ebsa
Under Quick Links, click on: Filing Searches
How to interpret what you find...
The Pension Rights Center http://www.pensionrights.org/
Read: "Tips for keeping Track of your Pension"
"Pension Funding Notices" and "How well-funded is your pension plan?"
Good luck and keep monitoring the status of your future.

Single Premium Immediate Annuity vs. "Safe Withdrawal" Strategy

"Economist and mathematician Michael Edesess compares a "safe withdrawal" strategy from a 60/40 stock-and-bond retirement portfolio with a single premium immediate annuity of the same value. He found the SPIA offers retirees a bigger monthly payout and decreases their chances of running out of money."

Author/researcher Michael Edesess explains:
"A safe withdrawal rate is the percentage of your assets you can withdraw each year without danger of running out of money, no matter how long you live. The seminal work on the subject was written by financial planner William P. Bengen and published in the Journal of Financial Planning in October 1994."
Bengen asked the question, with a portfolio of 60% stocks and 40% bonds, “What percentage of your starting assets can you withdraw yearly for the rest of your life without fear that you will run out?”
"His answer, based on simulations using past history, was that you can withdraw 4% a year (adjusted for inflation)."

"But in recent years, stock and bond market conditions have changed. Interest rates are historically low. This has caused some researchers to argue that 4% is not a safe withdrawal rate anymore.
In 2013, three researchers found, using their revised stock and bond market parameters, that as low as a 3% withdrawal rate would still mean a 10% chance of running out of money — too big a chance for comfort."

Edesess compared the "safe withdrawal rate" strategy to buying a Single Premium Immediate Annuity (SPIA):  A SPIA "is a financial instrument that guarantees you a consistent monthly income as long as you live."  Don't confuse a SPIA with the "more complicated, expensive, and much less useful annuities with other names, such as variable annuities or fixed-income annuities."

According to Edesess, "My own calculations show that for an investor to be 95% certain of not running out of money with a safe withdrawal strategy from a 60%/40% stock-bond portfolio, the strategy would be to withdraw 3.5% of the initial investment in real (inflation-adjusted) dollars each year."
"If the portfolio started with $500,000, for example, the average annual lifetime income would be $23,000. With the SPIA, the average annual lifetime income would be $33,500, and the certainty of achieving it is greater than 95%."
"Thus, both the certainty of not running out of money, and the lifetime income, are much greater with the SPIA than with the 'safe withdrawal' strategy."

By purchasing a SPIA you are creating your own pension. 

Read the full article at: https://www.marketwatch.com/story/this-one-investment-move-can-give-you-lifetime-yearly-income-in-retirement-2019-04-29

Create More Retirement Income and Cut Your Longevity Risk

When you retire, your monthly income stops unless you are one of the few retirees with a pension. "But there is a way to replace income no matter how long you live."

You can create
your own pension by buying an immediate annuity that pays guaranteed income for your life.

A deferred annuity, which pays out in the future, lets your money grow tax-deferred until you start taking payments.

An immediate annuity provides "income that replaces your salary or self-employment income, an income annuity insures against the risk of living longer than average."

An immediate annuity is "the only type of true longevity insurance. You transfer the risk to an insurance company in exchange for a premium."

"Risk-pooling and guarantees are what make lifetime annuities so valuable. With lifetime annuities, the 50 percent of people who die earlier than average subsidize those who live longer." You don’t know which half you’ll be in.

"You can self-insure against longevity risk by investing in stocks, bonds, and savings."  BUT! "You’ll need to save 25 percent to 40 percent more than with an annuity because you won’t have the advantage of risk-pooling, according to a Wharton Financial Institutions Center study."

Get the details from Ken Nuss at: https://www.mdmag.com/physicians-money-digest/personal-finance/create-more-retirement-income-cut-your-longevity-risk

Locate a "lost" pension from a former job

The Squared Away Blog tells the story of two sisters who worked for Spiegel decades ago.  Blogger Kim Blanton explains:
"Betty Taylor is 74 and retired from a job she held for more than a decade filling Spiegel catalog orders and packing them up for shipping – she left in 1984. Diane Taylor, 70, was a packer and then a keypunch operator there between 1982 and 1995."
"But the sisters, who live together in their late mother’s house on Chicago’s Southwest Side, couldn’t track down anyone who could confirm that their low-paying jobs entitled them to Spiegel pensions.
This is more common than one might think." Blanton explains how the Pension Action Center (PAC) at the University of Massachusetts Boston helped the sisters receive their hard-earned benefits.
See: http://squaredawayblog.bc.edu/squared-away/do-i-have-a-pension-sleuths-can-find-it/

Pension Payout: Lump sum or monthly check?

"If you’ve worked many years for this employer and have earned a substantial benefit, deciding between the lump sum and monthly pension will be one of the most important financial decisions you’ll make about your retirement. It’s well worth your time to carefully consider your choices before doing so." Financial writer Steve Vernon lays out the pros/cons of each option: http://www.cbsnews.com/news/pension-payment-lump-sum-or-monthly-check

Evaluating a Pension Buyout Offer

Many employers are trying to divest themselves of long-term, expensive pension obligations. One way to do this is to offer employees and former employees a lump sum of cash in lieu of a pension. You can hire a financial planner to run the numbers and help you decide or do the analysis yourself. Read this post in the Squared Away blog for one example:

http://squaredawayblog.bc.edu/squared-away/evaluating-a-pension-buyout-offer/