J & J Pension Question

I've got about 21 years of total service with J & J. I left J & J in 2013 and rejoined in 2015. I'm vested in both pensions. The "old pension (FAP)" is the annuity payouts and the "new pension (RVP)" offers the employee the choice of a lump sum payout or an annuity.

My question is does it make sense to take the lump sum payout of the new pension (which will be taxed btw) or the annuity? I'm leaning towards the annuity option because it will payout monthly for the rest of your life.

Any retirees thoughts would be appreciated.

 

I've heard it said always take the lump sum. You usually make more when you're alive, and then your heirs will keep the balance when you die. Presently with an annuity option, JNJ will pay you the interest on what your balance produces monthly stipend (usually only 4-7% annually divided by 12 months) and keep the balance when you die.

Good luck and congrats on the long career.

 

Also, JNJ 401k options are woefully bad. Underperforming funds with high expense ratios and fees actually help pay for the match the company offers. Leaves the workers underpaid, for decades potentially, so the company can say they have a match.

I suspect the pension works similarly...keeps thousands of workers trapped by the thought of the pension and costs the company little or nothing as they keep the balances of the deceased.

 

My rule of thumb is take control of your $ if possible. Retired in the fall of 2018 and took my 401k and put it in one of the brokerage houses. Can invest it in stocks, funds, bonds, whatever you want. Would have taken a lump sum on the pension but was told by HR JNJ doesn’t do lump sum payouts, though I’ve seen conflicting stories on here. Get both your 401k & pension if you can.

 

Retired with 25 years before the age of 60 a few years back. Asked for a lump sum, but was denied. They did tell be the approximate dollar value of the pension...I have already drawn about 35% of that total amount. My plan is for me and my spouse to stay healthy and live a long life and make the bastards pay many times over the lump sum they denied me.

 

A lot of years with J&J. Annuity way to go ! Especially if your going to live 20-40 yrs more

 

Original poster here,

I tend to think that the annuity is the best option as well. The lump sum option is only available for the "new" pension that started in 2014-2015.

A question for retirees: Annuity payments are taxed as regular income correct?

 

yes

 

After talking to two talented actuaries, and looking at it from different perspectives, I took the lump sum after 30 years service with a traditional FAP defined benefit pension option from another large pharma company. So, you may discount my advice but consider the potential risk/return. (Essentially it was your old plan that apparently you folks are not allowed to take as a lump sum. Geez J&J.)

I retired 5 years ago and have almost tripled it's value in the market. So, even if I had gotten 7-10% return/yr I would have done the same. Lump sum. Now, I am mostly out of the market (excluding my Covid-19 stocks like BioTech SE, VXRT and Tesla) waiting for Biden and chaos to enter the picture creating another opportunity. ....just kidding kids. Kinda. Chill. Congrats on 21 years. The rest of you, get back to work.

 

Taking the lump sum and investing in the market depends on your risk profile. My 401k, IRA and other non-qualified savings are in the market. I also have a fair amount of JNJ stock. I like the pension as annuity because it’s a guaranteed monthly amount for the rest of your life.

 

You're absolutely right. There is nothing wrong with taking the pension annuity. It's too conservative for me. But hey, this market will retreat. So set I set my stop losses, I'd sell some of that J&J stock, place puts, hedge bets and stay as liquid as needed. It's all good. Well earned.

 

The risk of the annuity is when hyperinflation hits US, because your annuity can't keep up with price inflation. on the other hand, the risk of lumpsum is that you need to invest and manage it properly to get the proper return. Lump-sum gives your more flexibility assuming know how to manage your money.