Pension - Lump Sum Buyout Offer

I was laid off by J&J last year (2018), after 15+ years. Happened in my early 50s, which is typical J&J procedure, to avoid paying full pension / healthcare benefits at 55.

I received an offer in the mail from J&J to receive a Lump Sum Pension Buyout. Anyone know how that is calculated?

I hear the Lump Sum Pension Buyout is typical for J&J.

Most likely I am going to take the lump sum and go invest it for retirement.

 

How much?


QUOTE="anonymous, post: 6289547"]I was laid off by J&J last year (2018), after 15+ years. Happened in my early 50s, which is typical J&J procedure, to avoid paying full pension / healthcare benefits at 55.

I received an offer in the mail from J&J to receive a Lump Sum Pension Buyout. Anyone know how that is calculated?


I hear the Lump Sum Pension Buyout is typical for J&J.

Most likely I am going to take the lump sum and go invest it for retirement.[/QUOTE]

 

interesting. I left JNJ last fall after 20+ years @ 50+ years old. I asked about a lump sum pension payout and was told JNJ does not do lump sum pension payments. I didn't/don't really care either way but I was interested in seeing what the $ would be vs the monthly payment. Perhaps it's just that HR is clueless, or the fact that policies change depending which way the wind is blowing.

 

Don't do it! Unless you have a terminal disease or are near death, you are most likely going to lose a lot by taking the lump sum.
https://www.kiplinger.com/article/r...weigh-a-pension-lump-sum-offer-carefully.html

 

I requested a lump sum payout and was told jnj does not do such a thing. That was 6 years ago. Railroaded out after 20 years of service and never below standards rating. Attained level of sr executive rep. Simply worked myself out of a job. Jnj Credo is a farce

 

I would take the buyout just to be free of them. I can invest that money and do better with the added bonus of peace of mind. Peace has a price.

 

I wouldn't take the buyout. Stock market could crash and you'd be wiped out. Also, interest rates are going to be negative, so putting it into an IRA at a bank isn't a smart move either. The JNJ pension is federally insured by the PBGC, that's a much better piece of mind.

 

Agree. Also received the buyout letter. If you run some quick calculations based on living to 75, 80, 85... you see that the lump some is less than half of the expected lifespan.

Articles online suggest these are financial decisions to reduce company’s pension liability. They aren’t doing it as a credo move or for the employee... standard for JNJ.

Even with all the lawsuits, the pension is federally insured... so it is your safest option.

Only if you are sure you can double your cash buyout money by the time you retire does this make sense on a pure numbers basis.

 

I'm going to take the pay out - I was with JnJ for 8 years before I resigned. My plan is to roll it into one of my IRAs along with my 401k simply to give me control of my money. I already have a full military retirement so I am in a different situation than most. GE just froze its pensions for many and I'm not going to sit around and wait for JnJ to do something similar, no matter how low the odds.

 

Wise approach... Take the money and invest it well in an IRA. That money should easily produce what "would have been" your pension amount at the time it was promised. When you die, you heirs will keep the balance of your IRA and be thankful you were wise enough to take this option.

Ex. Your pension was to pay out $3,000 per month at 65. You are 45 presently. Your lump sum offer is ~$200k. At 65, JNJ would have roughly $900k in an annuity earmarked for you. They'd pay you $36,000/year, which is the interest off of their $900k. When you die, they keep the $900k.

OR...

You take your ~$200k and invest it well and earn ~10% from 45-65. Then it would be worth $1.4M. You draw just the average earnings of 10% each year ($140,000!) for the rest of your life. (You could even draw less if you choose.)When you die, your heirs are presented with a fine legacy of $1.4M.

 

TAKE IT !! Average 4% a year and after you die you(Trust) family keeps it all. Take the pension and after you die the money is JnJ

 

I think I know who you mean. BM?

 

What crystal ball do you have that has told you that you will earn 10% on your investments?

 

One clarification. Federally insured pensions don't replace 100% of pension benefit. It used to be 40%, but I am not sure what it is currently. Also, the program is underfunded. Only time will tell the better strategy. Regan era changes to laws allowed corporations to view pension obligations as assets. This allowed activist shareholder groups to use pension money in ways that weren't permitted when pensions were considered a liability to a company. As such, under bankruptcy, liabilities were paid off before shareholders. Not so anymore.

 

PBGC insures up to $60,000/year of pension benefits. If your projected pension is over $60,000/year, then you are mostly likely already pretty wealthy.

Congress bailed out the PBGC recently, so all US taxpayers are on the hook for the liabilities.

 

It depends. You're correct that JNJ's pension does not do lump-sum payouts, but it can also depend on your legacy OPCO. For instance, I'm J&J but was hired on through the Pfizer acquisition. PFE worked a deal with JNJ whereby the portion of the pension earned at PFE would be sent over to JNJ (at the time both companies had somewhat comparable plans). So if I somehow miraculously last past 55 with JNJ, I could elect to take the PFE-portion of my pension as a lump sum.

But to other's posts - yes it's just an algorithm where they have figured out how to pay you less than the actuaries would say that you'd earn without taking the lump sum