Should You Accept a Pension Buyout Offer?

CTS retirement party 2010.

As bargaining talks continue, CWA members who are pension eligible are wondering if they should take the lump sum buyout before it becomes an option of the past.

In exchange for giving up the right to receive monthly pension benefits for the rest of their lives, the company would instead pay them an up-front lump sum of cash. A lump sum buyout of your defined benefit pension plan represents the present value of all payments due over your actuarial life valued as of the time you accept payment.

The lump sum option remains in effect while we are working under the 2008 Verizon contract. We don’t know if the company will continue to offer a lump sum buyout option in the next contract.

I have heard many members say that they will retire, rather then lose the option of a lump sum buyout. Whichever you choose, Verizon pension or cash buy out, do your homework before you make the choice.

Take the Money and Run… excerpt from an article by Dan Caplinger 

Accepting a lump sum in exchange for future payments has obvious appeal. Not only can you stop worrying about what might happen if your former employer runs into financial difficulties, but you also get the opportunity to take the money and invest it yourself — hopefully in a way that gives you better returns.

With pension lump-sums, you usually have the right to take the money and roll it over into an IRA of your own — avoiding negative tax consequences and getting the benefits of tax deferral during your retired years.

Moreover, the lump sum gives you some options that pension recipients don’t get. Most pension payments end after the worker’s death, with married workers often leaving survivor benefits to their spouses. A lump sum, however, lets you leave any leftover money for children and grandchildren or other purposes after you die.

Read the full story.

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