Olde Hornet
Well-Known Member
GE's pension freeze raises a question: Should you take a lump-sum buyout or keep benefits?
Buyout offers present a quandary to employees who must decide whether to take a one-time payout or stick with the guarantee of a pension.
www.usatoday.com
“Lump sums are very attractive to people," says Karen Friedman, policy director at the Pension Rights Center, a nonprofit advocacy group "They'll say, ‘Look at that, the company will offer me $100,000. That's a lot of money.’ But you have to be very careful before you take that lump sum.”
People who take lump-sum payments don’t have a sterling track record in managing the money, according to a 2017 survey from MetLife. One in five of those who took a buyout burned through the money in less than six years, it found. And among those who hadn’t spent their money, about one in three told MetLife they were anxious the money would run out.
Buyouts are cheaper for businesses
Companies offer lump-sum buyouts because it’s typically cheaper for them in the long run. Partially that’s due to longer life spans, with some Americans spending 30 or 40 years in retirement, compared with a 10- or 20-year retirement for previous generations. That’s making pensions more expensive for businesses.