Does anyone have any experience with a pension plan that a company wants to get out of and is offering a buyout. Asking for a friend(son), because I am long past that time in my life.
Gary J

What's the alternative to the buyout?

buyout is so it costs the company less. if no buyout and the company pension fund are both bankrupted that buyout would seem like a good thing. if its union, when the bankruptcy is declared, if big d is in the whitehouse, the pension wont lose. if its nonunion the buyout is probably a good idea

Good advice. My wife worked for a fortune 50 company, and they offered a buyout. The lump sum invested would not provide the amount that was projected for her pension, so no go.

Projections are nice and all but pensions are sucker bets. At least with a 401k or other retirement plan, at least you can get out before the company goes down, and the pension with it. Lot of retirement planners wont even take a pension into account in the planning. Its just a nice bonus.

Thanks for the replies. It's a Minnesota Power company that I think is pretty stable. I don't think the pension plan has been available for any new employee for at least ten years.
Gary J

I don't know anything about pension buy out , other than it is to have a fixed cost that they can pay and be done with.

the only advice I have it all the finantial people I know now are saying Roth IRA put everything you can in the Roth as they expect we will see EU type taxes in the fairly near future.

used to be 401K all pre tax contributions were pushed because you wouldn't make as much after retirement , now it seems that will matter less they will tax you to death anyway.

1. Depends on the amount
2. Depends on the persons situation
3. How long does he have until retirement?
4 How's his health ?
If it's invested in the market it might be gone by the time he can get it cashed out ...
I listed them in what I would think is priority ! Look at the what if's . BIG thing is yes the company might be in good shape but what if it sells out? Could he use it to invest in property ? Heck buy up bit coin !! It's going to 100,000 in no time ........

Take the money and run. Don’t get caught holding the bag because bag will be empty. Look at your family genetics , if it looks like you might not make it till 85 years old I would take the money nD

You REALLY think they are gonna leave all that money there without taking a bit?

I have a Roth but expect the Gov will change the rules before I get there.

If,,,If,,,If Lot of Ifs you got there.First off ,IF its a non union,,I doubt there would even be a pension to offer a buyout from.

I took a cash buyout 20 years ago, so far we are doing okay, made some mistakes but also got a few winners! I would do it again!

Some companies will offer extravagant buyouts to longer time employees to get them out of the system.Company is looking at long term.Spend a bit more now,,save a lot in the long run.Then they don't offer the same pension and benefits to the new employees.Have to do the math with buyout vs. lifetime pension.Buyout might be nice if its big enough,,BUT,,now you have to manage that money yourselfe to last,,as opposed to a monthly check for the rest of your life.

Depends on what kind of buyout it is.Look at it carefully and crunch the numbers.
On the Railroad when the company wanted to cut back on employees they offered early pensions to employees that were within 5 years of the 85 factor,(full pension eligibility years of service and age).
On top of the early pension,(which would be 2% less for every year they took their pension before the 85 factor)he company offered a lump sum buyout equalling their yearly wage for each year left,and a monthly bridge benefit equal to/ until their govt OAP and CPP kicked in at age 60 and 65 respectively.
All eligible took the buyout.

Sort of like a long term settlement. OR better yet winning powerball. You want the annual payments to get the 20 million? (hoping you live for 40 years ) OR you want the 9 million cash option up front? Never promised tomorrow !!!!

Basically, a pension buyout is the cost to purchase an annuity to pay the projected pension payments. This cost is inversely related to interest rates. My company sets this once a year. Due to interest rate changes for example, if I took the retirement on December 1, it would have been 20% less than on November 30 due to the reset. I think they need to have a talk with the HR department about how all this works.

Buying out a pension can be an advantage for the company as it takes a liability off the books. Pensions are quickly becoming a thing of the past for this reason.

With the stock market being down, it might be a great time to take the lump sum and invest in a 401k. Talk to a financial advisor about investing in an annuity if you want a guaranteed monthly payment at some point and check out all options.

I would be mostly worried if my retirement was only in company stock...(see ENRON).

And if you really want to go down the investing rabbit hole, check out -
https://www.early-retirement.org/forums/

I have a roth and expect the same , nothing is for sure but it is better than being sure your paying taxes on it is the only way to think about it.

my goal is to need to pay for food , taxes and fuel when I get around to retirement. most of my $ is in a traditional 401k because it was what you did 25 years ago I am making the contributions I can to my roth.

the only for sure is that they will be working to steal from you or screw you out of what you have.

but not saving has the guarantee you will have nothing.

Just for clarification for some that might not know:

#1. Roth contributions have limits, $6,000 for 2022 & $6,500 for 2023
#2. If your adjusted gross income is above a certain amount, you may not contribute to a Roth. If you file taxes as a single person, your Modified Adjusted Gross Income (MAGI) must be under $144,000 for tax year 2022 and $153,000 for tax year 2023 to contribute to a Roth IRA, and if you're married and filing jointly, your MAGI must be under $214,000 for tax year 2022 and $228,000 for tax year 2023.

And, BTW I would never pay taxes now if I could defer them to when I actually needed to spend the contribution money. The dollars you pay in taxes are much better spent by investing them. If you truly are investing for the future let your estate pay the taxes after you tip.

Example for the bold statement.

Consider a tax rate of 25%. don't pay the 25% now but rather invest the 25% in a standard IRA. Those extra dollars invested over time will more than pay any taxes due years down the road. ROTH's are simply a government trick to make you pay more taxes now.

That was what had me confused but have had 3 people now tell me Roth everything you can.
they all stated the probability of taxes

the conventional logic I had always heard was you will not be making as much as much later and you will pay less in taxes now because it will be a lower net income being taxed

and no worries on my making over the limit any time soon.