Pension in distant future - how does it work?

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JD2775
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Pension in distant future - how does it work?

Post by JD2775 » Sat Dec 21, 2019 1:10 pm

Pension was frozen at my previous company, I got a statement that read my payout will be $1100/mo payable at normal retirement age (in 2040).

How does this usually work? Do I need to reach out to the company distributing the pensions when 2040 nears and request the payments to start? Or is it generally automatic, once I hit a certain date the monthly checks will start coming in?

Basically, do I need to stay on top of this? Being 20 years away I can see myself forgetting about it

Geologist
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Re: Pension in distant future - how does it work?

Post by Geologist » Sat Dec 21, 2019 1:28 pm

I'm not sure there is any standard. At a minimum, the company needs to know where to find you, so you had better keep them informed of your current address (and have some way of knowing that they know of your address). This implies sending them updates when your address changes.

As pensions are sometimes payable earlier than normal retirement age at a discount, I would suspect that you would be well advised to contact them.

Quaestner
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Re: Pension in distant future - how does it work?

Post by Quaestner » Sat Dec 21, 2019 1:29 pm

I'd set a yearly reminder on my phone to let the company know about any change of address. Not sure what more you can do. Maybe others will have better insight!

scubadiver
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Re: Pension in distant future - how does it work?

Post by scubadiver » Sat Dec 21, 2019 1:47 pm

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Last edited by scubadiver on Sun Jul 12, 2020 12:25 pm, edited 1 time in total.

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Stinky
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Re: Pension in distant future - how does it work?

Post by Stinky » Sat Dec 21, 2019 1:52 pm

You should definitely update the employer if you change addresses.

There may be a variety of reasons for the Plan to contact you. They may offer a lump sum buyout. They may offer a reduced annuity benefit if you start payments before your normal retirement age. If you’re married, they’ll also need to know whether you want payments to be based on your life only or to have survivor benefits.

Also, if you’re married, let your spouse know about the pension. If you die before you start receiving benefits, there may be some residual benefit to your spouse.
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Topic Author
JD2775
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Re: Pension in distant future - how does it work?

Post by JD2775 » Sat Dec 21, 2019 2:12 pm

Thanks everyone! Sounds like mainly keeping them updated if I change addresses. Makes sense.
I didn't even think of the potential buyout. I hope they do offer that and the math makes sense to do so. I would prefer that, as I don't trust the money will be there in 20 years on their end. We will see.

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Watty
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Re: Pension in distant future - how does it work?

Post by Watty » Sat Dec 21, 2019 2:13 pm

JD2775 wrote:
Sat Dec 21, 2019 1:10 pm
How does this usually work?
It can really vary by the details of the pension plan.

I have one like that where you were allowed to take the amount as a lump sum at any time after you left that company, or you could leave it in the pension plan.

Not all plans will allow you to take a lump sum amount.

It was an older pension plan and my balance would grow each year by a stated percentage. This was something like the one year treasury rate or 5% whichever was greater. Back then the 5% figure was laughly low so pretty much everyone ignored that. As interest rates dropped that 5% then looked very good so I left my money in the pension plan to get that 5% and I counted that in my fixed income asset allocation.

During the 2008 financial crisis the pension funding percentages were behind so they were required to suspend the lump sum option for about five years then they reinstated it when the percentages got better.

I can sign on the pension company(an insurance company) website to check my balance and see what with current options would be.

Just before I turn 65 I will decide if I should take the lump sum or monthly pension.
JD2775 wrote:
Sat Dec 21, 2019 1:10 pm
Basically, do I need to stay on top of this? Being 20 years away I can see myself forgetting about it
You really need to stay on top of this.

I retired four years ago and earlier this year I realized that I had not gotten the annual statement that I got while I was working. While I could see my account I also could not see an annual statement when I signed on to the insurance companies web site.

I call them up an much to my surprise they said that they do not send out an annual statement once you leave the company! I am really surprised that this is allowed so now each year I will print out some screenshots and put that in a folder and I wall call the companies 800 number to just check in. There are two potential problems I want to avoid;

1) I need to have a good record of this in case something happens to me and my spouse needs to collect the pension.

2) With financial accounts if you do not have any contact with the company for a number of years(5 ??) then some accounts may be turned over to your state. The legal term for this is "escheated" if you want to Google it. I do not know how that works for pensions but by calling them one a year I will eliminate any risk of that.

You really need to study your pension plan paperwork and find out the details and stay on top of it.

If you have an option to take a lump sum you can make another post with the details to find out which option people think you should take.

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