Many engineers in Boeing’s white-collar union, the Society of Professional Engineering Employees in Aerospace (SPEEA), choose to take their pension as a lump sum. That could lead to a brain drain of experienced engineers, creating holes in the company’s technical know-how. Choosing a lump sum means giving up the option of receiving fixed monthly payments in retirement. This is not a choice to be made lightly without the guidance of a certified financial planner practitioner.
It’s Your Money
The advantage of a lump sum is that you will retain complete control of the money. Unlike a regular annuity payment, wherein The Boeing Company makes payments on your behalf, you will be in charge of managing and making sure the money lasts you for the duration of your lifetime. With interest rates currently rising, this may be a disadvantage for those considering a Boeing pension lump sum option. Segment rates are used to discount your pension to determine the present value of your future payments. When these rates increase, it can cause a significant reduction in your pension lump sum payout.
You Have Full Control
For many, this lump sum represents a significant portion of their financial assets and may be the only private source of income they have. When you choose to receive your Boeing pension as a lump sum, the company’s responsibility for managing the money ends when they hand it over to you. With this in mind, you have complete control over the funds and can invest them as you see fit.
You can also name a beneficiary to receive any money after your death. However, you should be aware that the lump sum calculation is driven by segment rates and mortality tables. We are currently witnessing a rapidly rising trend in segment rates that could significantly decrease the value of your lump sum. This is particularly true for those who intend on retiring in 2023 or later and are interested in the lump sum commencement option. As a result, you should carefully consider your retirement options given these current market conditions.
You Can Pass It On
Choosing a lump sum means giving up the possibility of monthly pension checks from Boeing for the rest of your life. That’s something to think about and weigh carefully with the guidance of a trusted certified financial planner professional who can provide an objective analysis of your situation. Taking a lump sum may make sense for some people, but it’s not the right choice for everyone. For example, someone with a family history of heart disease and high blood pressure may have a shorter life expectancy than average.
That would mean they need their pension payments to last longer than someone without that risk factor. Boeing’s regular pension plan also offers a joint survivor option that extends the payments to a spouse for life after you die. That’s an option that may be right for some retirees. However, it could cost a lot more to stretch out those payments than the lump sum option. A review of the segment rates that drive the lump sum calculation in November 2023 would help determine how to best utilize those options.
You Can Invest It
Many engineers are in the final years of their careers and facing decisions that impact the rest of their lives. Choosing to take a lump sum is one of those pivotal choices. Whether the lump sum will be worth more than a lifetime of pension payments is determined by actuary calculations that discount future pension checks using mortality tables and interest rates. Interest rates are currently rising, meaning the amount of money that would buy the same retirement income from a lump sum is shrinking. Investing in a lump sum can provide greater returns than a traditional pension, but it also comes with more risk and requires careful planning. A competent financial advisor can assist you in choosing the best course of action for your situation.
