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What am I missing? What is the buy out option?
I left EY as senior manager this year and just took buyout. I compared my 401k growth which is around 11% to my expected pension growth at around 4%. Also, I checked the value of my pension before I left EY and then again at the time of buyout and it was worth 20k less than when I first checked. I called and they said they had to revalue the plan based on federal law changes. Which is true but the federal law change extended life expectancy which you would think would increase the value of the plan. Either way, I didn't trust them to handle my money. As PWC1 stated, there is a potential loss of death benefit as well. The firm is trying to get the debt off their books. Currently, their pension liabilities exceed their pension assets. My husband also had two pensions so I factored that in as well.
Being a cpa I'm naturally skeptical of why they're giving us this option. Knowing EY and their management, they seldom do things in our best interests. Thoughts?
My wife might do the buyout - we are looking at the options soon. We have strong retirement savings in other accounts and are looking to simplify and consolidate.
@senior manger 1 when you leave theyll offer you a buy out of the pension plan if youve vested into it. Only one I heard of a s2 leaving a fews month before s3 (so almost 4 years) getting a 10k buyout offer.
I'm amazed EY still had a pension plan this recently. Good for you guys...
This is rather sophisticated FB thread.. So, assuming you don't need the money and assuming you will live a long time, is there a best option or is it completely unknown now whether buyout or no buyout will be better in the end?
I'm going to consider it.
When I bounce I will take buyout, roughly 44k, the avg growth inside plan is about 4% that EY estimates which any standard mutual fund beats that
I got the lump sum estimate yesterday at they said 19k. I'm about to be a senior 2. That seemed pretty high to me...anyone else know roughly what it should be around ?
Left EY 2008 - took the buyout last summer - the small print said if you don't take the buyout there may not be any death benefit for family - a bird in the hand...
It is about reducing longevity risk and lowering administrative costs for them. Taking a lump sum is not necessarily a bad thing (or sinister by the company) because as you all point out as long as you can get a decent return you'd be better off. As far as the death benefit goes, that'd be 50% of what you'd otherwise get so with a will that too can be avoided.
Also, your lump sum amount will vary based on the current interest rates, as mandated by the government. You cannot lose the benefit (i.e. annuity value) you've accrued.
So if you opt for the buyout, what can you do to minimize any tax burden assuming you reinvest that money for your retirement?
If you roll it into a 401k there is no tax affect.
Can existing employees take the buy out?
SM1, no
In my view, if you are smart enough to do this properly the lump sum is the best option. By this I mean... roll it over so you aren't paying taxes and get someone to invest it. I think at current rates when I last looked at it you had to get an effective rate of 4-5% which over a long enough time horizon is obviously doable. Now, the other thing to consider is your current age. Very young I think taking it is a no brainer as your annuity is likely small and you aren't inflation protected really. If you're nearing retirement and/or have a very large annuity (i.e. enough to live on or form a decent chunk of your monthly retirement income) I'd definitely keep it in as you can't replace the security of having that money available to you or a spouse until you die. But, that's just my two cents.