The financial security that comes from a steady flow of income is an integral part of life. However, it isn’t the only part. The engineers of Boeing’s white-collar union, SPEEA, have a choice this fall. They can take a lump sum or a fixed monthly check for life. Both options have different long-term impacts.
Invest Your Lump Sum
As you get close to retirement, you must make pivotal financial decisions that will affect the rest of your life. One of these is choosing between an annuity and a lump sum Boeing pension. A lump sum investment is a great way to maximize your retirement income. Lump sum investments earn a higher interest rate than savings or investments made over time.
Taking the lump sum and investing it is a great way to try and beat inflation, but it also comes with more risk. The size of a lump sum is based on broad actuarial data about people your age, and the risk of market losses can be reduced. It would be best to consider whether you want to pass on any part of your lump sum to heirs.
Regular pension payments can only be passed to a spouse or other beneficiaries, while a lump sum can be invested and left to non-spouse heirs. Also, remember to update your beneficiaries. You can do so online at The Boeing Company website.
Take the Lump Sum Payment
An upfront payment from your pension provider is known as a lump sum. Lump sum payments can come in many sizes and terms, and you should select the best option for your financial situation. Choosing between a lump sum and lifetime monthly annuity checks is a significant financial decision with implications for your future. Several variables, such as your investment risk tolerance and life expectancy, determine the lump sum amount.
Boeing’s white-collar union engineers – the Society of Professional Engineering Employees in Aerospace (SPEEA) – can take their pension as a lump sum or as fixed monthly annuity payments for life. The size of the lump sum is based on a calculation that uses broad actuarial assumptions about people your age when you retire. As interest rates have risen, the lump sum amount has decreased. For example, a 35-year veteran engineer calculates that an increase of just 1% in interest rates will cut his lump sum by $240,000.
Work with an Advisor
Working at a company like Boeing has many perks, from tuition reimbursement to competitive salaries. But one of the most significant is the Boeing pension. These benefits can help workers and their spouses retire comfortably and leave a legacy of income for family members. Understanding your pension plan is essential to make informed decisions. However, the rules can be complicated and complex, and they can also change over time.
It would help if you worked with a qualified, independent advisor to understand your options. A good advisor can help you make an informed decision about your VIP investment choices and the retirement income you’ll receive from them. They can also guide your choices’ tax consequences— now and in the future. Tax planning should be a vital part of any investment strategy.
Roll Your Lump Sum into an Annuity
Boeing gives its white-collar engineers, members of the Society of Professional Engineering Employees in Aerospace, a choice of receiving their pension lump sum or as a fixed income monthly check. In recent years, about half have chosen the lump sum option. You must submit a written request to your plan administrator to roll your VIP account balance, and transfer the eXMeritus or Global Aeronautica participant balance into an annuity.
Investment earnings stop while the loan is outstanding, and you are charged interest on the amount borrowed. Remember that your decisions should consider the impact on taxes you and your spouse/partner, if applicable, pay today and in the future. Your financial advisor and a CPA can help you manage your tax situation. It would help if you also considered any healthcare costs you may face as you leave Boeing and enter retirement.
