Is A Boeing Pension Lump Sum Right For You?

A local husband and wife opted to take their Boeing pension in a lump sum. They based their decision on retirement planning scenarios modeled.

Many Boeing engineers have traditional pensions that allow them to choose a lump sum or regular payments. The choice is important because a stable retirement cannot be passed to non-spouse heirs.

It’s a one-time payment

When you choose to take your Boeing pension as a lump sum, the company’s responsibility for those funds ends when they hand it over to you. From then on, it’s up to you to invest the money and ensure it will provide for you in retirement.

In the example above, a couple taking their Boeing pension as a lump sum would need $244k at retirement to last 30 years (assuming a 3% growth). They would only need $191k if they could achieve 5% growth.

Many engineers retiring from Boeing are forced to cash out their pensions early because of rising interest rates. This trend is accentuated by the fact that a boeing pension lump sum payment has less longevity protection than monthly payments. This is because the lump sum payout calculation is based on segment rates. Segment rates are adjusted each November, and higher rates cut the lump sum equivalent in actuarial terms.

It’s irreversible

If you’re one of the hundreds of vested Boeing engineers offered pension lump sums this fall, your decision may come with a hefty price tag. The amount of your pension calculated as a lump sum compared to traditional monthly payments varies with interest rates. The current rates are low – but they will be adjusted each November. That adjustment could dramatically slash the size of your payout if you choose to take the lump sum option.

When you choose to receive a lump sum, Boeing’s responsibility for the money ends when they hand it over to you. That means you must manage it carefully to ensure it provides for your needs throughout retirement. It’s not a choice that should be made without careful consideration and the guidance of a financial professional.

It’s not guaranteed

Whether to take a lump sum buyout of your pension or continue receiving fixed monthly checks for life is a personal decision. Ultimately, it comes down to your risk tolerance and life expectancy.

The pension plan for Boeing’s union engineers (the Society of Professional Engineering Employees in Aerospace, or SPEEA) has two choices when you retire: a lump sum or a regular annuity payment. Choosing a lump sum leaves Boeing’s responsibility for your money in your hands.

However, calculating what a lump sum is equivalent to a lifetime of monthly payments changes with interest rates. It adjusts once a year, in November. That means you’ll get a payout calculated using last year’s interest rates if you retire before then. But if you withdraw after that, the interest rates will be much higher, and the amount will be lower accordingly. The difference is roughly the cost of your annual living expenses.

It’s not tax-free

Many Boeing employees can receive their pension as a lump sum or monthly payment. If you choose the lump sum option, The Boeing Company’s responsibility ends once they hand you the money, and it is now your responsibility to manage that money throughout retirement.

Choosing a lump sum also means you can invest the money to generate income that lasts for as long as you live. However, it’s important to note that investing the money will not make it last as long as a lifetime payout from the pension plan itself.

Whether a lump sum is correct depends on your circumstances and financial situation. We encourage you to consult with a retirement-focused advisor and read The Boeing Company’s to start planning!

Leave a Comment