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Verizon retirement cash payout plan questions

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Verizon retirement cash payout plan questions

Old 11-30-2009, 05:14 PM
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Default Verizon retirement cash payout plan questions

My uncle is planning on retiring from Verizon in New Jersey, Jan 2010.
I will ultimatly be responsible for his care in the later years. He is now 67 and has 37 years with Verizon/Bell as a union employee.

He is with the understanding that Verizon will pay him 7% a year on $400,000 that is in his ''retirement account''. He says it is an annuity but does not have much more info than that to provide to me.

He can take the $400,000 plus a $75,000 buyout now and roll it into his own investment products. (my suggestion so as to cut ties with Verizon and get control of your own money)

I have an appointment set with him to talk to our financial planner but was wondering if anyone has any desails on the Verizon retirement options.

Thanks in advance.
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Old 11-30-2009, 06:02 PM
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First and foremost, don't touch the money yet. I would go find a local financial planner. Since you are not looking for anything long term, in other words, you already have the money, you just need a plan and advice, hire a fee based planner. In other words, one that will charge you a fee for advice and not make a commission on a product.

Second, DON'T TOUCH THE MONEY until you know what is going on. If you remove the money and take possession, potentially, you will cause penalties and tax payments. Can't say for sure until you know what the money is in. My guess is the money is qualified, meaning tax deferred and he will be paying tax on it when it comes out. I would be very surprised if there is any guarantee for 7% interest.

If it is an annuity, you need to know whether it is fixed or variable. If it is fixed, there is a guarantee of payment once it annuitizes but until you know exactly what product it is, you don't know how much, how long and what happens to the money if he passes. If it is variable, the amount he gets paid will depend on the performance of the equities that back the annuity. In other words, if the insurance company invests well, he gets more. If the insurance company's investments do not do well, he gets paid less.

Right now, I would do these things in order:

* Find out exactly what he has, in writing.
* Find out what the payout options are.
* Find a fee based planner and pay him the $500-$700 he will want to make some recommendations.

Whatever you do, do not take possession of that money until you know what he has and what the consequences are. Good luck, it is a nice position to be in.
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Old 11-30-2009, 06:13 PM
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Jags thanks for the input. All points well taken and the these are the steps that we are taking.

What I am really looking for is someone that is familiar with what Verizon is offering. I will find out more tomorrow when he is at work but was looking for some info tonight.

Thanks again.
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Old 11-30-2009, 06:22 PM
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Sorry am not aware of Verizon's plan. But I can tell you that, if the 400K is secured (i.e. not invested in variable funds like equities, mutual etc.) it will take some going to find a 7% return with no risk.

As Jags says, a good financial advisor is the way to go. You can also make an appointment with his HR department to start to ensure you have all the info. One challenge you are going to have is getting at the principal. A rule of thumb is to take 4% of your investments each year. However starting at 67 he may be able to take a bit more. If the Verizon plan will not allow any withdrawals then your advisor will be looking at the downside of living off 7% rather than what he could get elsewhere plus drawing down the principal with a target of, say, age 90.

Good luck, and hope you can find a Verizon employee with the info.

Have you tried looking for a Verizon employee forum?
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Old 11-30-2009, 06:34 PM
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I did a search and could find bits and pieces but nothing that explained what the plan was.

He is describing it as an annuity. My concern is that it is funded by Verizon stock and that Verizon could someday end up like ENRON, GM, USAIR, place a name here_________, etc.
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Old 11-30-2009, 07:20 PM
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Try this search
http://www.google.com/search?q=veriz...rlz=1I7ADBR_en
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Old 11-30-2009, 07:48 PM
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He should have a pension along with that annuity he should receive a certain % of his salary on month I know the guy who use to live next door to me worked on Long island for verizon 30+years he told me he was getting $3500 from his pension a month plus what he had in his annuity
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Old 12-01-2009, 04:36 AM
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My guess is the 7% includes principle and interest and would be paid out over his lifetime with no residual. I agree with strikerthree that he probably has a traditional pension plus his 401K with that many years of service. You may also want to determine the financial strength of whatever entity is backing the payments.

You didn't mention whether he was married. If he is, there may be additional payout options. Before you speak to the planner, try to get as many of these questions answered as possible. This will lead to better advice. Verizon's benefits department should be able to provide the answers.

In general, you are better off taking the lump sum which gives you more control. The best advice will take into account his cash flow needs, social security benefits, other assets, etc.
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Old 12-01-2009, 09:37 AM
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It is a rare situation where leaving $$ with your employer plan results in a better overall estate plan than rolling the funds into something qualified that you control (with or without the help of an advisor). Even pension plans where there is a lump sum payout option taking the lump sum is generally the better answer, especially form an estate planning perspective.

I have mixed feelings on financial planners. Some are very good and very actively manage their clients portfolio's. Others merely take the money and dump it into many mutual funds to achieve an asset mix based on the investors age. The latter a monkey can do. The former takes time and is, well, active. The down side of simply paying someone for 1 time investment advice is today's advice may not work tomorrow, next month, year, etc..

I would first obtain the plan documents. I would then speak to someone with the companies HR. Companies generally pull together a fact sheet explaining an employees options and the general tax treatment of the options. I have helped create these for some of my past clients. This will give you a pretty good idea of what your dad's options are. Short term you will likely be able to roll the funds into an IRA, something short term and secure (they do have bank CD IRA's). Then either help your dad select a diversified mix of mutual funds or put it in the hands of a financial planner.

Whatever the decision, confirm with a tax accountant the tax ramificatins of your decision.

I just realized after posting SProckets said essentially the same thing as I, albeit less long winded. Oh well.
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Old 12-01-2009, 02:25 PM
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is he management or in the craft?
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Old 12-01-2009, 04:25 PM
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Originally Posted by andyp262 View Post
is he management or in the craft?
union pole climber from wayback! now he is riding a desk in a call center ''bothering'' me with email jokes all day
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Old 12-01-2009, 04:30 PM
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There's a guy named Ray Lucia who has a nationwide call in show where you can ask questions like this of him and his panel of experts he refers to as "The Brain Trust". He's a great guy who knows his stuff. He's written several books on retirement planning and does seminars all around the country. He also has a network of affiliated advisors in many states.
His phone is 1-877-PLANNER and the website is www.raylucia.com.
Jim Serra Palm City
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Old 12-01-2009, 05:09 PM
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Originally Posted by signmansez View Post
union pole climber from wayback! now he is riding a desk in a call center ''bothering'' me with email jokes all day
i would tell him to call the hall and see who they use for a financial guy. most guys have been taking whats called the lump sum buyout plus the enhanced money on top of it. the only bad part about that is that its a complete seperation from the company ie, no health insurance, no monthly pension check. the way the company has been hammering us the past few years i wouldnt count on free health and a good pension much longer, maybe as soon as the 2011 contract. i think thats why most guys lately have taken the lump sum and invested it. i hope your uncle enjoys retirement, he earned it
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Old 12-01-2009, 06:13 PM
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Originally Posted by andyp262 View Post
i would tell him to call the hall and see who they use for a financial guy. most guys have been taking whats called the lump sum buyout plus the enhanced money on top of it. the only bad part about that is that its a complete seperation from the company ie, no health insurance, no monthly pension check. the way the company has been hammering us the past few years i wouldnt count on free health and a good pension much longer, maybe as soon as the 2011 contract. i think thats why most guys lately have taken the lump sum and invested it. i hope your uncle enjoys retirement, he earned it
Just got an email from him, 8:45pm and he is still at work (@ close to $50 per hour O/T!) He talked with our ''money guy'' and I think he is going to do the lump sum payout. He is gathering all the details for the financial man to look over before any decisions are finalized.

Now on to me, where do I sign up for a liver transplant? This guy can drink some beer!!

Thanks to all for your comments and advice.
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Old 12-01-2009, 06:44 PM
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I'm not sure i would take the lump sum he worked 37 years for that pension and healthcare the company will make good on it, after 2011 they probably wont if you decide to retire but i wouldnt just cash out now he's leaving allot of money behind cause if he takes the lump sum once that moneys gone its gone if he takes his pension the traditional way he has that money for life
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Old 12-01-2009, 07:34 PM
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Find a professional and spend a couple of hundred bucks for his advice. and maybe then talk to another one. No reason to ask on t he internet. IMHO
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Old 12-01-2009, 07:54 PM
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Originally Posted by mike343 View Post
Find a professional and spend a couple of hundred bucks for his advice. and maybe then talk to another one. No reason to ask on t he internet. IMHO
Got it handled. Thanks

FWIW, wasn't asking for advice just looking for info on the Verizon retirement plan.
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Old 12-04-2009, 08:20 PM
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Originally Posted by strikerthree View Post
I'm not sure i would take the lump sum he worked 37 years for that pension and healthcare the company will make good on it, after 2011 they probably wont if you decide to retire but i wouldnt just cash out now he's leaving allot of money behind cause if he takes the lump sum once that moneys gone its gone if he takes his pension the traditional way he has that money for life

Just found out the details of the Verizon Pension Plan. It pays the retiree an amount equal to 7% APR of the cash buyout each month for the rest of his life. When he passes the payouts end and any principle goes to Verizon. If he had a spouse she would continue to receive 80% of the monthly payments until her death. There is no death benefit.

Who would opt for this plan!!!???

His $400,000 at a secure 5% would give him $20,000 per year and he would retain his principle of $400,000!

By taking the cash payout it does not affect his health benefits from Verizon. Since he is 67, Medicare will now be his primary and Verizon's plan will be his secondary.

Thanks to all who offered up advice and comments.
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Old 12-04-2009, 08:24 PM
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Good deal.

Tell him congrats and to enjoy his retirement from the guys at THT who are still working the salt mine!
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Old 01-28-2010, 07:25 AM
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I'm sorry for the late reply, but I wanted to make sure you were provided with accurate information. First, my practice has been working with Verizon employees since 2000. We have over 150 verizon employees that are now clients of ours and we hold monthly seminars to educate verizon employees about there options prior to and during retirement. Like most companies the pension benefit booklet provided from Verizon is very confusing. I will try my best to answer your question, but I urge you to book an appointment with one of team members at no cost or obligation. So, here goes.....
The 75k that you are speaking of is called an Enhanced Incentive Pension Plan (EIPP). Verizon is ultimately incenting you to leave on them. How the EIPP works is you receive approximatey $1000 per month for 4 years or 48 months and an additional 17k as a lump sum from the company. This is not to be confused with your Pension/Lump Sum option or your 401k. This is seperate and apart from that. In addition to the EIPP you have to make a decision, do you take a pension or a lump sum from your Pension plan with verizon.....These are the options.....Pension: It works very similar to an annuity. You will receive a single life monthly check that will end when your uncle passes. If he passes prematurely the money stays with Verizon, therefore you lose control. There are survivor options. If he were married or has children he would receive a reduced benefit now and if he were to die the spouse or a beneficiary can receive something for a stated term or their lives depending on the option you chose. Lump Sum: You have the ability to receive the Present Value of all of the future payments that you would have received had you taken the pension/annuity, as a lump sum payment.....You need to be careful how this is received. It is important to roll the Lump Sum into an IRA so that you do not get hit with the tax burden of receiving a check in hand.....We see many people make this mistake prior to meeting with us. Why would one take the lump sum? Ultimately it gives you control over your assets and you can create your own income stream similar to the pension, however you have a greater ability to keep up with inflation and meet other needs as they may arise and pass along a legacy to your beneficiaries Again you make the decisions not verizon.
Now lets talk about the 401k..... You can leave your 401k at the plan sponsor (Fidelity) and take withdrawals as you need them or you can roll the 401k to an IRA. Rolling to an IRA puts the money in your control. Please keep in mind these are the options but these may or may not be the answers. The answers are peeled back after your uncle meets with an advisor to address his true questions, concerns, and comfort levels. Lastly, because your uncle is of Full Retirement age, he will receive Medicare benefits and verizon will provide the secondary insurance needs. I hope that you found this information valuable and I urge you to call with any questions, concerns or if you are interested in setting an appointment. My cell number is 917.803.7894.
Best Regards
Rick
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