Should I Take a Buyout On My Pension?

 
Dear Natalie,

My former employer is offering me a small payout or pension benefits. The payout is around $16,000 and the pension benefits are $178/month ($2,136/year). I am leaning towards the payout and investing in some good stocks. I only have until Oct 2 to decide. Can you offer any advice?
 
Signed,
Every Little Bit Helps!
 
Dear Smart to Ask for Help!
 
This is really a two-part question. One is, “Should I take the buyout?” and two is, “Can I make a killing in stocks?”
 
Should I Take the Buyout?
If you are willing to learn about investing and be a good steward of your money, then taking a buyout is very likely a great idea. Most companies are underfunded on their pensions, and this is unlikely to improve in the coming years. In 2016, S&P 500 companies were underfunded by $391 billion on their pensions, with plans only 80.75% funded. Other post-employment benefits (like health benefits) were even more severely underfunded. Your company is one of the most severely underfunded in the U.S. So, the next offer you get could be a lot less than what you are currently being offered. Many legacy companies use Chapter 11 to restructure their debt and pension obligations when they get too overloaded. That is a risk going forward as well, if you choose the payment plan.  

If you want to discover whether or not your company is severely underfunded on pensions and/or other post-employment benefits, this information is often found in the annual earnings report. That is a lengthy, unwieldy report that is quite hard to read, until you learn how to do power-searches. I can usually locate this information in about 5 minutes. If you are not familiar with earning reports then you might not find this data at all!
 
Should I Invest in Stocks?
Even great stocks lose money in a bear market. So, it’s important to educate yourself on investing before you dive in to the stock market, or leap into any investment on the advice of a friend, family member of financial professional. There are a few critically important rules that are easy to understand and implement, and can be the difference between growing and enjoying your returns, or watching your investment evanesce in thin air.
 
In short, you can certainly take a buyout and have that capital grow into a rewarding investment, but only if you’re willing to educate yourself and be the boss of your money. If you take the buyout and just hand it over to a “financial professional” without knowing what’s appropriate for you at your age and at this time in your life, you could end up giving the broker-salesman a great payday at your own expense. There are a lot of slick salesmen selling risky investments as “great” because they pay a nice commission (on the backend – you’ll be told that you don’t have to pay anything!).
 
You can read about The ABCs of Money in my 3 bestselling books, or you can learn them firsthand in my 3-day life-transforming Investor Educational Retreats. I also offer second opinions on your current budgeting and investing strategy in my private, prosperity coaching sessions. Call 310-430-2397 or email Heather @ NataliePace.com to learn more.
 
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About Natalie Pace:
Natalie Pace is the author of the Amazon bestsellers The Gratitude Game, The ABCs of Money and You Vs. Wall Street (aka Put Your Money Where Your Heart Is in hard cover) and the co-creator of the Earth Gratitude project. Natalie Pace is a repeat guest on national television and radio shows such as Good Morning America, Fox News, CNBC, ABC-TV, Forbes.com, NPR and more. As a strong believer in giving back, she has been instrumental in raising tens of millions for public schools, financial literacy, the arts and underserved women and girls worldwide. Follow her on Twitter.com/NataliePace, and Facebook.com/TheABCsofMoney. For more information please visit NataliePace.com. Click to access a longer bio on Natalie Pace.
 
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Please note: NataliePace.com does not act or operate like a broker. We report on financial news, and are one of the most trusted independently owned and operated financial news corporations in North America. This article is intended to educate and inform individual investors, and, thus, to give investors a competitive edge in their personal decision-making. Any publicly traded companies or funds mentioned in this article are not intended to be buy or sell recommendations.

ALWAYS do your research and consult an experienced, reputable financial professional before buying or selling any security, and consider your long-term goals and strategies. Investors should NOT be all in on any asset class or individual stocks. Your retirement plan should reflect a diversified strategy, which has been designed with the assistance of a financial professional who is familiar with your goals, risk tolerance, tax needs and more. The "trading" portion of your portfolio should be a very small part of your investment strategy, and the amount of money you invest into individual companies should never be greater than your experience, wisdom, knowledge and patience.  

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