2022 Pension Strategy & Twitter Free Speech

Nate Crosby |
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Is the McRib sandwich the secret weapon to your investment strategy? While it may be true that people flock to their nearest Mcdonald’s when the McRib is back on the menu, we have to believe it has no bearing on broad stock market performance. Some analysts have said the stock market tends to perform well every time the McRib comes back – I guess we’ll have to wait and see what happens this time. 

How do you decide when to retire

There are a lot of factors that go into the life-changing decision of retirement. Those factors are situational and vary by person or family. If you are one of the roughly 15% of Americans that have a pension, that would certainly be an input for your decision. 

A pension is a managed fund in which your employer provides the benefits via a detailed plan. Pensions are defined benefit plans, meaning as the pension holder you know what benefits you will receive when you retire. As you get closer to retirement, your monthly statements will even proactively show you what your payout would be. Sounds great, right? Most years that answer is an easy ‘yes’ because interest rates have been low for so long – now that they have risen, it’s time to pay attention. 

How is a pension payout calculated

Pension providers are required to recalculate interest rates at least once a year – this is known as the re-evaluation or re-calculation period. The keyword is “at least'' in that sentence, meaning they can do it more often if – for example – interest rates are climbing at a steady rate. The calculations are done using MPV (minimum present value) segment rates and those are made public on the irs.gov website. Future values of lump sum payouts are worth more when interest rates are low, and future values are worth less when interest rates are high. 

What does this mean for a pension holder 

If you are 1-2 years away from retirement – and you plan to take the lump sum pension payment – you may want to at least consider taking it now. Consider this – assume your lump sum payout is $500,000 using interest rates at 1% and then next year let’s say the rate is 4%. Your $500,000 lump sum just became $337,000. As I said before, other factors should be considered when making this decision but it’s certainly worth doing the work to see what makes sense for you. 

What else are we watching

  • The Elon Musk and Twitter saga continues as he announces he’s planning to lay off 75% of the current Twitter staff. The employees responded with an open letter to Elon with their list of demands. Can this end well?  
  • Switzerland is considering putting a cap on the level that you can heat your home this Winter. Where fines would be given to anyone that heats above 19 degrees C (around 66 degrees F) – is it just me or does that sound really cold? 
  • The US’ strong push to move to electric cars continues. Remember that time California mandated electric vehicles and then due to grid stress wouldn’t let people charge them? We do.