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Lump Sum or Monthly Payments? Pension Deadline Could Speed Retirement of Experienced Boeing Engineers

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If you’re a regular listener to AgingOptions on the radio, or if you’ve attended a LifePlanning Seminar, then you know that Rajiv Nagaich is an enthusiastic advocate for a personalized tool called a financial dashboard. It’s a system created for you by a qualified, objective financial planner that allows you to make important decisions about saving, spending, and investing with the complete picture in view – almost like having your own crystal ball.

We thought immediately about the financial dashboard when we read this important story in the Seattle Times just a few weeks ago. On the surface, it doesn’t seem to be about financial planning, but we think it is.

The article, written by award-winning aerospace reporter Dominic Gates, describes a critical situation in which one of America’s leading manufacturers is at risk of losing several hundred experienced engineers to early retirement, all because these highly trained professionals are being forced to make a major financial decision without the aid of the one planning tool that they need the most.

We can’t cover all aspects of this complex story, but we’ll summarize the high points. The story of the Boeing engineers does provide a near-perfect illustration of the power of a financial dashboard, and the risk of making crucial financial decisions without one.

Pension Interest Rate Adjustment Slashes Lump-Sum Payout

“Boeing may see hundreds of veteran engineers retire this fall ahead of a pension adjustment that will dramatically slash the payouts to those who choose to take the money in a single lump sum,” reporter Gates writes. “The interest rates used to determine the lump sum will be updated in November, after which one 35-year Boeing employee calculates that his payout will be cut by more than $200,000.” That cut would take place immediately, on December 1 st.

One 57-year-old engineer finds himself being forced to make a tough decision. He planned to work a while longer, because he loves his job. But with the slash in the lump-sum payout, “I’d be working another year for free,” he told The Seattle Times. He now plans to retire at the end of November, and says many colleagues about his age “are going to bail this year.”

These top engineers belong to SPEEA – the Society of Professional Engineering Employees in Aerospace. It’s the SPEEA union contract with Boeing that has led to the potential brain drain.

Higher Interest Rates are to Blame

Boeing engineers are not the only ones facing a tough choice. “This looming cut to the pension lump-sum payout is not unique to Boeing,” Gates writes. It applies to any similar traditional pension plan that offers a choice between a lump-sum payout and a guaranteed monthly payment upon retirement. The plan offered to Boeing’s top engineers who belong to SPEEA does include that option, which, says the article, is the choice of about half of retirees.

As the Times reports, the IRS uses a formula, adjusted annually, to compare how a lump sum pension payment would equate to a lifetime of monthly checks. The calculation uses actuarial data and prevailing interest rates, so that, when interest rates go up, the lump sum payment goes down. As Gates explains, “the expectation is that a lump sum invested will yield higher growth and so a lower amount is granted.”

The bottom line, says the article, is straightforward. “Anyone retiring before the end of November will get a lump sum based on last year’s interest rates. The lump sum for anyone retiring in December will be calculated off the much higher interest rates coming with this November’s adjustment.” For a 6o-year-old SPEEA member, each 1 percent increase in the rates slices $78,000 off the lump sum. Projections show a possible 5 percent hike by November, which “would yield a massive cut to the lump sum of more than 25 percent.”

600-700 SPEEA Members Faced with a Major Decision

With a major shortage in engineering talent, Boeing can scarcely afford to lose a large group of skilled professionals. Yet, as Matt Kempf of SPEEA told The Seattle Times, roughly 600 or 700 experienced local engineers close to retirement will have to consider an early exit. “The fact that you might lose $200,000 or $300,000 can really shock you,” Kempf said. “Some people might not believe it, but it is really happening.”

“Our folks have a decision to make, go or no go,” he added. “If you want the lump sum, 2022 is the time to go.”

Monthly Option Offers No Inflation Protection

As Dominic Gates reports, with inflation on the rise, even more SPEEA retirees than usual; have been asking about the lump sum payout. “That’s because the annuity in the SPEEA plan doesn’t have a cost of living adjustment,” Gates writes. “The amount of the monthly check is fixed through the life of the pensioner, and so its value decreases as inflation raises prices.”

Even with stock market volatility, most Boeing retirees seem to feel that taking the lump sum and investing it is a way to try to beat inflation, says the Times. “The choice between a lump sum and fixed monthly checks is influenced by many factors, including tolerance for risk and life expectancy.” A retiree in ill health would be particularly better off with the one-time payout. For others, the choice is more complicated.

Deciding the Best Course Demands Careful Planning

The Seattle Times article does quote one financial planner, Stephen Emanuels of Mercer Island, who (says the article) “specializes in financial and retirement advice to Boeing employees.”  Emanuels acknowledges that the decision concerning when, how and why to retire is “not a slam dunk,” even with the change in lump sum payouts. “There are too many factors that need to be considered.”

What the article does not suggest – but we strongly recommend – is that these Boeing engineers are being forced into “flying blind” when it comes to a life-altering decision. As Rajiv Nagaich of AgingOptions states, “These engineers would never try to design a Boeing airplane without the right diagnostic tools. Well, if they find themselves having to make a crucial financial choice, a financial dashboard is the tool they need.”

With a dashboard in place, Rajiv explains, a person can run a series of “what-if” scenarios to gauge tomorrow’s outcome from today’s decisions. “You can see what might happen with various interest rates, tax rates, spending rates, and rates of return,” Rajiv says. “In the case of these Boeing engineers, even though the lump sum might be tempting, it could turn out that working longer and taking the monthly payment is better over the long haul.”

Rajiv adds with a smile, “If you know one of these Boeing engineers, have them contact me. We have the tools to help them make an informed decision. But hurry – November is just around the corner!”

You may not be facing such a critical decision deadline, but no matter your situation, a financial dashboard can prove to be an indispensable tool. Contact us and we’ll answer your questions, then provide you with a referral to a trusted financial planner.

My Life, My Plan, My Way: Get Started on the Path to Retirement Success

At AgingOptions we believe the key to a secure retirement is the right retirement plan – yet statistics show that 70 percent of retirement plans fail. That’s why for nearly two decades we’ve been dedicated to the proposition that a carefully-crafted, fully comprehensive retirement plan is the best answer to virtually any contingency life may throw your way as you age.  Our slogan says it all: My Life, My Plan, My Way.

When it comes to retirement planning, most people focus on one fairly narrow issue: money. Financial planning is an important component of retirement planning. However, people heading towards retirement often make the mistake of thinking that a little financial planning is all that’s required, when in fact most financial plans are woefully inadequate. What about your medical coverage? What if you have to make a change in your housing status – will that knock your financial plan off course? Are you adequately prepared legally for the realities of retirement and estate planning? And is your family equipped to support your plans for the future as you age?

The best way we know of to successfully blend all these elements together – finance, medical, housing, legal and family – is with a LifePlan from AgingOptions. Thousands of people have discovered the power of LifePlanning and we encourage you to the same. Simply visit our website and discover a world of retirement planning resources.  Make certain your retirement planning is truly comprehensive and complete with an AgingOptions LifePlan.  Age on!

(originally reported at

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