how to do to counteract rising interest rates lowering your potential lump sum pension payout?

[senior1426]

Hi all,

Is there something you can specifically do to counteract rising interest rates lowering your potential lump sum pension payout?
I'm 51 and currently have 30 years of service with a big corporation. This corporation offers a lump sum pension payout. Even though I'm not even close to retiring I do like to go onto the company pension website on a monthly basis just to model what my lump sum payout would be if I were to retire.

So when I went on the website today I noticed that if I were to retire today ( 3/2/17) my lump sum payout would be $560K, but if I should retire next month that figure is only $520K, a drop of $40K. Not a small amount of money! The reason for this drop is an anticipated interest rate hike this month.

So my question is - can/should a person be doing anything using their other investments to hedge against interest rate hikes giving a big haircut to their pension amounts, or does it not matter if you are not close to retirement? I guess I should mention that I also have a 401k and rollover IRA, but neither has anything comparable to the pension lump sum amount in it. Thanks in advance.

 

[OneEyedDiva]

Assuming the company is going to keep dropping your lump sum payout, I'd say retire as soon as the company will allow! Heck if they drop it again the next year...even if it's only $30,000 and then what if you wait another year and it's another $30,000. That's a loss of $100,000! That's a lot of money! Some practical things come to mind. Lower your spending and that can be done in many creative ways without depriving yourself. Invest in dividend paying investments so at least you are getting other income. Make sure your investment fees aren't eating up too much of your portfolio too. And tax proof your investments as much as you can. Most of my investments are in a Roth. I like the freedom of being able to withdraw what I want...IF I want and not have to give Uncle Sam some. And there are certain investments that should be in a Roth anyway, like REITS and those with nice capital gains rates. In 2016, after reading an article on how to minimize taxes, I shuffled some of my investments so that they will be more tax efficient.