Expert: Allen - 5/14/2010

Question
QUESTION: 23 years I left a staff position at a major teacher's union and took out all my retirement money.  After 2 years being unemployed (just ran out)recently (and turning 63) I applied for social security and got it.  Social security advised me of an annuity at my old company.  I contacted them, could not get a lump sum as there is over $5,000 in my account ($25,000)- under $5,000 I could have gotten a lump sum.  I opted for a monthly annuity distribution based on that info ($93/mo).  I can not pay next month's mortgage, old Company & Insurance Co.(State Street) say there is nothing they can do to release balance of funds (started 11/09). Is there anything I can do to obtain a lump sum payout??

ANSWER: Sorry to hear about your situation.

Unfortunately, there is probably nothing that can be done. The distribution is governed by the wording in the plan document and I gather that the plan does not offer a lump sum option when the benefit is worth more than $5,000.

One thing looks odd to me. $25,000 should provide approximately $150-$175 per month. Ask them to provide you with the details of the calculation.



---------- FOLLOW-UP ----------

QUESTION: Calculations are based as follows:
monthly payment of $93
Beginning at age 62
Life expectancy until age 85
thus:
$93/mo x 12 mos.yr. x 23 yrs. = $25,668
My career was Accounting

Answer
Is the plan a defined benefit plan or a defined contribution (money purchase, profit sharing, 401k) plan?

Also calculations are supposed to take into account the fact that the unpaid sum will earn investment income. That's why I believe the monthly benefit should be larger. I have never seen a plan that calculates the monthly amount the way you showed it.