DuPont’s Pension Buyout and Pension Advice for Workers
- The merger of Dow and DuPont left the company with a $51 billion pension obligation
- Lump-sum pension buyouts don’t protect individuals from longevity risk and retirees often find themselves spending their pension buyouts too fast
- Retirees can use their pension buyouts to generate guaranteed retirement income, such as purchasing a Personal Pension or an income annuity
DuPont’s Pension Buyout – The Cause
The Merger of Dow and DuPont in August 2017 has created a combined $51 billion in pension obligations. This has been a massive cause of concern for the new DowDuPont and three spin offs that will be created within the next two years. Both DuPont and Dow Chemical had started de-risking prior to the merger and the combined company has continued with the same strategy. De-risking is a way for a company to reduce the impact of pension obligations and funding requirements on its financial statements. A company can do this by offering retirees a lump-sum pension buyout payment instead of regular pension payments.
By accepting DowDuPont’s recent offer of a lump sum, pensioners can receive funds instead of waiting until they reach 62 to collect a traditional pension. Certain participants can elect to receive a lump-sum payment or direct DowDuPont to purchase a group annuity on their behalf using the after-tax proceeds of the lump sum. Prior to the merger last fall, DuPont made the offer to about 18,000 retirees, or 7% of the those whose plans had vested. Previously DuPont had announced that they will no longer contribute to active employees’ pension plans, a move that will impact the retirement of 13,000 workers.
DowDuPont is however not alone in their decision to freeze pensions. It’s part of a broader trend as since 1998, nearly one-quarter of all Fortune 500 companies have stopped contributing to employees’ primary pension plans, and 40 percent offer only a 401(k).
DuPont’s Pension Buyout – Issues Faced by Pensioners:
Both frozen pensions and lump-sum buyouts are problematic, especially if a retiree lives longer than expected. About 21% of retirees who opted for a lump sum over a pension plan said they already spent it all, according to a poll by New York insurer MetLife. The February 2017 poll also found that 35% of those who still have some of the money worry it will run out.
DuPont Employees Options to Mitigate
Assuming DuPont has frozen or bought out your pension plan, you are left with two options — be forced to spend less and live a sub-optimal retirement, or figure out a new way to generate more income for retirement. We believe the latter is the better option, which we address below by providing two alternatives.
DuPont’s Pension Buyout Option 1 – The Personal Pension
We believe this to be the better of the two alternatives. The Personal Pension is the next best thing to an employer pension and is a way to generate pension-like income in retirement without your employer. Instead of being provided by employers, it’s backed by insurers, like an annuity. But, unlike the average annuity, you can purchase it in small amounts over time. Blueprint Income offers a Personal Pension account with the lowest minimum, $5,000. After opening an account, you can make subsequent contributions of as little as $100, each of which will increase your pension check.
Here you can see what contributing to a Personal Pension will guarantee you in annuity retirement income. After just a few years in retirement, you’ll have recouped your initial investment, and the rest will be profit.
From there, you can fill out the information to have one of our specialists follow up with you, or continue with the enrollment process on your own. To do that, start with the Personal Pension Builder, where you’ll be able to set a goal for how to grow your pension over time. Note that all future contributions are optional, but it’s always great to have a goal.
DuPont’s Pension Buyout Option 2 – Buy an Income Annuity
An alternative is to buy an income annuity. Income annuities generally come in two types – longevity annuities and immediate annuities. Immediate annuities (as the name implies) have income starting within the next 12 months, whereas longevity annuities start income (at a predetermined level two years or more into the future). Both of these types of income annuities provide the financial security that you get from a guaranteed lifetime income stream that comes each month for as long as you’re alive. They are ways to increase your pension check.
At Blueprint Income, we offer annuities from more than 15 top rated insurance companies. Click below to get real-time personalized quotes, where you can compare options offered from different insurers on an apples-to-apples basis.
From there, you’ll get access to our annuity guides, team of specialists to help you analyze your retirement finances and walk you through the application process.
In short, if you’re looking to increase your pension check and mitigate DowDuPont’s Pension Buyout by getting more guaranteed lifetime income, you have some options for how to get it. (Note that these options are available to all Americans, not just DowDuPont employees.)
Editor’s Note: After the merger with Dow Chemical in August 2017, the combined company was called DowDuPont. We are referring to the company as DuPont in our title and article headers as the name DowDuPont is not widely known.