We are approaching that time of year again where a lot of attention will be paid toward the Edison pension interest rates. The official rates that apply to 2020 will not be published till September but I wanted to give you an update on where rates currently stand and how they compare to the rates in effect for 2019.
Below is where the 3 segments stand as of June, and how they compare to the rates in place for 2019.
Segment 1: 2.72% (3.10% for 2019)
Segment 2: 3.76% (4.15% for 2019)
Segment 3: 4.33% (4.46% for 2019)
Impact for Grandfathered employees: If you are looking to take the lump sum option from the grandfathered pension, you want lower rates. Based upon where the rates stand as of June, this would be a positive change compared to 2019 rates. As a general rule, if all three segments move up or down by 1%, the lump sum will move by about 10% in the opposite direction. If you would like to talk more about the impact to your personal situation, feel free to contact me at the number below.
Impact for Non-Grandfathered employees: If you are in the Cash Balance pension plan you want higher rates. The only rate that impacts the Cash Balance plan is the 3rd segment. This is the rate at which the money in your pension plan grows during the year not counting Edison’s contributions. It also impacts the annuity payment at retirement if you select that option. For 2019, your money is growing at 4.46%. If rates didn’t move between now and September, your money would grow at 4.33% during 2020.
The interest rate markets are always fluctuating so we expect these numbers to change between now and September. Rates had initially moved higher after the 2019 pension rates were announced last year but since November they have been steadily declining. We will continue to keep you apprised of the pension rate moves and how they impact you.
As always, if you are interested in talking further about the information provided above or have other questions as it pertains to retirement planning, don’t hesitate to call.
