Dear Mr. Berko: I’m single and retiring at the end of the year from Alcatel-Lucent. The company has offered me a lump payment of $181,000 or a guaranteed monthly income of $1,020 when I retire. What to do? Three stockbrokers are very persuasive and advised me to take the lump sum, saying I could earn much more than $1,020 each month on that money. One broker, at J.P. Morgan, insists he could earn $1,700 each month using an options technique. His fee is 1.5 percent yearly. It sounds complicated, but his explanation makes it sound simple to do. Please help me make a decision.
— T.G., Joliet, Ill.
Dear T.G.: Alcatel-Lucent will guarantee a monthly income of $1,020, or $12,240 a year, even if you live to be older than Methuselah, Noah’s grandfather. If you take a $181,000 lump sum payout, then your broker, every single year, must earn a minimum of 6.78 percent — after fees of 1.5 percent — to earn $12,240 a year. Considering the skills of most brokers, I don’t believe that return is possible — and certainly not from a J.P. Morgan brokester. Take the guaranteed monthly income, but tell those brokesters, especially the J.P. Morgan bum, to take a long leap from a high alp. J.P. Morgan’s management team is a thieving, disingenuous and crooked lot, which I believe sets the tone for other employees.
You are among the dwindling number of Americans who have busted their tails at the same employer for most of their working lives. You’ve occasionally been jerked around by management — sometimes fairly, oftentimes unfairly. But you’ve kept that grindstone close to your nose and your mouth shut. You’ve done that because you’ve made a fair wage and because the company’s pension guarantees you $1,020 a month for life.
I know it’s tempting to take that $181,000 lump sum, which is more money than most of us have ever dreamed of having at one time. But stay the course! Thank Alcatel-Lucent for its kindness, and say you’d prefer to get monthly $1,020 checks until you turn toes up. Lump sums are tempting, and on average, 64 percent of employees take the buyout because most brokers are terrific salesmen and convince them they can do better. Few can, and over the years, I’ve heard horror stories so egregious that the brokerage firms reimbursed the clients without arbitration. It’s difficult, even for knowledgeable investors, to get trustable and suitable investment advice when brokesters’ bosses set the example for probity.
