Back in November 2022, my pension value was updated with the October 2022 segment rate release, and the numbers weren’t pretty, with a drop of 53% of my pension lump sum value.

Now that the November 2023 pension value update has happened, does it look any better?

How bad is it?

In short, no. In fact, despite having worked another year, my pension lump sum value dropped by an additional 14%. That means the value is the smallest it has been since if I’d left in November 2019. As it currently stands, if I were to leave and cash out my pension today, my last 4 years of work would have been for nothing.

Talk about feeling like your work is a pay cut in disguise…

So while I’m frustrated, let me tell you how to protect yourself from a similar situation having major impacts on your retirement. And nope, I don’t have some secret math or investment strategy.

What can I do?

If managed correctly, this situation isn’t actually all that bad. It’s true, if I were coming up on my 65th birthday and going to retire, and I was going to cash out (or be forced to cash out) my pension imminently, it would be bad. The strategy instead is to leave an employer with a lump sum pension several years before you plan to retire, or at least before you turn 65 or need the money.

Let’s say you retire or separate from service with your lump sum pension accruing provider at age 60. You leave your pension alone, and either go work for another employer or draw retirement income from another source (eg your 403b). Then you will have 5 years for interest rates to drop, and your pension value to recover. This isn’t an apples-to-apples comparison, but by looking at a chart of interest rates for the last 200 years, you can see that rates can be fairly volatile, and may indeed come back down with a few years of flexibility in when you cash it out.

In short, there are things you can control, and things you can’t. Interest rates is one you can’t control, but you can control your future by building flexibility into your plan as to when you’re needing this money.