How Vroom Employees Can Navigate the Impact of Inflation on Their Pension Choices

Healthcare Provider Update: Healthcare Provider for Vroom Vroom, a company focused on simplifying the car buying process, provides its employees with healthcare benefits facilitated through various insurers, including UnitedHealthcare, Aetna, and Anthem. These partnerships often allow Vroom employees access to a range of healthcare options tailored to meet their needs. Anticipated Healthcare Cost Increases in 2026 for Vroom Employees In 2026, Vroom employees are likely to face significant healthcare cost increases as the Affordable Care Act (ACA) premiums are expected to rise sharply-potentially over 60% in some states. The expiration of enhanced federal premium subsidies combined with rising medical costs is creating a pressing financial environment for many policyholders. As employers look to manage their own rising healthcare expenses, Vroom is expected to adjust benefit structures, possibly shifting more costs to employees, making it crucial for them to be proactive in understanding benefit changes and planning their healthcare expenditures for the year. Click here to learn more

Rising interest rates also play a large role in the decision of whether Vroom employees should take their pension as an annuity or a one-time lump sum payment. As inflation continues to rise, the Fed has responded by gradually increasing interest rates, which decreases the value of future pension payments as well as the lump sum value. This is because the future pension payments are worth less today as the dollar devalues and the higher investment return drives the total present value of the payments down. To show this mathematically, imagine an individual with pension payments of $48,000 annually ($4,000 monthly), a 20-year time horizon, and a 5% interest rate

 

The present value of all of these payments is worth $598,186, which should roughly be the value of the lump sum payment. With a single percentage increase in interest rates from 5% to 6%, the new present value of the payments is reduced to $550,556, just under an 8% decrease over the old present value. Evidently, rising interest rates negatively affect the present value of future payments so given Federal Reserve Chairman Jerome Powell’s mention of 2-3 more interest rate hikes this year, the decision of whether to take a lump sum now or later could have a big impact on your retirement from Vroom.

 

'Taking your pension as a lump sum and knowing how to manage your funds to last for your retirement requires hard work.'

 

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In practicality, taking your pension as a lump sum and knowing how to manage your funds to last for your years of retirement from Vroom requires hard work. Figuring out how much to withdraw, when to withdraw, and how much you can spend each year are just a few of the many decisions that are needed to be thought out in order to maximize the benefit of taking your pension as a lump sum. If you don’t take the time to think out these decisions, you could find yourself running out of funds during your years of retirement from Vroom.

For our Vroom clients who would prefer the safety of a guaranteed stream of income for the rest of their lives, taking the annuity over the lump sum may be the better option for you. With taking your pension as an annuity though, there is no certainty that the company paying your pension will remain in business for the duration of your retirement so you run the risk of receiving smaller pension payments from the PBGC (Pension Benefit Guaranty Corporation) in the event that Vroom goes under. Both options have their pros and cons and in the end up to you to decide which suits your personal financial situation and lifestyle.

 

If you are interested in more information about this topic, view our e-book here:  https://retirekit.theretirementgroup.com/effects-of-inflation-e-brochure