Is a Lump-Sum Pension Payout the Right Choice for Clean Harbors Employees as Interest Rates Rise?

Healthcare Provider Update: Healthcare Provider for Clean Harbors Clean Harbors partners with various healthcare providers to ensure the well-being of its employees, primarily utilizing Aetna Health for their health insurance plans. This partnership aims to offer comprehensive healthcare benefits, including medical, dental, and vision coverage tailored to meet the needs of their workforce. Potential Healthcare Cost Increases in 2026 As 2026 approaches, Clean Harbors employees should brace for significant changes in healthcare costs. With healthcare premiums projected to rise sharply nationwide-some by over 60%-the burden may fall heavily on employees as employers adjust their benefit structures. Escalating medical costs and the potential expiration of enhanced federal premium subsidies will likely lead to an increase in out-of-pocket expenses, compelling employees to adopt proactive measures in managing their healthcare choices. Staying informed and prepared for these adjustments will be crucial for navigating the financial challenges ahead. Click here to learn more

Clean Harbors employees who have a lump sum option and are considering taking a lump-sum payment from Clean Harbors need to move fast.

You shouldn’t wait much longer to decide, as the Federal Reserve’s planned series of interest-rate increases stands to reduce the size of the payout.

Lump-sum payouts, if available to you from Clean Harbors, are calculated by determining the present value of your future monthly guaranteed pension income, using factors based on age, mortality tables published by the Society of Actuaries, and the Internal Revenue Service’s minimum present value segment rates.

There is an inverse relationship between interest rates and lump-sum pension payouts. When rates are low, the calculated payout rises because it takes a higher initial sum to arrive at the same future value of your lifetime monthly payments. As interest rates climb, it takes a lower initial sum to arrive at the same future value of those monthly payments, so the lump-sum buyout decreases.

As a Clean Harbors employee, it is important to understand how companies sometimes offer lump-sum pension buyouts to workers at or near retirement, and former employees with vested pension benefits who haven’t begun taking monthly payments. This reduces the total obligations and risk within their plans.

As interest rates rise, more corporations will offer pension buyouts intending to reduce pension obligations on their balance sheet while paying out smaller lump sums.

As a Clean Harbors employee potentially being offered a lump-sum payment, it is important to consider the risks associated with this alternative. According to research published in February by MetLife, in an online survey of 1,911 Americans ages 50 to 75 last fall, 34% of retirees who took a lump-sum buyout from their defined-contribution plan depleted that sum within five years.

With that taken into account, it becomes worthy to consider collecting monthly payments for the remainder of one's life as an alternative to the lump sum. Furthermore, given the availability of a survivor benefit, payment would carry on past the owner's death to the end of their spouse's life. Monthly checks provide longevity protection, preventing seniors from depleting their assets during a lengthy retirement.

According to the MetLife survey, 79% of retirees who took a lump sum made at least one major purchase, such as a vehicle, vacation, or a new or second home, within a year of getting their money. Monthly payments can serve as “guard rails” and prevent overspending, providing retirees with an established spending limit.

Although receiving monthly benefits may promote longevity by establishing monthly limits, the alternative of taking a lump sum is a better option for some. Those in poor health may not live long enough to collect all the money in monthly payments, and taking the lump sum now may allow them to leave more money to heirs. Single retirees may also opt for the lump sum since they aren't responsible for providing income to their spouse post-death.

Articles you may find interesting:

Some pension plans have capped benefits, so workers who have been with the company for most of their lives might not earn higher monthly payments by sticking around. Under circumstances like these, one may opt to retire with a lump sum prior to the rise of interest rates and work elsewhere.

Those with other assets besides their pension and Social Security may opt to take a lump sum. Having other assets provides enough security to afford the added risk of investing the buyout and seeking a better return. Similarly, seniors who plan to work full or part-time may want to invest part of their lump sum, knowing that their regular paychecks will help them weather a market downturn.

Rising inflation rates may make the lump sum option more attractive compared to the monthly payments. Assuming an annual inflation rate of 3%, a $1,000 monthly payment today will be equivalent to about $744.09 in 10 years. With that in consideration, it becomes beneficial for Clean Harbors retirees to sit down with a financial adviser and calculate which option is best for their specific case.

Indexed annuities offer principal protection and the opportunity for investment gains when the market rises, serving as a hedge against inflation. Those retiring from Clean Harbors companies should be aware of the high costs associated with many annuities and understand the details before exercising the purchase.

Using a lump sum to buy an annuity can prove to be of benefit when retirees fear the financial instability of their employer. Private-sector workers should inquire about their company's participation in the Pension Benefit Guaranty Corp., which covers a portion of their monthly benefits in the event that an employer’s pension fund becomes insolvent.

Democratic Sens. Patty Murray of Washington, Tina Smith of Minnesota, and Tammy Baldwin of Wisconsin reintroduced a bill that holds sponsors of pension plans accountable for providing detailed information to participants about proposed pension buyouts. The bill, known as the Inform Act, urges sponsors to provide a comparison of benefits participants would receive if they take the buyout or accept monthly payments, as well as an explanation of how the lump sum was calculated.