Lockheed Martin Pension Lump Sum Calculator

Lockheed Martin Pension: What You Need to Know

Plan status: Frozen

Salaried employees hired after December 31, 2005 aren't eligible for Lockheed's defined benefit plans, and new union-represented employees generally aren't either. Lockheed froze its non-union plans in two stages: pay after December 31, 2015 stopped counting, and credited service stopped after December 31, 2019. The salaried plans were fully frozen on January 1, 2020, and salaried employees moved to an enhanced defined contribution plan.

Buyouts and annuity transfers

Lockheed bought group annuities from Athene twice: about $4.9 billion for about 18,000 U.S. retirees and beneficiaries in August 2021, and about $4.3 billion for about 13,600 more in June 2022. Both covered the Salaried Employee Retirement Program and the Aerospace Hourly Pension Plan. In the fourth quarter of 2023 Lockheed made a voluntary lump sum offer to certain former employees who hadn't started payments, paying $414 million to about 6,500 participants. In December 2025 it converted earlier group annuity contracts to buy-outs, transferring $943 million of obligations.

Understanding your lump sum offer

A plan doesn't have to offer a lump sum. If it does, IRC 417(e) sets the least it can pay: the present value of your annuity using the IRS segment rates and mortality table. A cash balance plan usually quotes your account balance instead.

Comparing an offer to the 417(e) number tells you whether the plan is paying at least the legal minimum. It doesn't tell you whether the lump sum is a good deal for you. That depends on your health, your other income, your spouse, and what you'd do with the money. If an offer comes in well below this calculator, ask the plan which month of rates and which start age it used.

The November 2025 segment rates are 4.07% for payments under 5 years away, 5.15% for 5 to 20 years, and 6.01% beyond 20. Many calendar-year plans use them for 2026. Your election packet lists the rates your plan actually used.

Tax considerations

The lump sum is taxable in the year you receive it unless you roll it directly to a traditional IRA or your new employer's 401(k). A direct rollover (plan to IRA) is not a taxable event. Taking the cash is. If you take cash, the plan is required to withhold 20% for federal taxes, and you'll owe the remaining taxes when you file.

A $400,000 lump sum taken as cash has $80,000 withheld, but the whole $400,000 is ordinary income that year. The withholding may not cover the bill. A direct rollover defers the tax until you take money out.

When the lump sum makes sense

For Lockheed Martin retirees specifically, the lump sum can make sense when: you have serious health concerns and don't expect to reach the break-even age, you have other guaranteed income sources (Social Security, spouse's pension) that cover your baseline expenses, or you're comfortable managing a large portfolio for the rest of your life.

The annuity is typically the right answer for people who don't have other guaranteed income, whose spouse is younger and may outlive them significantly, or who simply don't want to manage a large portfolio in retirement. The guaranteed payment doesn't fluctuate with markets. It shows up every month regardless of what the S&P did.

Sources

• Lockheed press release, Aug 3, 2021
• Lockheed press release, June 27, 2022
• Lockheed FY2016 10-K (two-stage freeze)
• Lockheed FY2023 10-K (2023 lump sum offer)
• Lockheed FY2025 10-K (2025 buy-out conversions)