Author Topic: When to start pension?  (Read 1445 times)

meadow lark

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When to start pension?
« on: May 07, 2017, 09:45:54 PM »
We are retiring (probably) July 1st.  DW has a very small, defined benefit pension that will pay $500/month when she is 65.  She could start taking it at 55 but it will be 46% of $500.  I was hoping someone would know where to find a calculator to make that decision about.  I understand the crossover point when she would get more total money if she waits until 65 is simple (haven't done it, but assuming it is somewhere around 76) but that doesn't include increased value of money now due to inflation or the money making money in the market.  And it doesn't include the bite from taxes.
Any links to calculators or ideas?  We don't need this money now, I just don't want to not take it the best way.

nobody123

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Re: When to start pension?
« Reply #1 on: May 08, 2017, 10:47:11 AM »
You probably want to look at all the rules.  If you don't need the money, you'll want to know what the reduction percentage will be if you wait a few years.  Also, is there any death benefit so if you spouse dies before collecting, the estate would still get $X?  Are the payouts inflation adjusted or flat?  Given the smallish benefit, is a lump sum option available?  How likely is it that the pension fund will be insolvent any time soon?

You can do a simple excel sheet to show you how much $230 / month invested will equate to over the long run and compare it to waiting to collect the $500 at 65.

Proud Foot

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Re: When to start pension?
« Reply #2 on: May 08, 2017, 11:08:20 AM »
Without taking taxes the crossover point would be between age 72-73, if invested (using 4% returns) it would be 77-78 (89-90 using 7%).  Like nobody123 said, you should look into any death benefits or if there is a lump sum option.   If there aren't any death benefits then I would go for starting it at 55 or taking a lump sum. But if there is a death benefit, not knowing anything about your DW's health and family history makes it harder to say.

Babybalrog

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Re: When to start pension?
« Reply #3 on: May 08, 2017, 02:08:44 PM »
Also consider COLAs. My pension plan sometimes grants COLAs to those collecting, but not to those deferring. Thus if I wait ten years I would still collect the same nominal value, but if I start collecting now my payments will grow over those 10 years.

Capsu78

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Re: When to start pension?
« Reply #4 on: May 08, 2017, 02:28:27 PM »
Do you know who the plan administrator is?  Mine (Milliman- an industry leader) offers us a web based calculator were you can plug in any number of scenarios, including a good number of options: Sole, Spousal (50%, 66%, 75%) that all generate different outcomes over various starting times.  If you don't know who is in charge of administration, or have not been in regular communication with them over the years (address updates etc) determining that would be my first task that may expose you to such calculators.