Author Topic: Pension  (Read 4671 times)

NoMoWork

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Pension
« on: September 15, 2020, 07:25:39 PM »
I know pensions are somewhat rare these days (I am very lucky to have one) and working for one company long enough for it to matter as well.  For those of you that have (or had) a pension available and stuck with the same company for an extended period of time, how did you handle the lure of the accelerating pension growth rate or additional benefits offered at the company's set retirement dates (e.g. 25 years of service, etc.)?  Did you hit your number before this date and decide to stick it out for the extra two, three, five years?  Or did you use the company requirements to set your early retirement date?  I've picked 2030 as my target year as it aligns with my 25 years of service.  Anyone else struggle through this?

RetiredAt63

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Re: Pension
« Reply #1 on: September 15, 2020, 08:33:49 PM »
I know pensions are somewhat rare these days (I am very lucky to have one) and working for one company long enough for it to matter as well.  For those of you that have (or had) a pension available and stuck with the same company for an extended period of time, how did you handle the lure of the accelerating pension growth rate or additional benefits offered at the company's set retirement dates (e.g. 25 years of service, etc.)?  Did you hit your number before this date and decide to stick it out for the extra two, three, five years?  Or did you use the company requirements to set your early retirement date?  I've picked 2030 as my target year as it aligns with my 25 years of service.  Anyone else struggle through this?

Well, from my name you can see I didn't retire all that early.  But my main job pension was fully vested at 60 for me.  I just changed jobs for a few years instead of retiring.

triple7stash

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Re: Pension
« Reply #2 on: September 15, 2020, 09:22:43 PM »
I will be vested for my employers pension next year. My plan for retirement is a combination of my pension payout + my 401k contributions. I imagine the only way additional service years will lure me in is if I don’t mind staying at my job to earn the additional rate of return. However, my driving thought towards retirement is how much more do I need for time freedom (not how much more money would I want). I also imagine work will be much easier when I’m essentially FI so I could leave at any moment if I’m not happy.

SunnyDays

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Re: Pension
« Reply #3 on: September 15, 2020, 09:33:42 PM »
I was with the same employer for 30 years and had a DB pension.  Rare on both counts.  Technically, I reached my minimum number (age and years of service) at 53, but had to work until 55 to qualify, so that is what I did.  I retired just before I turned 55, using vacation days to ensure I was still employed in the new year for tax reasons.

skp

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Re: Pension
« Reply #4 on: September 16, 2020, 05:17:53 AM »
I'm 62 and have been lucky enough to get a pension from work.  I've been vested for years.  But the pension has been a secondary consideration for me.  I'm working for health insurance.  There is a pension projection app on my companies web site that you can play around with different retirement ages.  My pension maxes out at 65, after which point you start to loose money.  If I retired right now I'd only loose $150 a month.  But health insurance on the other hand.... that would set me back over $1000.  If I hated my job, the $150 a month wouldn't deter me.  If I hated my job the $1000+ a month for health insurance for a couple of years wouldn't deter me.  But I don't hate my job so instead I went part time.
Some changes in company policies also contributed to me going part time.  My company has changed pension plans. They use to base your pension on your last 5 years. That would make it hard to go part time.   The current plan has my prior vested amount guaranteed plus I get from the new plan  a percentage of your salary.  They also changed health insurance and made it so that employees over 55 who have been there 10 years can work part time and only have to pay the lesser full time insurance rates.  They also do a company match for my 401K. 
Part time was the smart choice for me.

RainyDay

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Re: Pension
« Reply #5 on: September 16, 2020, 06:19:37 AM »
Anyone else struggle through this?

Yes!  I won't get FULL retirement benefits unless I stay another 12+ years, which I am not going to do.  So I compromised and will stick it out til I have 20 years of service, which is in just over 2 years.  I won't get health benefits and my pension will be delayed til I'm 60, but that's okay.  Fortunately the 20-year mark roughly aligns with my FI timeline anyway. 

PhrugalPhan

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Re: Pension
« Reply #6 on: September 16, 2020, 11:15:24 AM »
I'm struggling with this now.  I could leave now with an early reduced pension, but the way it is computed I will lose $2,000 / mo. for life if I leave now versus working just 27 more months (when I can get an unreduced pension).  That is just too much to walk away from for me.  While I never computed an FI date it probably would have been 3 years ago.  Yes, these last 5 years have been / are a slog, no doubt about it.

As for how to deal with it?  For me I figured out where I needed things better in my life and worked on them.  Currently that includes exercising, decluttering my house, making repairs, streamlining my investments.  Also I am slowly burning through all the excess leave I have built up.  As of now my annual leave and sick leave amounts to about 35% of the remaining work days, so I am trying to get used to using leave, not building it up for later.

Sanitary Stache

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Re: Pension
« Reply #7 on: September 16, 2020, 01:42:50 PM »
I am working toward vesting in a defined benefit pension plan.  I have come to think of it as an annuity that my employer loaned me the money for. 
Currently, my plan is to work until the plans early retirement age of 55.  Early retirement comes with a slight reduction in benefit, but if I make it to 55, the pension will cover half of my expenses.
I am considering looking for part time opportunities in my current position after I vest into the pension.  If I leave my organization after 5 years, my early retirement benefit is about half what it would be if I stay 15 years.  I haven't figured out a real analysis, but it doesn't feel like something for which I would stay in a job that I was ready to leave.  Most of my retirement planning is based on saving and investing in index funds.
Interesting about health insurance.  My organization offers comprehensive health insurance and it is expensive.  I would save money on the health exchange, rather then waiting for 20 years of service to continue paying 20% of the premium.  Though as universal health care gets further and further away I may reconsider as I get older.

ikonomore

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Re: Pension
« Reply #8 on: September 16, 2020, 09:42:07 PM »
I'm struggling with this now.  I could leave now with an early reduced pension, but the way it is computed I will lose $2,000 / mo. for life if I leave now versus working just 27 more months (when I can get an unreduced pension).  That is just too much to walk away from for me. 

My problem is just like this. I have 34 years but need to do another 5 years.  The penalty leaving early each month is huge.  Almost $2k a month also.  I've thought of just bridging the gap but doesn't make much sense to do with wfh and still earning my highest 3 years still.  I'll have almost 40 years and that's leaving at 60.  If i started my job 2 years earlier, I'd be able to retire at 55 with a higher percentage pension amount.  A friend of mine who is a year older retired last year with a much better pension and is just living it up.

Cassie

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Re: Pension
« Reply #9 on: September 16, 2020, 11:06:04 PM »
I started my career late so retired with only 15 years at 58. Very grateful for the monthly check.

Greystache

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Re: Pension
« Reply #10 on: September 17, 2020, 08:29:54 AM »
I worked for the same company for 33 years and quit when I qualified for pension payments at age 55. That was always the plan. We planned to have the kids launched and the mortgage paid off by the time we turned 55. I chose not to contribute any of my own funds to the pension plan, so it was only the company contribution. We also contributed to a 401K and 403B so we had an additional $1.1 million for our retirement at age 55. We decided to take our pension in a lump sum ($500K) paid over a 10 year period.  So my pension is paying for most of the first 10 years of retirement. We have not tapped our retirement accounts (now rolled over into an IRA) and they have grown quite a bit even though we have a very conservative asset allocation.  Our net worth now is higher than when we retired in 2015 even though we have burned through half of my pension.
I never really considered retiring before age 55, but in hindsight we could have made that happen if we had made it  a priority.

bmjohnson35

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Re: Pension
« Reply #11 on: September 17, 2020, 08:45:20 AM »

I retired earlier this year at 50.  I will take a 50% penalty for retiring before 55, regardless of how many years I had worked for the company.  As you can see, it didn't deter me from leaving.  I can start collecting as early as 55 at reduced payments. Like most pensions, the benefit increases each year I don't collect benefits up to around 70 or so.  My company was struggling when I left and is in the process of being acquired by a competitor.  I will be happy if I'm able to collect any benefits in the future.  I intend to start collecting at 55. Fortunately, the pension was not used to determine whether or not we had reached the number needed to FIRE.

teacherwithamustache

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Re: Pension
« Reply #12 on: September 17, 2020, 04:09:41 PM »
My advice when evaluating early pension withdraw is to do the MATH.  IF working 5 more years gives your monthly pension a 25% boost or greater then work 5 more years if that is what your FIRE plan calls for.  IF working 5 more years only gives you a 10% boost monthly pension boost then dont work 5 more years.  With teaching this is very important.  In TX if you work 5 more years your monthly benefit stays the same but they give teachers a 110k lump sum check.  This makes all of the teachers so excited because they can not do MATH.  I ask them what their dream job is and 1 teacher said park ranger.  I told her park rangers make 40k a year.  You could do that for the 5 extra years and have a 200K lump sum check (Accrued park Ranger Salary) and be better off then being miserable working 5 more years here.  I could be a bartender at Top Golf max out my 401k for 5 years.  Work 3 days a week, and make more then being a teacher.

aceyou

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Re: Pension
« Reply #13 on: September 17, 2020, 04:52:40 PM »
I'm a teacher and so is my wife.  We will qualify for our pensions after 25 years of service, at age 48.  We are 37 and 36 respectively.  We will likely be financially independent around age 43, but the extra 5 years will probably triple our wealth when you consider extra 5 years of income, contributions to our stache, and the value of our two pensions.  Hard to predict the future, but we both intend to teach till 48.

max924

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Re: Pension
« Reply #14 on: September 17, 2020, 06:37:50 PM »
I am probably in a similar situation. I am 36 with 13 years into a very good DB plan. I have saved enough that combining my savings with my pensions commuted value (my plan allows me to take the commuted value out) puts me well above my required number. Combining that with the fact I am not enjoying what I do anymore seems like a no brainer to me, I am resigning in a couple months.

If I was not able to take the commuted value I would be in a different situation of course, not sure if that is an option for you.

They are called the golden handcuffs for a reason. My take is, if you only have a few more years for those huge jumps in value then maybe wait it out, if you are looking at 15-20 years more, you need to evaluate a little closer $$ vs time. In my case, not worth it.

Just for some perspective, my commuted value is ~$700k after taxes, so its not like I am getting peanuts in this case... I am one of the very lucky few in a position such as this.

Sandi_k

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Re: Pension
« Reply #15 on: September 17, 2020, 11:13:29 PM »
I know pensions are somewhat rare these days (I am very lucky to have one) and working for one company long enough for it to matter as well.  For those of you that have (or had) a pension available and stuck with the same company for an extended period of time, how did you handle the lure of the accelerating pension growth rate or additional benefits offered at the company's set retirement dates (e.g. 25 years of service, etc.)?  Did you hit your number before this date and decide to stick it out for the extra two, three, five years?  Or did you use the company requirements to set your early retirement date?  I've picked 2030 as my target year as it aligns with my 25 years of service.  Anyone else struggle through this?

Yes.

I have a Defined Benefit Pension, and I made my decision based on a number of factors. My monthly benefit depends on years of service, multiplied by an age factor, multiplied by the "high three" average salary years.

Since I want 100% survivor benefits for DH, that reduces the dollar amount by ~ 12%.

I came to my decision by making a flat, lined spreadsheet.  First column is "age on January 1 of that year." Then I chose a date based on age, and plugged it into my company's retirement estimator. What I found was that the multiplier is very powerful.

As of this month, the multiplier is 1.85% x years of service (32) = 58.44% minus 12% spousal, so ~ 46% of the current paycheck.

If I retire 5 years from now, the multiplier is 2.5% x years of svc = 90% of salary, minus 12% spousal, so about 78% of the current paycheck.

I now have that rowed spreadsheet laid out so I know the percentage of current paycheck for every 6 months (March and Sept) for each year until Sept. 2025. I can see, very clearly, the longterm benefits of staying the course and hanging on until 2025.

Maybe laying out a plan per year like that would be very helpful for you? There clearly are diminishing returns after a certain amount of service credit and age. You should do the homework to figure out that return curve based on your age and service accruals.

ericrugiero

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Re: Pension
« Reply #16 on: September 18, 2020, 02:25:32 PM »
We also have a defined benefit pension plan.  The slope of the value increases exponentially towards the end.  It looks just like the expected value of a 401K account due to compound interest.  I calculated ours last year and it came out to around 5.5% expected return on investment.  When I retire, I'll probably take the cash value option (currently $150,000) and roll it to my IRA. 

New employees don't get included in the pension plan, they get and additional match of their 401K instead which really works out about the same. 

fuzzy math

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Re: Pension
« Reply #17 on: September 18, 2020, 04:30:45 PM »
16 months until I'm vested!! It's a 5 year vest, I feel mildly embarrassed saying its that difficult to stay.

Odin Force

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Re: Pension
« Reply #18 on: September 19, 2020, 12:28:58 PM »
I'm a police officer with 19 years of service. Vested after 5 years. We basically have a 30 year retirement. Sick time and vacation can be rolled over to meet the 30 year requirement. Assuming no serious illness, I should be able to retire at a little before age 50. I'll get 80% of the average of my highest 4 years. Once I reach age 62, the pension drops to 55%. No health insurance, so that's the big question mark for me.

TomTX

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Re: Pension
« Reply #19 on: September 19, 2020, 03:08:12 PM »
I know pensions are somewhat rare these days (I am very lucky to have one) and working for one company long enough for it to matter as well.  For those of you that have (or had) a pension available and stuck with the same company for an extended period of time, how did you handle the lure of the accelerating pension growth rate or additional benefits offered at the company's set retirement dates (e.g. 25 years of service, etc.)?  Did you hit your number before this date and decide to stick it out for the extra two, three, five years?  Or did you use the company requirements to set your early retirement date?  I've picked 2030 as my target year as it aligns with my 25 years of service.  Anyone else struggle through this?

Yes.

I have a Defined Benefit Pension, and I made my decision based on a number of factors. My monthly benefit depends on years of service, multiplied by an age factor, multiplied by the "high three" average salary years.

Since I want 100% survivor benefits for DH, that reduces the dollar amount by ~ 12%.

I came to my decision by making a flat, lined spreadsheet.  First column is "age on January 1 of that year." Then I chose a date based on age, and plugged it into my company's retirement estimator. What I found was that the multiplier is very powerful.

As of this month, the multiplier is 1.85% x years of service (32) = 58.44% minus 12% spousal, so ~ 46% of the current paycheck.

If I retire 5 years from now, the multiplier is 2.5% x years of svc = 90% of salary, minus 12% spousal, so about 78% of the current paycheck.

I now have that rowed spreadsheet laid out so I know the percentage of current paycheck for every 6 months (March and Sept) for each year until Sept. 2025. I can see, very clearly, the longterm benefits of staying the course and hanging on until 2025.

Maybe laying out a plan per year like that would be very helpful for you? There clearly are diminishing returns after a certain amount of service credit and age. You should do the homework to figure out that return curve based on your age and service accruals.

I went through a similar exercise recently, as my pension value is based on the "high 3" years of salary, and  managed that 20% pay bump a year ago.

Fortunately, I'm already vested - and because I'm in the old version of the plan, there is no percentage penalty for not hitting a certain age. Flat 2.3% of base salary per year of service. To draw, I need to be age 60 or use the "rule of 80" to retire (age + years of service) - Rule of 80 means I'll also get health insurance.

Today, I'd have to wait til I'm 60 to retire, and wouldn't get health insurance.

At my current salary, the value of my monthly pension payout is going up 0.75% of current salary for every month I keep working. Working another 2 years will not only reach the "bend point" where the benefit per month worked drops precipitously (presuming no major promotions, andpromotion would be hard without going Management) - it will also let me pull the pension 10 years later under the Rule of 80.

Retiring directly from service would mean waiting til 2027.

Big incentive to stay 2 more years - and by then we should have a good handle on the post-pandemic economy, see what the Democrats will do toward Universal Health Care, etc - plus the increase will more than cover the similar ~12% drop to maintain 100% spousal payout, should I die first.

Thinking on this, I should start a case study and get input on strategies for bridging that 10 years. Sure, I could put it all in bonds and make it, but there wouldn't be much left.

Silrossi46

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Re: Pension
« Reply #20 on: September 19, 2020, 06:25:05 PM »
I am struggling with this as well.  I am also in a defined benefit pension system with 26 years credited to me and I am 50. The system provides us premium free medical after 25 years of service for life so medical is a non issue since I already have the 25.  I can retire penalty free at 55. The pension has no COLA.   (Newcomers do not get this ).  My pension is based on the average of my highest three years salary.   I also have 50 vacation days and 270 sick days banked that I can start liquidating to burn some more time. 

Leaving today at age 50 =. Years of service/ 55 x average of highest three = 58k / year for life.  Includes 15% penalty for leaving 5 years early.  (3% penalty per year).

Leaving at 55 =. Projecting ahead with average increases of 3.5% for 5 years  and removing the 15% penalty and not even factoring in any merit raises the average of my highest three would yield me a pension of 98k per year for life. Probably higher if I am able to get any merit raises. 

One of the major reasons I am staying is to pad up my other savings as well.   Currently I max my 457b with the 50 and older catch up provision and in the years I am age 52/53/54 I can use a special double catchup and the max will be 40k per year deferred for 3 years.  This amounts to a lot more savings.   If I leave now I lose that opportunity.  I also contribute about 2800/month to my vanguard after tax account. 

Current accounts are as follows
457b = 502k
Vanguard = 225k
Cash = 100k. ( I need this as I buy fix and flip cars on the side).

So I have about 725k invested now in all index funds.  With the pension I can take this risk.  These contributions would stop if I quit now but would likely grow to a million or more if I stick it out to 55.


 I am already Fi. My expenses are about 40k.   My house is paid for and I have no other debt.  My job is extremely high stress as i am in IT.  Basically it sucks and the thought of 5 years depresses me.  There is no option for part time.    I am burned out, stressed out and hate going into work anymore. 

So the question is given the value proposition seen above In staying the 5 more would you stay or would you go? 

TomTX

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Re: Pension
« Reply #21 on: September 19, 2020, 06:41:42 PM »
I am already Fi. My expenses are about 40k.   My house is paid for and I have no other debt.  My job is extremely high stress as i am in IT.  Basically it sucks and the thought of 5 years depresses me.  There is no option for part time.    I am burned out, stressed out and hate going into work anymore. 

So the question is given the value proposition seen above In staying the 5 more would you stay or would you go?

Burn your leave time and walk away.

You hate the job. You are FI with a decent safety margin on top of it. Don't torture yourself (and likely shorten your life) by sticking it out.

Make sure to go to the doc and get PT referrals for any nagging neck/arm/back/wrist/knee/ankle/whatever issues. Burn sick time for the PT, at least a half day each session.

Alternately, if you just can't pull the ripcord: IT people are in HIGH demand right now. Find a low-stress, high paying job and take it.

I just ran the numbers again myself on Rich, Broke or Dead - it looks like I could walk away tomorrow with a very small margin. However, I'm in a relatively low stress job doing useful work, a great boss, and full time WFH (at least for now) - cruising 2 more years will make me a lot more comfortable. I should be able to stash at least another $80k (plus any growth) in the meantime.


https://engaging-data.com/will-money-last-retire-early/

deborah

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Re: Pension
« Reply #22 on: September 19, 2020, 06:55:36 PM »
I am already Fi. My expenses are about 40k.   My house is paid for and I have no other debt.  My job is extremely high stress as i am in IT.  Basically it sucks and the thought of 5 years depresses me.  There is no option for part time.    I am burned out, stressed out and hate going into work anymore. 

So the question is given the value proposition seen above In staying the 5 more would you stay or would you go? 
I’d go. There is no value at all in staying, as you have enough. If you don’t really have enough, work out what “enough” really is, and stay only that long. Do you want a gold casket for your ashes? When you already have enough, there’s no point in amassing more than enough.

Silrossi46

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Re: Pension
« Reply #23 on: September 19, 2020, 07:43:30 PM »
Thanks for the replies.  I couldn’t likely just burn all my sick leave time as they would probably mandate me go on fmla for that so I would have to think that through some.  I have some dental visits to do as well and some work to be done so that factors into this because I do not have dental as part of the premium free healthcare after retirement. 

I could withstand maybe all of 2021 to toe all that up and also save 3 more % of penalty.   

The struggle is real.....

TomTX

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Re: Pension
« Reply #24 on: September 19, 2020, 08:30:56 PM »
Thanks for the replies.  I couldn’t likely just burn all my sick leave time as they would probably mandate me go on fmla for that so I would have to think that through some.  I have some dental visits to do as well and some work to be done so that factors into this because I do not have dental as part of the premium free healthcare after retirement. 

I could withstand maybe all of 2021 to toe all that up and also save 3 more % of penalty.   

The struggle is real.....

Set up a GP appointment (many docs now have online scheduling, you could do it now) - try to get in early this upcoming week.

Get the PT referral, push for a  lot of sessions - go at least twice a week. Maybe you'll be so tired afterward you have to take the whole day as a sick day. No need to kill yourself for an overly stressful job when you are already at roughly 200% of FI.

It will likely be more effective to have separate PT referrals if you have multiple issues to work on (say knees and back - 2 referrals)

Get any other specialist referrals you may need: Opthamologist, dermatologist, allergist, colonoscopy, etc. When was the last time you had a dermatologist do a visual for skin cancers? Are you up to date on a Tdap vaccination? MMR? You're a bit older than I am - I only got 1 MMR as a kid, recommendation is now to have 2, so I got a booster a couple years ago.

Get your dental work lined up, make sure to give yourself enough recovery time.

Whatever is in less than prime shape or could use a professional opinion on an aspect of your health - get it done!

Probably wouldn't hurt to discuss all this with some kind of counselor (on SL time of course) - this is going to be a huge emotional shift, and it doesn't hurt to discuss it with someone.

At my work, as long as it's not 3 days of SL in a row - the payroll system won't flag you for FMLA paperwork. Dunno about yours.

Note that I am not advocating for faking anything - just taking full, justified use of the benefits you have earned over the last 25+ years.

Dicey

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Re: Pension
« Reply #25 on: September 19, 2020, 09:55:10 PM »
Posting so I can find and read through this later. DH and I were just discussing this yesterday.

Andrew928

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Re: Pension
« Reply #26 on: September 20, 2020, 02:42:35 AM »
I work for an SO and we have a 20 year retirement, that will put me at 45 with a 50% payout of my 3 highest grossing years. Assuming I don't hate my life at the age I will do another 5 years getting 2.5% more per year of service. So right now at 26 that extra money for 5 more years sounds good but who knows once the time comes.

Fomerly known as something

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Re: Pension
« Reply #27 on: September 20, 2020, 05:57:50 AM »
Being FI and waiting until my earliest full retirement date is better than not being FI and waiting another 58 months to retire with an immediate pension and continuing health care.  I know if thing get bad I can say “fuck it” but mentally I know my job needs me more than I need my job.  (We are understaffed).  My job can be stressful and hasn’t change since I became FI, but being a FI gives me the comfort to know if it gets so stressful I need a break, I can tell my boss so because I don’t “need” the money, I just want it.

PhrugalPhan

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Re: Pension
« Reply #28 on: September 21, 2020, 01:37:52 PM »
One of the major reasons I am staying is to pad up my other savings as well.   Currently I max my 457b with the 50 and older catch up provision and in the years I am age 52/53/54 I can use a special double catchup and the max will be 40k per year deferred for 3 years.  This amounts to a lot more savings.   If I leave now I lose that opportunity.  I also contribute about 2800/month to my vanguard after tax account. 

Current accounts are as follows
457b = 502k
Vanguard = 225k
Cash = 100k. ( I need this as I buy fix and flip cars on the side).

So I have about 725k invested now in all index funds.  With the pension I can take this risk.  These contributions would stop if I quit now but would likely grow to a million or more if I stick it out to 55.
I would go or stay based on how stressful it is.  As I am in IT also, I have stopped giving an Efff so I understand your attitude. 

One thing I would point out, if you decide to stick around to when you can access the double catchup period and if you have a 457b Roth option seriously consider using it.  I am in a 457b too and I figured out if I didn't use the double catchup ($39,000) I would just put the money into a brokerage account anyway, so by contributing 100% Roth this year I am paying income tax on this money like I would normally do, but it will now be tax free for life going forward.  And with less earnings from the brokerage I will have more room for Roth conversions before the RMDs kick in for me.   While that extra room may not be important for many FIREees who will have plenty of conversion room, when you have a pension like we do Roth conversion space is extra valuable for us.
« Last Edit: September 21, 2020, 08:58:33 PM by PhrugalPhan »

Silrossi46

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Re: Pension
« Reply #29 on: September 21, 2020, 04:53:52 PM »
Phrugalphan = thanks for this information.  More to think about.  I lose the Before tax deferrals By going full Roth.  At my salary that will definitely be a tax hit at years end.  More to think about. 

Sandi_k

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Re: Pension
« Reply #30 on: September 21, 2020, 07:31:46 PM »
Phrugalphan = thanks for this information.  More to think about.  I lose the Before tax deferrals By going full Roth.  At my salary that will definitely be a tax hit at years end.  More to think about.

That's true, but I did the math for us, and it's a difference of 22% + 9.3% (CA) x that $26k. So 31.3% x $26k = $8,138 each year for the next 5 years. But it means we go from 92% pretax savings for more like 75/25% - and it means that we can control income for IRMAA years.

It also means that the surviving spouse can use the Roth funds to manage income once the tax brackets apply to only one of us.

DeniseNJ

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Re: Pension
« Reply #31 on: September 22, 2020, 10:27:39 AM »
I am already Fi. My expenses are about 40k.   My house is paid for and I have no other debt.  My job is extremely high stress as i am in IT.  Basically it sucks and the thought of 5 years depresses me.  There is no option for part time.    I am burned out, stressed out and hate going into work anymore. 

So the question is given the value proposition seen above In staying the 5 more would you stay or would you go? 
I’d go. There is no value at all in staying, as you have enough. If you don’t really have enough, work out what “enough” really is, and stay only that long. Do you want a gold casket for your ashes? When you already have enough, there’s no point in amassing more than enough.
This.  If you are truly already FI and hate the job then working even 1 more day for an extra million dollars is not worth it.  Once you are FI, it doesn't make a difference if you triple your money in a year of working.  Now if you are looking at skinny FI versus fat FI, then maybe.  But if you truly have what you need now then how does working one more day make sense?

LaineyAZ

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Re: Pension
« Reply #32 on: September 22, 2020, 08:27:06 PM »
For what it's worth, Biden's campaign platform includes dropping the age to begin Medicare from 65 to age 60.
So if he gets elected and that gets enacted, that may change the calculations for some of you here.
Something to keep an eye on.

Silrossi46

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Re: Pension
« Reply #33 on: September 23, 2020, 06:31:02 PM »
DeniseNJ = yup I would say it’s the difference between skinny and fat for sure.  Probably the difference between never having to work again versus maybe having to down the line.  Splurging on a big ticket item or two? 

Dicey

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Re: Pension
« Reply #34 on: September 24, 2020, 12:09:53 AM »
For what it's worth, Biden's campaign platform includes dropping the age to begin Medicare from 65 to age 60.
So if he gets elected and that gets enacted, that may change the calculations for some of you here.
Something to keep an eye on.
Whoa, I missed that tidbit. Interesting indeed. Thanks!

Sugaree

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Re: Pension
« Reply #35 on: September 24, 2020, 06:23:57 AM »
Honestly, keeping my health insurance is a bigger draw than the pension.

Laura33

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Re: Pension
« Reply #36 on: September 24, 2020, 09:25:14 AM »
Depends on timing.

Early on, we assumed no pension -- seen too many fail.  Savings amounts were all based on the assumption that we needed to foot all our bills ourselves. 

As we got closer, we started factoring in pension (and SS) at a partial amount.  Current plan is that pension will be helpful to cover basic costs between retirement and SS (we're not retiring until probably late 50s; he can start drawing pension at 55).  That moved RE date up some.

Pension now is the "quit whenever you want" backstop.  We hit FI earlier than originally planned, in large part because we were ignoring the pension/SS.  That means that having that extra money now gives us the option to quit whenever we want.

Big caveat is that pension is cash-value, so there is no big cliff or vesting date -- everything vested after 5 years, he can see exactly how much the pension is worth in his account, and that is going to increase at the same slow rate no matter how many years of service he puts in or how his salary rises.  So there really isn't a premium on staying until X date.  Now, if they offer one of those sweeteners to encourage early retirement during some future round of RIFs, we'd certainly consider that bonus. 

robartsd

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Re: Pension
« Reply #37 on: September 24, 2020, 11:25:49 AM »
Honestly, keeping my health insurance is a bigger draw than the pension.
That's what I've been thinking. If I work until at least age 50, I can retire and stay on group medical coverage (same terms as when I was employed if I have at least 20 years of service, portion of premium covered by employer is prorated based on service length). I'll reach 20 years with my employer at about age 55. I recently check out what I would expect to get on an ACA plan based on income at current spending level and was surprised that my overall costs for the cheapest silver plan (same provider as my current plan) might be slightly lower through the ACA. Of course, I'm not sure how much I want to depend on ACA subsidies, besides my current projections don't have my savings being high enough to FIRE much before age 55 so 20 years of service/age 55 is my current FIRE target.

TomTX

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Re: Pension
« Reply #38 on: September 26, 2020, 04:04:37 PM »
Big caveat is that pension is cash-value, so there is no big cliff or vesting date -- everything vested after 5 years, he can see exactly how much the pension is worth in his account, and that is going to increase at the same slow rate no matter how many years of service he puts in or how his salary rises.  So there really isn't a premium on staying until X date.  Now, if they offer one of those sweeteners to encourage early retirement during some future round of RIFs, we'd certainly consider that bonus.

Interesting. I have a pretty steep increase in pension value for the next 2 years due to the "High 3" rules - but that does get me thinking about potential incentives to leave early. It's been a long time, but there is precedent.

kanga1622

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Re: Pension
« Reply #39 on: September 26, 2020, 05:25:34 PM »
I’m a state employee and have no set retirement date in mind. I’m much more FI interested than RE. But my early retirement date is in 2033 which puts me at 53 with 32 years of service. I am mostly happy with my job and enjoy what I do and most of the people I work with.

It will be nice knowing I have a nice cash flow for retirement anytime after I am 53 but I expect to work as long as my health allows until sometime in my 60s. But knowing that safety net is there will be wonderful.

NoMoWork

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Re: Pension
« Reply #40 on: September 26, 2020, 08:20:09 PM »
Wow!  So many responses to my OP.  Thank you all for providing insight. This is really a great community and each comment has been helpful.  I am still planning to stick around for a few more years to see what happens... As mentioned 2030 is my target date.

TomTX

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Re: Pension
« Reply #41 on: September 26, 2020, 08:28:01 PM »
Wow!  So many responses to my OP.  Thank you all for providing insight. This is really a great community and each comment has been helpful.  I am still planning to stick around for a few more years to see what happens... As mentioned 2030 is my target date.

I originally started the 2027 Cohort thread ~4 years ago.

Now my target is 2023 with a ~10 year gap til actually drawing the pension.

Periodically run the numbers for your situation.

investnoob

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Re: Pension
« Reply #42 on: September 30, 2020, 11:43:35 AM »
Interesting thread!

I am in the Canadian civil service. There are three options for retiring before "fully vesting" (this is language we don't use in our plan, but still works):
1. Retire and get an annuity at 50 with a penalty of 5% per year before 30 years of service or the age of 55 (whichever is greater);
2. Retire and get an annuity at 60 with no penalty; or
3. Resign and get a lump sum. Some of the lump sum will not be subject to taxes, and the rest is subject to income taxes.

In my case, I am 42 with 19 years of pensionable service. If I were to leave now, I would likely take the lump sum.

Option 1 does not leave me FI, and the penalty for number 1 would be too great for me to ever be FI.

Option 2 would mean an income of 43,700 at 60 which would make me FI, but I'd need an income until then.

Option 3 would give me a lump sum of $830,000. $500,000 would be taxable, and in my province, I'd have to pay about $215,000 in taxes. Leaving me with 615,000.
I have around $200,000 in savings. That would mean around $815,000. My mortgage is paid off, and I need around $750 a month to handle insurance, property taxes, maintenance, and gas, and electric. So I think this amount would make me FI. The main thing keeping me from pulling the trigger is having a plan on how to move forward and do this while my girlfriend still works. Its likely that she won't retire until 60. So I haven't given this too much thought lately. I would have to have some conversations with her if I do want to pursue this.
« Last Edit: September 30, 2020, 11:46:08 AM by investnoob »