end of life care/quality & pension

[NewPerspective]

Hello,

Thanks so much for all of the enlightening information here!  I started reading MMM about 2 weeks ago and and have already started incorporating lots of good suggestions into my husband and my daily life. 

I was hoping to your perpectives on a couple of topics.

First a little info about us:

I'm 36, husband is 41.
We have a mortgage (approx 173K) and are paying $1000 extra per month. House is currently valued around $250k.   I have a student loan totaling about 24k- we are paying $400 extra towards that each month (the interest rate is very low 1.625%).  We are maxing 401k, Roths (for both of us) and investing into a couple of Vanguard mutual funds each month.  Overall we are in pretty good shape (although I now see how much better off we could be if only we had jumped on the MMM ship sooner!).

My husband is eligible for a pension, if he retires at age 50, we will receive $1700 a month.  If he retires at age 55, he will receive $5000 per month.  Is this enough of a benefit to work the extra five years?  Just curious about your perspectives.  :-)  He isn't sure how he actually feels about it yet.  On one hand he usually likes his job and that is a big payout difference, but on the other hand there are days when he would like to just quit. 

We do not have children which makes me think about my own elder years.  Should we plan to have more money in our very elderly years?  I'm also an only child, so I'm a bit concerned that I will be alone and will need to ensure that I've made the necessary financial plans to make sure I'm taken care of in a reasonable manner.  Anyone have any thoughts on this type of scenario?

Thanks so much!



 

[MooreBonds]

I have a student loan totaling about 24k- we are paying $400 extra towards that each month (the interest rate is very low 1.625%). 

To start with, why are you paying extra towards the student loan? It would be very easy to simply put that money into a variety of investments where the dividend yield alone is more than 1.625%! (not to mention average growth over time).

My husband is eligible for a pension, if he retires at age 50, we will receive $1700 a month.  If he retires at age 55, he will receive $5000 per month.  Is this enough of a benefit to work the extra five years?  Just curious about your perspectives.  :-)  He isn't sure how he actually feels about it yet.  On one hand he usually likes his job and that is a big payout difference, but on the other hand there are days when he would like to just quit. 

What kind of budget do you think you'll need when you retire? What would your savings goals look like at age 50 vs 55?

That difference of $3,300/month is HUGE. That is equal to $39,600/year in higher pension payments. Which, if you had a portfolio, would require $990,000 (if pulling out 4%) to spin out that much extra income. Do you think you could save up an extra $990,000 over the next 9 years to makeup that shortfall?

Perhaps in the meantime, max out his and your vacations to make things more enjoyable to trade off working those extra 5 years. Go on a few extra trips, make a few upgrades. Allocate a few extra bucks to spend and enjoy it now as you wait for him to fully retire @ 55, versus just saving up everything now and quitting at 50 to enjoy life then with a much lower pension.

[bogart]

Unless I hated the job, I'd stick out the 5 years for the extra pension.  As noted, the difference in payoffs is vast. 

Given your age, I think it's really hard to know how to plan for old age other than "save more."  I'm about a decade your senior and not entirely similarly situated but risk-averse with a noticeably older spouse (so statistically likely both to have care-giving responsibilities toward my spouse, with which I could well need/want help, and not to have a spouse to reciprocate the favor) and probably more inclined than the average Mustachian to buy long-term care insurance, but my sense of the industry is that its longer-term functionality is sufficiently uncertain that it doesn't much make sense to buy a policy (and I haven't, nor has my DH).  Certainly it's good to be aware of the potential issues in this realm but I do think (again, other than "save more") that it's hard to plan for this far out.

[Nords]

My husband is eligible for a pension, if he retires at age 50, we will receive $1700 a month.  If he retires at age 55, he will receive $5000 per month.  Is this enough of a benefit to work the extra five years?  Just curious about your perspectives.  :-)  He isn't sure how he actually feels about it yet.  On one hand he usually likes his job and that is a big payout difference, but on the other hand there are days when he would like to just quit. 

Do you have to lock yourself into the pension?

It might be better to plan a budget that will give you a chance of retiring at age 50 (or at least seeking a different occupation).  In eight years he'll have a much better idea how he feels about working the extra five years.  I watch way too many military servicemembers trying to make it through the extra 5-10 years until they vest their 20-year pension, and in most cases they're risking their health through stress.  They also become hostage to hardship tours because the assignment officer knows they're hanging around for the pension and will put up with just about any abuse to get there. 

Another longevity option is for you to start Social Security on your earnings record at an early age (assuming you have the same or lower lifetime earnings as him) while he delays until age 70.  You'll end up with more income after age 70 and (most importantly) you'll end up with higher survivor's benefits when you outlive him.  But this is a tremendously complicated decision that confuses the heck out of me every time I think about it, so I'd recommend reading through Mike Piper's eBook:  http://www.amazon.com/dp/0981454283/?tag=obliviousinvestorfeed-20

Take a look at hybrid insurance plans as well.  These attempt to combine life insurance or an annuity with long-term care insurance, giving you the option of getting some of each.  They're not perfect (and they may be mispriced) but they're better than only buying LTC insurance. 
http://the-military-guide.com/2012/12/06/interview-whats-wrong-with-long-term-care-insurance/