Author Topic: Incorporating Pensions into Net Worth/FIRE Calculations  (Read 988 times)

dpears34

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Incorporating Pensions into Net Worth/FIRE Calculations
« on: November 19, 2019, 08:32:07 AM »
Hello there, first time poster, started reading MMM a few months ago. I'm 33, SO is 34. We both have pension plans with our employers. SO is a teacher at a public school making $67k/year. I work for a private company making $58k/year. Trying to figure out how to account for our pension plans when determining FIRE # and net worth.

SO pays 7.5% of paycheck into pension plan. This is only source of retirement income (at the moment). Pension is years of service multiplied by 2 (this is the percentage of final pay that the pension will provide upon retirement). So if 35 years of service, final salary of $100k, $70k/year pension ($5,833/month).

My pension is 1% of final salary, multiplied by years of service. I also have a 401k (which employer contributes 3% to) and do not contribute to the pension plan. I've been at my company for 8 years. If I FIRE at 45, I'd have 20 years of service. Assuming I'm making $80k by then, I'd receive $16k/year starting at age 60 ($1,333/month).

Any help with how to account for these in FIRE/Net Worth calculations would be much appreciated.

reeshau

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Re: Incorporating Pensions into Net Worth/FIRE Calculations
« Reply #1 on: November 19, 2019, 08:40:23 AM »
If you put your question in a simplified way in the search bar in the upper right hand corner, you will see a number of previous discussions on this.

Personally, I recommend looking in the Appendix of "Your Money Ratios", by Charles Farrell.

DadJokes

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Re: Incorporating Pensions into Net Worth/FIRE Calculations
« Reply #2 on: November 19, 2019, 09:08:08 AM »
https://engaging-data.com/will-money-last-retire-early/ - This calculator is a good resource for incorporating pensions that won't be received until later in life. There is a section called "Extra Income." You can input the annual pension amount and the age at which you will begin receiving them.

DeniseNJ

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Re: Incorporating Pensions into Net Worth/FIRE Calculations
« Reply #3 on: November 19, 2019, 10:25:34 AM »
In planning the amount they will need to retire, some ppl look at thier pensions as income and plan on how to make up the difference between what they will make and what they will spend.  Like if you will need 100K in retirement and your pension will provide 60K, then you need 40K or $1 million, to take out 4% annually to have that 40K.  Then they decide their asset allocation for the 1M they will need.

Others think of their pensions as acting as their saftey money, like bonds, and go super aggressive with the rest of their stache since the pension money is a sure thing.

However, ppl making plans this early in life would do well to forget about their pensions and work towards retiring early. :)