Author Topic: Enticed by incentives to not retire?  (Read 4284 times)

matimeo

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Enticed by incentives to not retire?
« on: January 27, 2014, 03:12:38 PM »
I'm wondering if anyone else faces a dilemma like this one. 

I'd really like to be financially independent as soon as possible.  This might mean "retirement" around age 50 (currently 33).  However, my employer provides me with a pension which I don't have to pay into.  Basically free money in retirement.  Payout at retirement is based on ending salary, years of service, etc.  The earliest I could start collecting is age 55.  Here are some estimated projections (age I quit, collect and monthly payment):

Retire 50 collect at 55   $1,300
Retire 55 & begin collecting   $2,700
Retire 50, collect at 65   $3,200
Retire 55, collect at 65   $4,300
Retire 65, collect immediately   $5,900

It makes retiring earlier look like a bad idea.  Also, with health insurance, if I retire at 55, my premiums are covered 100% for life.  Retiring earlier leaves me with a significant gap in coverage. 

How would you handle a situation when all of these carrots are dangling to keep you working for longer?  I'm trying to focus on what I can control and save what I can so I don't need the carrot, but even the logical side of me has a hard time throwing that money away.

Allen

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Re: Enticed by incentives to not retire?
« Reply #1 on: January 27, 2014, 03:41:51 PM »
If you have 'enough', then how can more entice you?

Similarly, if you work longer and save more you'll have more later.  If your goal is to be free, and you've saved enough, extra pension should be irrelevant to you.

seattlecyclone

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Re: Enticed by incentives to not retire?
« Reply #2 on: January 27, 2014, 03:52:43 PM »
The concept of "enough" is key here. If you retire at 50 and start collecting from your pension at 65, that's an annual income of $38,400 before taking Social Security into account. That should be enough, right? As long as you have enough money saved up by age 50 to last you from 50 to 65, why should the prospect of earning money that you don't need be sufficient impetus to keep you in your job?

the fixer

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Re: Enticed by incentives to not retire?
« Reply #3 on: January 27, 2014, 04:00:54 PM »
You should start by separating the decision for when to collect versus when to retire, the two are only loosely related in that you can't collect before you retire.

If you collect at 55, there's a $1400/mo difference between retiring at 50 versus 55.
If you collect at 65, the difference between 50 and 55 for your retirement age leads to a $900/mo difference.

So let's say you decided to retire at 55 instead of 50, because you'd need less money saved up. That means you can spend more now, or you can save the same amount and spend more in retirement. So what would you spend this extra money on? Would it actually make you happier? Is it worth the extra five years of having a full-time job? Think of how many years you'd expect to have left once you're 50, and whether you'd want to spend 5 of them (15-20% of remaining) at a full-time job.

The decision for when to collect is a tradeoff between risk and return, as are most things in life. Collecting later generates higher payouts but you run the risk of getting less money overall if you don't live long enough or the pension implodes.

Khan

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Re: Enticed by incentives to not retire?
« Reply #4 on: January 27, 2014, 04:26:31 PM »
The only currency that matters is time.

You'll never get what you spend of that currency back.

Daleth

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Re: Enticed by incentives to not retire?
« Reply #5 on: January 27, 2014, 04:30:06 PM »
The only currency that matters is time.

+1. Yes.

And that, BTW, is why DH and I contribute unequal amounts to our household bills. I earn twice what he does when we're both working full time, so all household bills are paid for 66% by me, 33% by him. Why should I only have to work for 6 days to pay "my half" of the mortgage if "his half" costs him 12 days? That's not fair.

slothkey

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Re: Enticed by incentives to not retire?
« Reply #6 on: January 27, 2014, 04:56:51 PM »
Something else to consider is that your company pension might get terminated and that you will  be given a cash payout. This happened to me a few years ago. I don't know details of where you work/where you live but I wanted to raise it as a possibility because, sadly,  this seems to be happening with more and more frequency.

Given the scenario you laid out, it really depends on you... if the extra years of work (more $) will make you feel safer and more secure in your retirement, then that is what you should choose. But I would definitely take a close look at the reasons why you think you'll need more money and start addressing  those reasons/fears now. You might be able to surprise yourself and take the earlier retirement and have more time to do whatever  it is you'd rather be doing. :)

foobar

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Re: Enticed by incentives to not retire?
« Reply #7 on: January 28, 2014, 11:07:28 AM »
Is that 38k in todays dollars or in 20+ years from now dollars? Is the pension inflation adjusted or fixed? Are you eligible for SS or are you in a job that opts out?

At the end of the day, don't worry about this for another 10 years. Keep  on saving money and living frugally and then when you get close to like 45 you can decide if your getting enough enjoyment from the job to keep on doing it or if you want to quit. And if you have enough cash, you can make that choice every year.


The concept of "enough" is key here. If you retire at 50 and start collecting from your pension at 65, that's an annual income of $38,400 before taking Social Security into account. That should be enough, right? As long as you have enough money saved up by age 50 to last you from 50 to 65, why should the prospect of earning money that you don't need be sufficient impetus to keep you in your job?

ShavinItForLater

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Re: Enticed by incentives to not retire?
« Reply #8 on: January 28, 2014, 11:54:09 AM »
I'd second the notion of just not worrying about it now.  You're 33, so you have 17 years before this decision would need to be made.  I would venture to say it's a rare person who is even with the same company for that long.  I've stayed in the same industry/career path since leaving college 22 years ago, and the longest I've been with any one company is 8.  I'm not saying you won't be there that long necessarily, but really I don't see much point fretting over something like this any time soon.  17 years is a long time.

Richard3

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Re: Enticed by incentives to not retire?
« Reply #9 on: January 28, 2014, 02:13:23 PM »
I dunno who you work for, but you're 33. I'd ignore this decision until it's a real issue.

Save lots of money and think about the employer pension when you're 50 (if that's the earliest you can take it). Heck, you could be able to be FI before you're 50 anyway.

Quote
How would you handle a situation when all of these carrots are dangling to keep you working for longer?

At some point I would think "I have lots of carrots and would really prefer having some bacon" where bacon here is a synecdoche for all the good things in the world like not working in a boring job (if the job is boring). Yes, more money is nicer than less money, but the utility of money is very much a log curve.


There, some ten dollar words and a maths reference, and people say the Internet is hurting communication skills :)

matimeo

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Re: Enticed by incentives to not retire?
« Reply #10 on: January 29, 2014, 05:01:02 PM »
Good advice all around.  I do have a ways to go and I'm probably jumping the gun a little.  Time for a little more focus on the here and now and what I can control.  Count my blessings so to speak.