Author Topic: What to do about pension/ER conflict?  (Read 1159 times)

Psychstache

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What to do about pension/ER conflict?
« on: October 22, 2014, 06:07:00 PM »
So I have gone back and forth about what to do about the pensions that my wife and I participate in at work. It is mandated and replaces SS, though I will likely earn enough credits to get the bare minimum due to other work.

So here is the situation:

If the ER plan works out, I would be ready to retire at 40, which would give me 15 years in the pension system. The pension pays out 2.3% per year of employment of an average of the last 5 years salary. The issue is that I would not be able to begin collecting until I am 65, so that is 25 years for that spending power to get eroded (doesn't come with any COLA adjustment).

The other option would be to roll that money out of the pension system and into a traditional IRA. It would be my contributions plus 2% annual interest.

I have not been considering any of this money in the calculations for ER, so what would you do? Wait for the small guaranteed income later, or plug the cash value into your stash when you pull the plug?

Left

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Re: What to do about pension/ER conflict?
« Reply #1 on: October 22, 2014, 06:25:18 PM »
Could you take the amount out and put it into an investment and if you want a fixed income later on, buy an annuity with it? Would it pay out the same if you had let it grow in investment for the first 25 years?

kendallf

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Re: What to do about pension/ER conflict?
« Reply #2 on: October 22, 2014, 06:33:35 PM »
Yes, what's your contribution total going to be?  Run some numbers on that amount, invested at whatever market return you think you will get.  Compare to your pension payout.