Author Topic: Pension payout schedule question  (Read 600 times)

aperture

  • Bristles
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  • Location: Colorado
Pension payout schedule question
« on: November 16, 2017, 09:24:06 AM »
I am fortunate to have a pension at my job. I can opt to take it (or a lump sum) as early as next year (age 56) when I quit working or anytime until age 65. The pension pays out 100% at age 65, and on the following schedule for younger ages:
Age 55 - 60%
Age 56 - 65%
Age 57 - 70%
Age 58 - 75%
Age 59 - 80%
Age 60 - 85%
Age 61 - 88%
Age 62 - 91%
Age 63 - 94%
Age 64 - 97%
Caveat - I believe that the money will not grow once I quit. If my age 65 pension is $2000/month, then that is what I will get no matter what happens with inflation.

If I take a lump sum and invest it, I may be able to achieve the same or better growth over the next 9 years. On the other hand, investing a lump sum is riskier than letting the pension sit.

If I take the pension, it will be old age insurance - especially for my wife who is younger than I am. In that case, I should take it at 65 to have the largest dollars as a pension for age>85. This approach may not get the most absolute $s, but gives diversification to a 70:30 stock bond allocation (with plan to glide into 100% stocks over ~first 10 years of retirement). Inflation may kill pension value, but stocks will rise with that tide.

Presently I am leaning towards the pension at age 65. I wonder what I am not considering? Thanks, aperture.

MDM

  • Walrus Stache
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Re: Pension payout schedule question
« Reply #1 on: November 16, 2017, 10:25:13 AM »
If not taking the pension allows you convert significant amounts of traditional savings to Roth while paying minimal taxes, that is another reason to delay.

Deferring for the years in which the annual amount grows somewhat rapidly (through age 60) is easier to defend than the ~3.3%/yr growth after that.

Not the worst problem to have - good luck!