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Hello, 49 and Four months until retirement
Old 04-10-2016, 08:48 AM   #1
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Hello, 49 and Four months until retirement

Hi, I'm John and after 26 years in Law Enforcement, I plan on retiring in August 2016. I will be age 50 at that time.

Pension is $55,000 a year
Health Insurance-Work pays majority, but my out of pocket cost is $3,000 a year so that would put me at $52,000 which also has a 50% pension pay out for my wife if I died.

My 457- $300,000
Spouse 401- $100,000

I owe $16,000 on my townhouse. I plan on selling back all my leave and paying that balance off so I'll be mortgage free. I also have no outstanding debt. No kids at home and already paid for my only daughter's wedding.

I have $50,000 in my savings and plan on using some of that for house repairs.

My wife is older than me and plans on working another 7 years. After her 401 contributions, she brings home $35,000 a year. She has no pension, but will be eligible to draw SS.

At 62, I'll be eligible to draw $1,969 in monthly SS.

HR has already prepared my retirement numbers. My job offers a SSLI option which I have to accept or decline. If I accept the SSLI option, I will get $65,000 as a pension. However, once I turn 62, the pension goes down because the SS kicks in so you don't get an increase,you just stay steady at $65,000 (the pension is less - like a see saw of who pays). Once I past age 72, I would lose out. I was leaning towards declining this option. I like getting the $24,000 increase at age 62 with SS. Others at my work, say take the money now because you're young and can enjoy it while you're healthy or just take that money and invest it. Any suggestions on this?

I look forward to retirement and many years on this forum.

Thanks

John
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Old 04-10-2016, 10:57 AM   #2
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Your pension and SS situation is great. You do not say if there is COLA on the pension. I will presume not. I would also pass on the SSLI. I like the idea of getting the raise when SS kicks in. You do not say what your spending needs are. That is the key variable in whether your situation is OK or not. Your RE savings are really pretty modest. I would not plan to draw on it at the beginning and use it only for keeping up with inflation and as a safety reserve. You should draw up all your financials and run it through FireCalc. That will give a more definitive answer if your inputs are correct.
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Old 04-10-2016, 11:11 AM   #3
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I look at it this way. Let's say you can live on the $55K. If you take the SSLI option, you have $10K extra every year. If you don't, you have 0 extra until 62, then you have $24K extra. I ran a real quick spreadsheet, assuming a 5% investment gain on that extra, and you cross over at age 79 to the non-SSLI option being better.

But wait...won't inflation kick your SS up by the time you hit 62? With the non-SSLI option, you'll get that extra benefit, but with the SSLI option, are you locked into $65K, even if that $24K SS benefit is now $27K (with 1% COLA increase each year), and going up every year? If that assumption is true, the crossover happens at age 73. Is that what you meant by "Once I past age 72, I would lose out.", right? Sounds like we made the same assumptions and came to the same conclusion.

If that's really the case, that SSLI locks you into $65K, while the non-SSLI gives you $55K + SS at 62 + SS COLA increase, I think the non-SSLI option is a no brainer unless you have health issues or family history that makes living past 73 unlikely.
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Old 04-10-2016, 12:35 PM   #4
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Just to add after the comments, my monthly costs are $1500 (utilities, food, insurance, gas, etc.). We do get a COLA in our pension and it's been about 1% each year for the past several years.

No SSLI - $4,565, With SSLI - $5,407, Once I reach 62 - $3,459

There is nothing that states that I have to draw at age 62 and if the 24K in SS goes up to 27K or higher, because of a COLA, that's what I get. I'm not locked at $65 if the SS is higher. I'm still leaning towards declining the SSLI.

Message from my HR with my numbers:
Your biggest decision is what option you want to take your pension under. It seems that the next biggest decision is if you want taxes withheld and at what level. Taxes can be changed at any time but the option you take your pension under cannot. The other thing to think about is where your birth certificate/passport is and if you are taking a joint and survivor option.

Thanks for the input.
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Old 04-10-2016, 03:11 PM   #5
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Quote:
Originally Posted by AlbaCrush View Post
Just to add after the comments, my monthly costs are $1500 (utilities, food, insurance, gas, etc.). We do get a COLA in our pension and it's been about 1% each year for the past several years.
Does that $1500 include medical, taxes, travel, etc? If it is complete then your pension is 3X your expenses +COLA and I would say RE any time you want.
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Old 04-10-2016, 05:31 PM   #6
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Originally Posted by DrRoy View Post
Does that $1500 include medical, taxes, travel, etc? If it is complete then your pension is 3X your expenses +COLA and I would say RE any time you want.

It's more like 2X if you factor in taxes ($3100). That leaves me $1600 after all expenses paid. This doesn't include my wife's salary of $35,000 for next seven years when she finally retires.
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Old 04-10-2016, 06:53 PM   #7
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Welcome to the forum, I also retired from LE at age 52.

I gather that if you pass first your wife will continue to receive 50% of your then-current pension ($25k) until she also passes. Is the pension COLA'd? If not this will be huge in the future, and may strongly incline you to hold off on SS since that is COLA'd. She will also be eligible to receive either her own SS or yours, whichever is greater, so you'll want to consider those numbers as well. You don't say what her SS eligibility will be but if she's at $35k/year now I'd guess ~$1k/month or a bit over? So the longer you wait to take SS that can make a huge difference for her in later years.

I took the option that the pension went down by what SS would have been at 62 and had planned on starting SS then, but I then stumbled into a job that more than made up the difference so I put off SS until 66. It's personal preference really, actuarially it makes no difference. For us it makes a bigger difference for DW assuming I pass first.

The variables vary so widely from person to person there is no "correct" answer, but these are just some things to consider.
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Updated - 50 and FIRE Today
Old 08-25-2016, 01:20 PM   #8
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Updated - 50 and FIRE Today

Today was my last day. I turned in my badge and gun. I'm officially FIRE. I guess it won't sink in for a few days that I no longer have to work.
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Old 08-25-2016, 01:50 PM   #9
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Congrats, that is great news. Enjoy!!
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Old 08-25-2016, 02:01 PM   #10
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Congrats! Enjoy this next stage.
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Old 08-25-2016, 05:07 PM   #11
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Congrats, what was your final decision on your pension? I think you're in good shape either way.

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Old 08-25-2016, 09:30 PM   #12
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Let me add my congrats as well
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Old 08-25-2016, 10:45 PM   #13
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Originally Posted by enginerd View Post
Congrats, what was your final decision on your pension? I think you're in good shape either way.
I ended up taking the straight pension (No SSLI). I also sold back my vacation leave ($16,000) and rolled that into my 457 account to avoid the hefty tax hit.

Thanks for the congratulations. So how long does it take for it to sink in? I feel the sameas if I'm still working. i know I just left...LOL
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