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Hi, I'm Fedup and looking to retire in 2015
Old 04-04-2014, 10:14 AM   #1
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Hi, I'm Fedup and looking to retire in 2015

I've been lurking this site for years and finally decided to post. I'm 54 and looking to retire in 2015. Financially, I think I'm in the ballpark but not 100% sure if I will run out of money when I'm 100 years old. But that is a nice problem to have if I do get there.
However, lately I'm having second thought and wanting to retire sooner as in 2014 when my husband has retiree health insurance. Is it worth for me to work one extra year so I can have a small pension of $5K(COLA) per year starting 62? How to calculate the present value of this future income?

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Old 04-04-2014, 10:17 AM   #2
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54 and fed up. We are twins. Welcome to the board. There are many much smarter people who will ask you for more details about your expenses and assets to help give you advice.
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Old 04-04-2014, 10:37 AM   #3
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Is it worth for me to work one extra year so I can have a small pension of $5K(COLA) per year starting 62? How to calculate the present value of this future income?

Thanks
Fedup
While on the surface it doesn't seem like much, I would also calculate what the present value is. Then I would consider that this amount might allow you to keep that same amount in a retirement plan longer getting compound interest. That's the thoughtful side. But depending upon the zillions of variables here (what are your other funds, stability of the pension source, your current health). I might go with my immediate mental blurt: $5K buys about 1000 beers at the local brewpub (at $5.00 each), edit -so that would mean something to me.
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Old 04-04-2014, 10:46 AM   #4
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If I'm understanding you correctly, are you saying that if you retire this year you will have no pension, but if you work one more year you will have a $5K COLA'd pension? That's a pretty significant difference for only one more year of work if so. If it were me, I'd work the extra year to know that I had a guaranteed $5K per year for the rest of my life.
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Old 04-04-2014, 10:50 AM   #5
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The present values is determined by taking the future stream or lump sum and discounting it to today based on inflation. Say, e.g., the present value of $50 in 2020 has same purchasing power as $40 today. Used to do this by hand. Go on-line, you'll find a calculator. But key is the guestimated inflation rate. See thread below, "new, and wanting to retire (me). Nash031 provides a good write-up on rates, 2.5% historically I believe he stated.
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Old 04-04-2014, 11:02 AM   #6
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Thanks for all your replies. Source of pensions all from government with COLA for my husband. For me it's a Megacorp that is doing really extremely well. So in other words, I'm not worry it will go away. Mentally, I put my money in buckets. All of my husband's pensions and mine will be paying for expense, not mortgage, estimated to be around $4-$5K a month. But from the 2 years of budget that I've maintained, it barely covers my credit card payment. Granted we spent freely while we have employment (somebody has to help the economy). We will go into cash in 2015. Mortgage will be paid by income from a rental house. My husband's 401K will be spent down for both of us. I don't foreseeing needing much more. My 401K is for unforeseen event like medical. We have Federal health insurance with husband's retiree income.
We also have large cash savings outside of 401K just in case we need them. Worst come worst we can also sell or use the home equity from the rental. I don't see we ever need to do this ever and plan to leave to my kids. So that is roughly the financials of my situation.
Health wise, I'm fine, not taking any medicine nor vitamins yet. But I hate to put up with the commute.
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Old 04-04-2014, 11:21 AM   #7
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I would put your numbers in FIRECalc and see what it says. If you click the bottom button on the Investigate page, FIRECalc will give you a range of available spending levels based on confidence in your money lasting through your retirement. Then add and remove the 5k pension and see how the available spending changes. In deciding if the resulting amount is adequate, I would be conservative with spending and use current spending. You will likely need to refine the numbers for all your assets as you start to understand how FIRECalc works. For me this was a worthwhile effort.
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Old 04-04-2014, 11:57 AM   #8
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Hermit, I did put my numbers in TRowe Price calculator last year and it was 99% confidence and that without the non-401K cash account. I'm slightly worried I might not want to constraint my lifestyle so my money would last till I'm 100.
When the tech bubble burst my family was able to survive on less than $25K income but I'm not sure I want to repeat that frugality life style in my old age.
But thanks for your advice, when I'm more awake I will run FIREcalc.
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Old 04-04-2014, 12:02 PM   #9
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The present values is determined by taking the future stream or lump sum and discounting it to today based on inflation. Say, e.g., the present value of $50 in 2020 has same purchasing power as $40 today. Used to do this by hand. Go on-line, you'll find a calculator. But key is the guestimated inflation rate. See thread below, "new, and wanting to retire (me). Nash031 provides a good write-up on rates, 2.5% historically I believe he stated.
Find an immediate annuity calculator enter the amount per month and your age and you will find out how much it might cost. That is effectively the npv of the annuity.
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Old 04-04-2014, 06:22 PM   #10
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Update to add that I ran FIRECalc and it indicates 100%, 0 failed cycles. I didn't include my second home in the calculations.
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Old 04-04-2014, 06:53 PM   #11
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Update to add that I ran FIRECalc and it indicates 100%, 0 failed cycles. I didn't include my second home in the calculations.
Congratulations! Sounds like you should be close if not totally FI. If fact, sounds like you are being conservative and are actually FI now. The COLA then becomes a decision on whether you would prefer to purchase an additional year of freedom for the price of the COLA or would rather have some extra fun money each year for travel and luxuries. For some, OMY never seems to end, but in your case, there is a nice pot at the end of that first OMY.
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Old 04-04-2014, 07:27 PM   #12
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Thanks, it's good to know the numbers are there for FI. I also ran various online calculators and the present value of my future pension, if I stay until 2015, it is roughly about $100K.
I think I'll stay working but taking a lot more days off to recharge. The job is not stressful, only the commute.
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Old 04-05-2014, 11:23 AM   #13
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Edit to add more info about the comment that I made regarding my job is not stressful, I meant what I have to do is not stressful but the politics are awful and nauseating. Add with the long commute and it's a drain. So hopefully I won't get sick if I stay until 2015. I think that is my biggest worry.
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Old 04-05-2014, 12:07 PM   #14
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I extrapolate the pension value out by saying 1 yr = $5k pension same as 10 yrs = $50k pension ---
10 yrs for a 50k pension I'd be all over! So I guess 1 yr for 5k should be equally as appealling....
Now if earning the pension meant nothing to my financial future cause I'd never actually spend the $ then that would be different and I guess that may be the delema your facing?
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Old 04-05-2014, 01:33 PM   #15
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Hey Fedup,

I noticed you joined the Class of 2015. Congratulations!

I added you (and a couple of others) to the class list.
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Old 04-05-2014, 05:32 PM   #16
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@Hermit, thank you.
@militaryman, yes I guess that is my dilemma.
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Old 12-10-2015, 03:46 PM   #17
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Bring this post to say that I'm officially FIREd today. What a great feeling. Thanks everyone for your encouragement and help, many times this year I thought of quitting. But here I am. I'm a retiree now.


Sent from my iPad using Early Retirement Forum
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Old 12-10-2015, 04:32 PM   #18
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Congratulations, Fedup! Hope your last day at w*rk was wonderful. Enjoy your new FIREd life!
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Old 12-10-2015, 06:51 PM   #19
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Congratulations! Enjoy your new freedom! (And maybe change your screen name? )
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Old 12-10-2015, 08:46 PM   #20
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Congrats and thank you for the update.
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