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New angle on "One more year"
Old 03-31-2011, 08:30 AM   #1
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New angle on "One more year"

Greetings to all,
I recently attended a retirement seminar sponsored by our pilot's union. Much to my surprise I discovered that I qualify for a full 25 year retirement this fall (2011) versus my planned exit for next fall (2012). This is due to my hire date and how a year of service is determined (fiscal year versus calendar). Here are the numbers. I am 56 now. My non-cola pension pre-tax will be 110,000 this year or 114,000 if I wait. The difference is due to an additional year of early retirement penalty If I go this year. My state doesn't tax defined benefit pensions. I've run the nums through turbotax and it appears my fed tax liability will be approx 20K. There is subsidized health care (same buy up plan we now have) but will still cost 800-1000 mo versus the 200 we pay now. 730K in 401K, 70K in IRA. Expenses: approximately 105K yearly
(this is a very generous budget with no change in lifestyle). Home and RV paid off this fall. Two college bound teenaged girls still home. Presently 35K each in their 529s. My plan all along was to use my final year to fatten up the 529s and lay away cash for a retirement excursion in 2013 for whole family (14 people) that will cost around 40K. If I do go this year,any shortfalls could be covered by non-penalty withdrawals from Vanguard 401K since I'm already past 55. Now I know the simplistic answer is to look at the nums and say, "expenses are covered; good to go", but I'm hesitating. I need to make a decision within the next month or so as to maximize my vacation buy back if I decide to leave this year. Leaving the house for another week on the road has become excruciating. Thoughts or angles or simply "wise counsel" I haven't considered are appreciated.
Ken
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Old 03-31-2011, 09:01 AM   #2
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Unless there is something you haven't told us about the benefit of waiting another year, the additional $333 per month pension income and padding your kid's 529s wouldn't seem to be worth the added year of work - at least not to me. Since none of us know what the future holds for us or our families health, I don't see any reason to fall victim to the "just one more year" syndrome. One added year of retirement can be priceless.
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Old 03-31-2011, 10:05 AM   #3
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.......... Leaving the house for another week on the road has become excruciating.........
Here is your answer. Life is a finite resource.
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Old 03-31-2011, 11:16 AM   #4
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110k pension after 25 years, screw medicine I want to fly!
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Old 03-31-2011, 01:55 PM   #5
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My non-cola pension pre-tax will be 110,000 this year or 114,000 if I wait.
Welcome to the board, Ken.

All I know about the airlines is what I read in the headlines, but it seems to me that airline retirees have a much higher membership in the PBGC than any other occupation. Do you have to take a pension from the airline, or can you get some sort of lump sum or annuity that's paid by a more credible source? The reason I'm asking is because it seems that PBGC caps their pension payouts at a much lower figure.

Would you be able to continue your retirement if your airline went bankrupt and left it to the PBGC to pay a fraction of your pension?

If you haven't already done so then you should develop a budget and run it & your portfolio through FIRECalc. First it'll help you refine your budgeting, and second it'll help you decide what fraction of your purported pension you could survive on.
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Old 03-31-2011, 03:54 PM   #6
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Thanks for the responses. In terms of PBGC, yea I have thought of it but what is a guy to do? The major cargo carriers so far have been immune to the troubles of the pax carriers, but who's to say what will happen tomorrow? Our pensions so far are funded at or above government requirements and the company, even in severe downturns has made huge profits. I could be wrong but I believe that the pension is paid from an annuity that is purchased in the retiree's name at the time of retirement. As I mentioned in the thread starter, our 105K budget is fat and could be leaned fairly dramatically in a crisis. As to FIRECALC and budgeting, yes and yes. I like to tell people that I was Dave Ramsey 20 years before I ever heard of the guy. What I'm really trying to do by asking for advice is to somehow put a value on one year of my life. There is no question that things would be more comfortable if I stayed the final year, i.e 529s and emergency funds. As for now, both DW and myself are relatively healthy and young and heart but things could change overnight. We recently had a fellow drop dead in the simulator while undergoing annual training. There's seemingly not a week that goes by these days that we don't get an official notice from the company that another retired pilot has died. Our actuarials are not good (lots of prostate and other cancers). I believe the average number of retirement checks one of our guys draws is 24. Those types of things tend to make one think soberly. Thanks again for the comments.
Ken
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Old 03-31-2011, 04:29 PM   #7
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Thanks for the responses. In terms of PBGC, yea I have thought of it but what is a guy to do? The major cargo carriers so far have been immune to the troubles of the pax carriers, but who's to say what will happen tomorrow? Our pensions so far are funded at or above government requirements and the company, even in severe downturns has made huge profits. I could be wrong but I believe that the pension is paid from an annuity that is purchased in the retiree's name at the time of retirement. As I mentioned in the thread starter, our 105K budget is fat and could be leaned fairly dramatically in a crisis. As to FIRECALC and budgeting, yes and yes. I like to tell people that I was Dave Ramsey 20 years before I ever heard of the guy. What I'm really trying to do by asking for advice is to somehow put a value on one year of my life. There is no question that things would be more comfortable if I stayed the final year, i.e 529s and emergency funds. As for now, both DW and myself are relatively healthy and young and heart but things could change overnight. We recently had a fellow drop dead in the simulator while undergoing annual training. There's seemingly not a week that goes by these days that we don't get an official notice from the company that another retired pilot has died. Our actuarials are not good (lots of prostate and other cancers). I believe the average number of retirement checks one of our guys draws is 24. Those types of things tend to make one think soberly. Thanks again for the comments.
Ken

The value of one year of life is based on age.... at 20 it is very very cheap... and 55, the price starts to go up... at 75 it is getting high... at 90+ and you know you are about to go... you might pay everything you have for one more year.....


I can say that when I hit 60, the cost for someone to take a year of my working life will be close to $1 mill.... right now it is cheap because I have to work...
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Old 03-31-2011, 04:42 PM   #8
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Congrats, the pension puts you in a sweet spot.

I find myself thinking about the what-if situations for my DW. Is the pension figure based on joint survivor? Is she the same age? Just a few things I would consider and factor in.

As for the 529, will the 35k cover what you plan to do in respect to college funding? Any conversations with the kids as far as expectations?

Maybe consider reducing your hours/days if that is an option if you are concerned about $$ or timing.

An extra year early is nice... that's a nice surprise.
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Old 03-31-2011, 04:54 PM   #9
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The pension nums include 50% spouse survival. DW and I are the same age. 529s will need at least twice the 35K to cover 4 years for each. And yes, finding out I could potentially move my well oiled plan up a full year was a very pleasant surprise. I will be giving up a full years' 401K contribution as well as the company's 7% match (around 40K total) in addition to the higher health care premium. Thanks to all for helping me with my stream of consciousness.
Ken
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Old 03-31-2011, 05:08 PM   #10
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One more year?? Some days I don't think I will last one more day!

But I am counting down!
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Old 03-31-2011, 06:39 PM   #11
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Here is your answer. Life is a finite resource.
+1 You seem to be well prepared financially - go for it! (I hope to be right behind you - just waiting for a couple of pieces to fall into place).
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