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Retire on $100 k a year?
Old 04-30-2011, 08:14 PM   #1
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Retire on $100 k a year?

I am 50. I plan to retire from a government job in 2 years. I will get a pension of appoximately $100,000 a year, plus 2 percent cola a year. I have a very small mortgage on a house, which shouldn't be a problem. I still have about $100,000 in mutual funds.

Is this enough to last me til I die (don't know when, let's estimate 85).

No Social Security, and my medical will be taken care of with a nominal fee.
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Old 04-30-2011, 08:19 PM   #2
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Depends on the person. For some, that wouldn't be enough. For others, that may be 2-3x what they need.

For you, to answer that question you need to ask this one: What are your current yearly expenses?
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Old 04-30-2011, 08:22 PM   #3
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Welcome to the forum, Senin. The answer to your question is "it depends"......on how much you plan to spend each year, and on inflation. You are lucky to have a defined benefit pension!

If you haven't already done so, check out the link to FIRECalc at the bottom of the page. Plug in your own data and submit. Then play with the options.
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Old 04-30-2011, 08:24 PM   #4
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I think you're good. If you could invest 10k-20k of that 100k to protect against future contingencies -- like hyperinflation or catastrophic illness -- that might be prudent.
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Old 04-30-2011, 08:37 PM   #5
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That's the amount I'd like to have, but it's almost twice the amount I'm going to have...
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Old 04-30-2011, 09:13 PM   #6
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I would like to know how a person gets a $100,000 COLA'd pension from the Gov. I did 20 years and only get about $15,000 before taxes and no increases for two years. I must have missed something when I signed up. Oh, and welcome to the forum and like they have already said it depends on expenses and what the future hold for the government pensions.
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Old 04-30-2011, 09:51 PM   #7
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I'm sorry, but getting a guaranteed $100K annually with a 2% COLA, plus cheap health insurance, would make me dance every day of my remaining life.
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Old 04-30-2011, 09:51 PM   #8
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Originally Posted by DFA View Post
I would like to know how a person gets a $100,000 COLA'd pension from the Gov. I did 20 years and only get about $15,000 before taxes and no increases for two years. I must have missed something when I signed up. Oh, and welcome to the forum and like they have already said it depends on expenses and what the future hold for the government pensions.

My guess he is a state or local government employee not Federal.

Que the state pension thread battle.
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Old 05-01-2011, 01:24 AM   #9
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My guess he is a state or local government employee not Federal.

Que the state pension thread battle.
Not again! Why don't you go over there and beat up on CEOs instead?
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Old 05-01-2011, 02:44 AM   #10
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Thanks guys, great replies.

To answer a few questions. Yep. local government, in a city that cries poverty but has bucks.

"If you could invest 10k-20k of that 100k to protect against future contingencies -- like hyperinflation or catastrophic illness -- that might be prudent."
That was a great comment. I never thought of continuing to invest the 100k pension, I was just thinking of taking. Of course the investment better be pretty darn safe. I would not want to go through another one of these recessions. So the question would be... invest in what? Bonds?

By the way, that 100k is before taxes. So I don't know if I would really have the 10k-20k to invest.

I am feeling pretty good about the first day out the door. I just worry about the next 35 years, even with the 2% cola.
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Old 05-01-2011, 04:00 AM   #11
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Quote:
Originally Posted by Senin
Thanks guys, great replies.

To answer a few questions. Yep. local government, in a city that cries poverty but has bucks.

"If you could invest 10k-20k of that 100k to protect against future contingencies -- like hyperinflation or catastrophic illness -- that might be prudent."
That was a great comment. I never thought of continuing to invest the 100k pension, I was just thinking of taking. Of course the investment better be pretty darn safe. I would not want to go through another one of these recessions. So the question would be... invest in what? Bonds?

By the way, that 100k is before taxes. So I don't know if I would really have the 10k-20k to invest.

I am feeling pretty good about the first day out the door. I just worry about the next 35 years, even with the 2% cola.
Do you live in a state that taxes pensions? If so, are you willing to move to one that does not? Have you run FIREcalc with your expense, pension, and COLA? Do you know which expenses you are willing to cut if inflation goes over 2% and the cola does not?

All of that said, most people around here (or anywhere) would be jumping for joy with that amount.

Good luck, and welcome!

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Old 05-01-2011, 05:00 AM   #12
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Probably, most here could, but depends on all your expenses. I know I could.

Enjoy ER!
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Old 05-01-2011, 05:12 AM   #13
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Same here. I know I could.
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Originally Posted by Aiming_4_55 View Post
Probably, most here could, but depends on all your expenses. I know I could.

Enjoy ER!
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Old 05-01-2011, 05:42 AM   #14
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I would like to know how a person gets a $100,000 COLA'd pension from the Gov. I did 20 years and only get about $15,000 before taxes and no increases for two years. I must have missed something when I signed up. Oh, and welcome to the forum and like they have already said it depends on expenses and what the future hold for the government pensions.
It's entirely possible if you work for 30 years and have a good salary. In MA the average state pension is $27k a year and you don't get SS.....so that's not much to live on. However, people like cardiac surgeons and medical researchers who work for the state medical school often work for over 30 years and can earn salaries well above $100k a year......hence it is possible to get big pensions. These are quite rare and I would say deserved given the skill and qualifications of the recipients.

If the OP can keep their spending below $100k then they are set. The COLA is key and survivor benefits should also be considered.

Given such a big pension and the small size of other investments I'd try to save 25% of the pension for an emergency fund.
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Old 05-01-2011, 05:53 AM   #15
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Quote:
Originally Posted by Senin View Post
That was a great comment. I never thought of continuing to invest the 100k pension, I was just thinking of taking. Of course the investment better be pretty darn safe. I would not want to go through another one of these recessions. So the question would be... invest in what? Bonds?
Odds are you will go through another recession, possibly worse or several. I assume you meant you don't want to go through another with your own investment portfolio [which is what many of us are faced with].
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Old 05-01-2011, 06:09 AM   #16
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Odds are you will go through another recession, possibly worse or several. I assume you meant you don't want to go through another with your own investment portfolio [which is what many of us are faced with].
You should arrange things so your pension covers your expenses. Then any excess can be invested. As you have a guaranteed income source you could be quite agressive in your investing. Take a look at the FAQs on here and sites like bogleheads.com to get some basic information on asset allocation etc
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Old 05-01-2011, 06:20 AM   #17
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So ask yourself what could go wrong?
1) Inflation over 2% Mitigation: Have a portfolio of equities whose dividends will rise with inflation.
2) Divorce Mitigation: Don't know if you are married but if so be very nice to your spouse
3) Spend more than after tax income. Mitigation:Pretty obvious- cut spending
4) Catastophic illness: Mitigation: Hopefully your insurance will cover but should try to live a healthy lifestyle anyway.

Conclusion: Many(most?) people on this forum would be very happy to be in your position.
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Old 05-01-2011, 06:58 AM   #18
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My personal concern would be a "single source" for retirement income, without any alternative backup. Just because you forecast $100k today from a "government source" we know that the state funding battle has just begun (good or bad - not a political statement at all).

I've been retired four years; DW is expected to join me in the next year or so. Even though we're both 63, we will have different current income sources along with future sources coming on line during the next seven years, including two SS streams (ages 66/70), a temporary SS stream (my claim against my DW from ages 66 through 69), two small pensions for her at age 65, an existing SPIA (joint), along with my small existing VA disability income and of course our individual/joint retirement portfolios.

It's a bit like driving an 8-cyl vs. 4-cyl (or even 1-cyl MC) vehicle. On the 8-cyl, a misfire may be noticeable and only affect performance to a small degree. Once you reduce the number of cyl's (e.g. income sources), any "miss-fire" becomes more of a problem.

As far as other comments? I agree with the one's asking if 100k meets your personal income requirement, along with increases over the year. As for DW/me, it is below what we require, but then again there are two of us and our lifestyle is not conservative (nor is it extravagant in our situation, IMHO).

BTW - welcome!
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Old 05-01-2011, 07:54 AM   #19
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I am just curious how someone can earn enough money over say..... 30 years where they have a pension of $100K per year and only have $100K in savings....


Still did not list your expenses... without that nobody can tell you if you have enough.... IOW, if you were pulling down $250K per year and spending it all... then you do not have enough...
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Old 05-01-2011, 08:27 AM   #20
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I am just curious how someone can earn enough money over say..... 30 years where they have a pension of $100K per year and only have $100K in savings....
That's a good point, sounds like the OP is used to spending a lot of money.

Quote:
Still did not list your expenses... without that nobody can tell you if you have enough.... IOW, if you were pulling down $250K per year and spending it all... then you do not have enough...
Yep, the question is like asking "I want to buy this coat, will I be warm enough?" without telling anyone what kind of weather you'll be wearing it in.

OK, $100K is certainly enough to retire on, but we have no idea whether it means you will have to severely curtail your current lifestyle. 2% COLA isn't great, but if you have medical covered that helps, since that's one of the biggest unknown costs and most likely to rise faster than inflation.
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