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Teacher needs advice
Old 06-14-2009, 02:19 PM   #1
Confused about dryer sheets
 
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Teacher needs advice

Hi all,

Long time lurker . . . first time poster! Seeking your expert advice.

I have the opportunity to retire at the end of 2010, at age 51, after 30 years as an instructor at a public University. I would receive a $52K annual pension (with a 3% COLA) from a single-life annuity. (At this point, that would include paid health insurance, though the state legislature may change that down the road.) I have not contributed to Social Security.

I am single, healthy . No dependents. No debt. I own a modest $150K home in a very affordable community.

I’ve been living (comfortably but somewhat frugally) on about $30K/year . . . with the rest going to savings. Retirement plans include traveling, spending more, and at some point likely going back to work part-time in a new career!

I have approx. $330K in an IRA, 403(b), etc., which I don’t plan to touch until I have to. I have $170K in a CD which I plan to use for a house / condo in case I would to move to a "less affordable" locale after retirement. I have another $85K CD for "emergencies".

So . . .
  1. Other than the fact that I can’t imagine not teaching every quarter, anyone see any red flags here? My state government is in pretty sad financial shape. While the single-life annuity would be Constitutionally protected, I’m eager to lock this in next year before they move to change the retirement options to my detriment.
  2. I have the option to take a $600K lump sum, with no health insurance, in lieu of the single-life annuity payout. Anyone think I should consider that route?
Thanks in advance!
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Old 06-14-2009, 03:05 PM   #2
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I'll let brainier types answer your big questions, but advise that you check on your 403(b) expense ratios, if you do not know them now. My DW is a teacher and her 403(b) had some real rip off expenses built in.
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Old 06-14-2009, 03:22 PM   #3
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Hey Teri,

Welcome here.

Quote:
I have the option to take a $600K lump sum, with no health insurance, in lieu of the single-life annuity payout. Anyone think I should consider that route?
I would not consider trading this in. The health insurance alone may be worth it. Since your current expenses are quite a bit less that your pension and your deferred qualified plans will not be tapped for years to come, I can only suggest that you consider exchanging you funds to Vanguard so that mutual fund expenses can be more easily controlled.
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Old 06-14-2009, 04:49 PM   #4
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Welcome , I would stay with the plan that provides health insurance since that is the big unknown in retirement .
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Old 06-14-2009, 05:42 PM   #5
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I would ask the folks over at bogleheads as well. Link below:
Bogleheads :: Index
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Old 06-14-2009, 08:30 PM   #6
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Would you receive the $52K annual pension (with a 3% COLA) starting in 2010, or after you hit 65?


-ERD50
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Old 06-14-2009, 08:33 PM   #7
Confused about dryer sheets
 
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Quote:
Originally Posted by ERD50 View Post
Would you receive the $52K annual pension (with a 3% COLA) starting in 2010, or after you hit 65?
Starting 1/2011. Thanks for all the great comments so far!
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Old 06-14-2009, 09:03 PM   #8
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Welcome to the forum...lots of good advice here.

I'd second the suggestions that you take the annual pension with the health insurance over the lump sum.

You mention that the state legislature might be changing this in the future. That said, I'd lock it in NOW.

And take a close look at the fees; they add up. Moving to Vanguard or Fidelity can save you a lot of $$$.
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Old 06-15-2009, 04:36 AM   #9
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You have a 52K pension with a cola

you have health insurance

you have a net of 585K

You live on 30K a year, meaning you are going to bank some of your pension.

You have no one that depends on you.

You are 51 and will be around another 30 years or so.

I would say stick with the pension, the health insurance would cost you probably 5K a year for a single person, 52K time 30 years would give a payout of 1.56 million, better than putting the 600k into an annuity.

You basically have the 2 of the 3 legs of retirement. A defined beny pension, a good cash balance to supplement it, but no Soc sec. However, the cola, and the cash more than make up for it, and being frugal makes up for it, so go for it and enjoy your life. Looks like a go to me.

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Old 06-23-2009, 07:14 AM   #10
Confused about dryer sheets
 
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Thank you all for the advice and comments!
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