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Old 01-14-2015, 07:35 PM   #21
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Kind of sounds like you could go a lot sooner if your mo. spending is so low. Maybe I missed it , is your healthcare cost in retirement factored in ?
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Old 01-15-2015, 06:52 AM   #22
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Kind of sounds like you could go a lot sooner if your mo. spending is so low. Maybe I missed it , is your healthcare cost in retirement factored in ?
Yes, I factored healthcare in. To note, I am retired military so I pay minimal in comparison for healthcare.
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Old 01-15-2015, 07:00 AM   #23
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One can't use the 4% rule to determine the "value" of a pension. You can use it to approximate the needed income stream to replace a pension, but the two are not the same.

A pension has no value once the recipient(s) kick the bucket. The 4% (or 3% if you prefer) rule is designed to still preserve the original capital, adjusted for inflation, even after those drawing from it are deceased.

Therefore we can't say that a $20K pension is "worth" $500K just because 4% of $500K is $20K. The pension is worth less than that because it has zero value once the beneficiaries are dead, where as the investments outside the pension will probably still be worth $500K or more, adjusted for inflation, and can be passed on to your heirs.
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Old 01-15-2015, 07:46 AM   #24
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As part of your analysis, I recommend you ensure that the income for each of you as a surviving spouse is also adequate for your needs.

Even if you've chosen a Survivors Benefit Plan, that will only replace 50-55% of the pension amount earned by the deceased spouse. If you've chosen to use another strategy, such as insurance, for income replacement, you need to project the income that lump sum/strategy would generate. If you've chosen neither, then the survivor's income is reduced by the total pension amount earned by the deceased spouse.

Also remember that the survivor would also lose the amount of a spousal social security payment being collected by the spouse with lower lifetime earnings.

Best of luck.
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Old 01-15-2015, 09:48 AM   #25
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As part of your analysis, I recommend you ensure that the income for each of you as a surviving spouse is also adequate for your needs.

Even if you've chosen a Survivors Benefit Plan, that will only replace 50-55% of the pension amount earned by the deceased spouse. If you've chosen to use another strategy, such as insurance, for income replacement, you need to project the income that lump sum/strategy would generate. If you've chosen neither, then the survivor's income is reduced by the total pension amount earned by the deceased spouse.

Also remember that the survivor would also lose the amount of a spousal social security payment being collected by the spouse with lower lifetime earnings.

Best of luck.
All great points..My wife is 6 years older than I so I have not really been prudent enough. I will say that we have a living will and so the 500K plus annuities will go to her anyway. She has her own SS and pension so she should be fine If were to pass on first. Thanks
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Old 01-15-2015, 11:47 AM   #26
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OP, have you run your numbers through firecalc? Off-the-cuff, it looks like you are all set since your cola'd pensions cover you living costs and you just need to verify that the numbers work and decide how much you want to leave as a legacy and how much more you can spend.
I do not think firecalc considers COLO though
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Old 01-16-2015, 09:08 AM   #27
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What is COLO? If you mean COLA as in a cost of living adjusted pension, where you enter your pension there is a tick-box whether or not it is inflation adjusted or not.
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Old 01-16-2015, 09:41 AM   #28
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Oh yeah, you might look into taking a spousal SS at your FRA as your wife is older and will have already claimed
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Old 01-16-2015, 09:43 AM   #29
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Sorry yes cola. The other question for the group is wrt Thrift savings plan (tsp) Is it best to leave funds their or put in some other Avenue to withdraw at a 4% annual rate?

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Old 01-16-2015, 09:54 AM   #30
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My understanding, TSP has some funds that are hard to replicate outside of TSP. Specifically the G fund.
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Old 01-16-2015, 10:13 AM   #31
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Sorry yes cola. The other question for the group is wrt Thrift savings plan (tsp) Is it best to leave funds their or put in some other Avenue to withdraw at a 4% annual rate?

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I intend to leave a portion of my TSP funds in the TSP and will convert about 1/2 to a Roth IRA over next 5 yrs or so. Thinking the benefits of the G fund will out weight the negative tax implications once RMDs would begin. We've already moved DW's TSP to IRA as well as a small civil service TSP account I had. I don't currently own the G fund, just planning on moving funds to it later in life.
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Old 01-16-2015, 10:52 AM   #32
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The G-Fund is like the Stable Value fund that a lot of retirement funds once had. If you have access to these funds they are great as they allow you to get good interest and protect principal. I currently have half of my fixed income allocation in a stable value fund getting 2%. I don't see much reason to take money out of TSP as it offers very low fees and a choice of index funds to build a lazy portfolio.
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Old 01-16-2015, 10:54 AM   #33
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I intend to leave a portion of my TSP funds in the TSP and will convert about 1/2 to a Roth IRA over next 5 yrs or so. Thinking the benefits of the G fund will out weight the negative tax implications once RMDs would begin. We've already moved DW's TSP to IRA as well as a small civil service TSP account I had. I don't currently own the G fund, just planning on moving funds to it later in life.
Why not leave it all of it in TSP and convert half to a ROTH with TSP?
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Old 01-16-2015, 01:13 PM   #34
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TSP is a great program. Expense ratios are unbeatable, adjusting allocation is painless and even the few funds currently available let you cover all the most important investment areas. The one significant disadvantage is the very limited options for withdrawal.

Our retirement assets are about 50/50 TSP and Brokerage IRAs, which gives a broad range of options for investments and withdrawal scenarios. We take a fixed monthly amount from TSP as a predictable stipend and the IRAs are available for lump sum withdrawals (or not) depending on market conditions and the need for major expenditures, emergencies, etc.

Take your time deciding if moving funds from TSP to IRAs is correct for you. It's a decision that needs thorough analysis.
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Old 01-16-2015, 01:32 PM   #35
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Unfortunately TSP does NOT allow Roth conversions at this time. So that's why I rolled most of mine into a traditional IRA, so I can do Roth conversions over time. I'm doing this mainly to reduce my RMDs, since as a single person with pension and SS I will already be in higher tax bracket.....
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Old 01-16-2015, 06:30 PM   #36
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Some pension plans will allow you to leave your spouse the same amount that you are presently taking with a small reduction from the get go. That is how both of ours work so no reduction in pension income when one of us dies. In fact since it can't be left to anyone else the person still living see theirs go up by the amount it was originially decreased each month.
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Old 01-16-2015, 06:39 PM   #37
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They do now havea roth TSP now The gopd news is that i put my nbers in Firecalc and it came back at 100%, not even count my ss. Good news-

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Old 01-16-2015, 06:52 PM   #38
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Yes, there is a Roth TSP, but it is relatively recent and only pertains to new contributions. So if you have a lot in traditional (non-Roth) TSP accumulated in previous years, you are not allowed to convert it to Roth while staying within TSP.
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Traditonal Pensions
Old 01-19-2015, 08:40 AM   #39
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Traditonal Pensions

We are in a similar position as yourself and retired in our mid fifties. We chose to pay off our mortgage, however, rather than refinance to a lower rate. We have a 2.25% line of credit and can refinance the house, again, if necessary. Or sell and move into our RV, which we are considering, anyway.

For comparison:

After taxes and health insurance are removed, we have $3900 a month COLAd pension. The COLA was just reduced by almost half. Consider the possibility of future change to your pension. Ours was changed to reflect true inflation. Both our pensions are set up so that the survivor continues receiving the same income after their spouses death. Since my wife will outlive me by 15 years statistically, I sleep better at night knowing she's protected.

We can live on pensions alone. DW will have no SS, but has paid into Medicare. I will have a minimum SS - maybe $500 before any reductions from having a pension - but I don't calculate that into my figures. It's gravy. I never paid into MediCare. It will be more expensive than my current insurance - assuming Im required to buy into it. I'm not sure of that.

Of our million dollar portfolio, we like to take 2% for travel and other extras. We travel at least half of the time. We eat out a lot and and pretty much do as we wish. We placed a 3% limit on withdrawals and hit that once - paid off our son's car early as a college graduation gift, so he could start out debt free.

So if you can stick to your budget, I see no reason you shouldn't retire. The only question I would ask you to consider is if your budget covers living, just not surviving. If you're real budget is $4500 and your net income $6500, consider reducing how much you withdraw from investments. May come in handy later.

Good luck


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Old 01-19-2015, 09:06 AM   #40
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I think I need to clarify a few things. First and foremost the firecalc has us at 100%
Secondly: the 4500 is our pension cola'd as of today if my wife would retire tomorrow. She is 61 in March. (I am 55)That being said, this does not count our investments as of today about 500K in 401k and annuities. Also, does not count ss if wife took her ss 62? (Most likely won't).
At age 59.5 we will take 35K from those investments annually, that plus the 54k from pensions should be good enough. Two years later at age 62, I will have the option of pulling ss.
What I have NOT considered is what the taxs will be? The above mentioned pensions are net take home.


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