Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
A little help on my pension decision
Old 12-25-2015, 09:59 AM   #1
Thinks s/he gets paid by the post
RockyMtn's Avatar
 
Join Date: Jul 2009
Location: North Scottsdale
Posts: 1,234
A little help on my pension decision

I FIRE'd in July 2009. Since then I have continued on the payroll as a "consultant". Didn't really do a whole lot in the last 6.5 years other than answer a few questions from lawyers. It really was more like a non compete.

Well that arrangement is coming to an end on December 31st. So now I have to decide what to do with the pension from megacorp. Sure could use some help from the pension wizards on the site with my decision.

The numbers:

Pension 1

100% joint survivor starting 1/1/2016= $3047 per month. Non cola'd.
100% joint survivor starting 1/1/2023= $3657 per month. Non cola'd.
Lump sum option= $658k. Immediateannuities.com shows a $2813 per month joint survivor payment.

Pension 2

100% joint survivor starting 1/1/2023= $1250 per month. Non cola'd.

Social Security: Roughly $60k between the two of us in 2028 (70.5).

Current 401k/TIRA: $1.25m. Projected 401k/TIRA balance at 70.5 is $1.9m (see below).

Other income: I serve as an "advisor" to a company in which I receive $120k per year in 1099 income. I put about $50k of that into a solo 401k. This will continue until at least 2028.

We live off 1099 income and dividends. No need to tap tax deferred in foreseeable future.

Schwab RMD calculator shows required withdrawals of $102k starting at 70.5. So income at 70.5 is as follows:

RMD's: $102k
SS: $60k
Pension 1 (if take at 65): $44k
Pension 2 $15k

Total: $221k

The questions:
1. Should I start pension 1 now or wait to 65?
2. Should I do Roth conversions from 401k/TIRA even if it bumps me up to 33% tax bracket? Currently in 28% bracket.
3. Should I continue putting 1099 income into solo 401k?

I am going to run these scenarios through IORP as, if I recall, it is pretty good at identifying sequence of withdrawals. At this point I am thinking take pension 1 now and continue to dump $$$ into the solo 401k.

Thanks for your help folks! If more info is needed just ask.
__________________

__________________
FIRE'D in July 2009 at 51...Never look back!
RockyMtn is online now   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-25-2015, 11:11 AM   #2
Administrator
W2R's Avatar
 
Join Date: Jan 2007
Location: New Orleans
Posts: 38,949
I tend to agree with you, since you are already retired and you seem very well set overall, with future SS and wife's pension also to be factors in this. But good idea to run it through the calculators to see what would be financially advantageous, and also to get input from other forum members; if there is any doubt then I'd re-think it.
__________________

__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities.

- - H. Melville, 1851
W2R is offline   Reply With Quote
Old 12-25-2015, 11:12 AM   #3
Thinks s/he gets paid by the post
Souschef's Avatar
 
Join Date: Dec 2015
Location: Santa Paula
Posts: 1,201
i will only comment on Pension 1. Just doing the simple calculation, the crossover would be at 5.8 years, or 2029. This ignores the present value of the future pensions, or the earnings on the funds during that period
__________________
Retired Jan 2009 Have not looked back.
AA 50/45/5 considering SS and pensions a SP annuity
WR 2% SI 2SS & 2 Pensions
Souschef is offline   Reply With Quote
Old 12-25-2015, 01:02 PM   #4
Thinks s/he gets paid by the post
RockyMtn's Avatar
 
Join Date: Jul 2009
Location: North Scottsdale
Posts: 1,234
Quote:
Originally Posted by Souschef View Post
i will only comment on Pension 1. Just doing the simple calculation, the crossover would be at 5.8 years, or 2029. This ignores the present value of the future pensions, or the earnings on the funds during that period
Thanks Sous, but can you tell me how you come to 5.8 years? I come with something entirely different.

Taking pension at 58 instead of 65 is $36.5k x 7 years = $255k in early payments. If I take at 65 the difference in payout vs 58 is $7.3k more per year. Divide the $255k by the $7.3k and you get 35 years.

Am I doing something wrong?
__________________
FIRE'D in July 2009 at 51...Never look back!
RockyMtn is online now   Reply With Quote
Old 12-25-2015, 01:22 PM   #5
Thinks s/he gets paid by the post
Souschef's Avatar
 
Join Date: Dec 2015
Location: Santa Paula
Posts: 1,201
Your numbers are correct, but this is how I did it;
In the 7 years if you take it in 2016, by 2023 you will have earned $255948
If you wait until 2023, the point at which you will have earned $255948 will be in 5.8 years after 2023.
As i said, my simple calculation ignores any earnings on the money you will get for those 7 years. That would push the crossover point later than 5.8 years.
__________________
Retired Jan 2009 Have not looked back.
AA 50/45/5 considering SS and pensions a SP annuity
WR 2% SI 2SS & 2 Pensions
Souschef is offline   Reply With Quote
Old 12-26-2015, 05:45 AM   #6
Thinks s/he gets paid by the post
DrRoy's Avatar
 
Join Date: Dec 2015
Location: Michigan
Posts: 1,732
[QUOTE=RockyMtn;1673739

Taking pension at 58 instead of 65 is $36.5k x 7 years = $255k in early payments. If I take at 65 the difference in payout vs 58 is $7.3k more per year. Divide the $255k by the $7.3k and you get 35 years.

Am I doing something wrong?[/QUOTE]

I think this is a good way to look at it. Here is another. The $36.5/yr over 7 years at 3% is about $280k.

Annuity of $2813/mo for $658k gives $1197/mo for $280k. Taking the pension now and saving for 7 years gives $3047 +$1197=$4244/mo which is better than waiting.
__________________
"The mountains are calling, and I must go." John Muir
DrRoy is offline   Reply With Quote
Old 12-26-2015, 06:19 AM   #7
Recycles dryer sheets
 
Join Date: Apr 2013
Location: Humble
Posts: 188
I'd take the lump sum and invest it. If the company goes under or whatever, you don't lose anything. Yes, the annuitized pension is hard to beat, but it leaves you 'tied' to the company. The other thing is what happens (heaven forbid) if both of you die soon after starting the pension? There's nothing from the pension left for your heirs/estate.
__________________

__________________
Turn_the_Page is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Help with pension decision Packman FIRE and Money 2 02-09-2012 10:22 PM
Big decision-WHEN to cash in the Pension?? Ken11 FIRE and Money 15 09-28-2011 08:11 AM
Help with making pension decision please Dreamer FIRE and Money 14 01-24-2011 11:43 AM
Little by little sliding into mild depression. vicente solano Health and Early Retirement 61 09-03-2010 11:45 AM
Pension decision crispus FIRE and Money 12 08-04-2009 06:52 PM

 

 
All times are GMT -6. The time now is 10:37 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.