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Old 07-11-2011, 05:14 PM   #21
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Originally Posted by BigNick View Post

There is also the question of who would have priority if the pension fund hit trouble. Suppose the fund turned out to be 20% short of what it needed to pay everybody - I'm guessing that existing recipients would never take a bigger hit than 20% in those circumstances, and there could be pressure to make that a lot less (after all, those who are still contributing could be asked to pay in more, since they already have time to do so). This seems doubly likely if the pension is funded with public money. So taking benefits now could also be a way of minimising one's exposure to fund risk.
The financial solvency of your pension plan is also something you should consider in figuring out when to take your pension. It is always worth remembering that whatever your concern about the future investment climate; high inflation, bad stock market, debt crisis, bad economy etc., your pension fund manager (private or public) faces the exact same problems as you do. All of the potential events that would make it possible for you to run out of money apply to them also.

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Old 07-11-2011, 08:29 PM   #22
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I would like to thank everybody for their replies. clifp really brought it into focus with his 21k for 20years vs 20k for 21 years comparison. Even though the pension would go up 4% for each year, you are investing a year's pension for that future cash-flow. So the return is 4% on each years deferred pension. The breakeven point is out there around 25 years.

Some of the other questions-
Is there a COLA on the pension. No. It is a 1.5% of the average of your highest 5 years of the last 10 years, x the number of years of service. So working an extra year will increase the pension by 1.5% plus whatever average raise you got over the last 5 years plus 4% for less penalty before age 60. So pretty strong incentive to work until 60 years old. More years to build the nest egg, everything's good, except having to be there more years.

Is it fully funded? At this time, yup. The company is strong, I trust that the pension will be there much better than I think I will see any SS.

Lump sum option? Nope. Only way to take it out is a month at a time.

Longevity risk? Investments are in good shape. Not like some of them on this board, but pretty darn good shape.

College expenses? Not unless I lose my first wife and acquire a 2nd one that is still in college! She would have to have HUGE assets of her own to get me to do something silly like that!

Enjoy my current job? It's OK. I work with some very good people. I am in a position now, financially and career-wise, that works out. I have no aspirations of climbing the ladder further. The ability to retire tomorrow helps immensely.

Occasionally the company has offered early retirement or separation opportunities. A year ago they offered a plan to some divisions (not the one where I work) that gave them 18 months of salary to walk out the door. I want to be in a position where I have my background investigation complete.

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Old 07-11-2011, 08:52 PM   #23
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ER Fireball, your current situation is remarkably similar to what I once faced. Five years ago, I felt the need to make a decision between retiring at 55 or waiting until I was 60. I, too was torn between retiring at an earlier age or holding out for a larger pension at a later date. Ultimately, I decided to retire at 55.

I can tell you from personal experience that ER is far better than W*rking. But, let me qualify this statement by saying that this is only true if you have interests or hobbies that will occupy your free time. For me, I've traveled more in the past five years than I traveled in my first fifty. Currently, DW and I are enjoying immensely an RV tour through Alaska with absolutely no time contraints, except we'd like to be out of here before it gets 50 degrees below zero.

Why did I make this decision? Well, it's very simple. I decided that my health was good at the time and that I had absolutely no way of knowing what it would be like five years later. I could count on the present, but not the future.

But, the question begged, why not wait and then I'd have a much larger pension later ? Well, I'm not a gambling man. Time is a precious natural resource and one that cannot be replaced. My health was good at the time and I had absolutely no way of knowing what it would be like at age 60.

What would I have done with the extra money in a monthly pension? I really don't think it would have contributed more or less enjoyment to my ER. Extra money is nice, but there are limitations as to what difference it will make in your overall happiness.

So what are you waiting for? I would recommend that you begin typing up your resignation and begin living life to the fullest!
"I went to the woods because I wished to live deliberately... and not, when I came to die, discover that I had not lived."

--Henry David Thoreau
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Old 07-12-2011, 09:38 AM   #24
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Originally Posted by Delawaredave5 View Post
Unreduced pension starts at 58. If I left at 54, I would have 2 options:
1. Start a reduced pension (20% less),
2. Defer the pension and start withdrawing at 58 unreduced

However I think doing option 2 above has me forfeiting retiree medical coverage (or pushing it back to 62 or 65).
My megacorp pension is similar. I had the same concern about retiree medical however found that the decision to take/defer pension and to take retiree medical were totally separate. And that the election of retiree medical was a one-time opportunity that had to be made within 30 days of retirement date - if I didn't take it then I would completely lose the opportunity to ever take it.

It was surprisingly difficult to get this information clearly - took several calls to HR to get it all straight. The homework was worth it - I deferred my pension (plan to take it at 58 when it is non-reduced but can always decide to take it earlier if needed) and took the retiree medical (of course). Now just need to find health insurance for DS (19 YO) before his COBRA runs out.

"One of the funny things about the stock market is that every time one person buys, another sells, and both think they are astute." William Feather
ER'd Oct. 2010 at 53. Life is good.
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