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Old 03-28-2010, 07:30 PM   #21
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This is incredible. A percentage that high and COLA'd. Wow. Double Wow.
It's about 66% of TAKE HOME, not gross. On the gross it's more like 48%. But we have been living on a lot less than his take home pay for a few years so this is not a big adjustment. As an employee in the pension system he was contributing 10% to the pension (employer portion is 14%). That's the first big chunk that will no longer be withheld. Also medicare 1.45% and his costs for the employer provided medical insurance.

In Jan 2010 we had changed his withholding to M-0 because we lost our last dependent and last juicy tax credit for eduation when our son graduated in Dec. Figuring our taxes for this new phase I see that our taxes will drop significantly. So that's why the monthly pension with be such a big percentage compared to his regular paycheck.

One more revelation he's had about retiring - he doesn't have enough "weekend" clothes now that he needs to dress down 7 days a week!
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Old 03-28-2010, 07:40 PM   #22
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Congratulations Sue...time is precious...enjoy every minute of it.
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Old 03-29-2010, 06:13 AM   #23
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Congratulations!
This is a great example how LBYm really pays off. If you had been used to a high cost life style it would be much harder to adapt to the new budget.
But as LBYMer, able to live on what comes in in future, you can fully focus on the benefits of ER for one of you.
Enjoy!
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Old 03-30-2010, 06:30 AM   #24
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I'm also impressed by the multiplier. In Maryland the equivalent pension (Employees pension system) with 100% to the spouse would be less than 50% of the salary. Even with Social security (which of course we paid for ) it is very hard to get it up to 60 percent unless you are very low income and benefit from the redistributive portion of social security.

You said his area is social services. In many areas qualified social services professional who already have health insurance are in substantial demand in the hospital- health insurance area.
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Old 03-30-2010, 09:13 AM   #25
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Congrats - enjoy the ER!

The following is just for some perspective, it is not about what is earned, deserved, or jealousy or anything. Just some numbers for comparison:


Quote:
Originally Posted by Delawaredave5 View Post
This is incredible. A percentage that high and COLA'd. Wow. Double Wow.
Quote:
Originally Posted by Sue J View Post
It's about 66% of TAKE HOME, not gross. On the gross it's more like 48%.
and...

Quote:
total of 26.667 years; ... We're taking the reduced pension with 100% to the survivor. It's COLA-ed 3% a year.
plus some (reduced) SS eligibility.

I suppose my MegaCorp pension is pretty typical, let's see. My pension calculation on 28.x years of service provides for ~ 38% of my Final Average Earnings if I take it at 65. Cut it in half to take it at 55YO (19%). Multiply by .77 for 100% Survivor benefits, that gets us to 15%. No COLA at all.

I haven't run a FireCalc comparison with a fixed 3% pension, but a full COLA pension is ~ 2X the value of a non-cola pension. So probably close.

15% versus 48% is a 3.2 x the benefit before any COLA adjustment, lets say a conservative 1.5x for that COLA, and you are at 15% versus 72%!!!! A 4.8x multiplier!! And for fewer years of service. So QUADRUPLE-PLUS WOW from me!

You didn't give numbers for HC, but you do get a considerable % allowance, and have the option for a higher deductible plan (OK, I am jealous there, I wish Mega Corp would offer that, I'd love to run the numbers and I don't see why they don't, other than inertia and probably few takers). SO that is likely more attractive also.

Yes, I'll get SS also. But I paid into it too, so that would take some more math to equalize. At any rate, I hope you appreciate that this is a very significant difference from typical private pension systems.

And again, CONGRATS - enjoy yourselves!

-ERD50
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Old 03-30-2010, 09:50 AM   #26
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"I suppose my MegaCorp pension is pretty typical, let's see. My pension calculation on 28.x years of service provides for ~ 38% of my Final Average Earnings if I take it at 65. Cut it in half to take it at 55YO (19%). Multiply by .77 for 100% Survivor benefits, that gets us to 15%. No COLA at all. "

Something is not right or Mega Corp is simply vicious. The actuarial calculation, (supported by lots of studies) for a spousal pension at age 55 is closer to 10 %.
The early retirement reduction already compensates mega corp for any added spousal costs due to early retirement. Also a multiplier of 1.3 is fairly low even at megacorp, unless it is a non contributory pension.

If its not contributory you have to allow for the difference. I contributed 7% of salary to my pension for 30 years. I would also point out the obvious, that salaries are typically higher at Mega Corp than at Ohio Counties

My wife is in FERS. The multiplier is one percent of salary with a match of 5% on the 401 k equivalent (TSP) with a cap based on the IRS limit. If you work the math, after 28 years of service at age 60 her whole package is worth 39% of her high three, without providing for survivor benefits. She also contributes to the system
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Old 03-30-2010, 10:26 AM   #27
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We definitely do appreciate this and know that pensions like this are likely not going to be available in the future. Our 25 year old son is also in the same pension system. He has 4.5 - 5 years of service. Changes to the pension calculation have already been proposed. DH would have been grandfathered in but if our son stays in his job long term he knows it will be very different by the time he gets there.

Would you like some specifics?

Final Average Salary (ave. highest 3 years) X 2.2% X Years Of Service = Annual Payment
So at 30 years it's 66% of FAS.
If less than 30 years Annual Payment is reduced (29 yrs = 95%, 28 yrs = 90%, 27 yrs = 85%, 26yrs = 80%, 25 yrs = 75%)

That's for Single Life. 100% to Survivor is further reduced based on actuarial tables for retiree's age and spouse's age It's about 88% of Single in our case.

We also appreciate the difference between making it to 25 years vs having less than 25 years. DHs job loss was one of the last of a list of (what appeared to be) middle-aged, middle managers. Over the past 3 years he's seen this happen to many of his cohorts. Some of them had made it to 25 years and a few of them were between 20 and 25 years. At less than 25 years you do not get a pension payment before age 60 and then there's all those reductions in the calculation. A coworker (age 53) who was not renewed in early 2009 had less than 25 years of service and is still looking for a job in the same pension system (or any job at this point) and is coming to the end of his unemployment benefits.

DH is very aware of how fortunate we are to have been in a state pension system, have 26 years (remember we bought back 5.25 years that we had cashed in in 1981) and that we learned to LBYM a while back. We couldn't do this at this point if we had a mortgage or college expenses in the future or if we hadn't seen this coming and had time to plan for it.

He used to think he was getting paranoid, now I tell him he wasn't paranoid, he was clairvoyant!

Here's numbers for Health Care -
Enhanced = $650/month each
Intermediate = $550/month each
Basic = $373/month each

DH gets credit of 86.67% of Enhanced = $563
I get credit of 59.22% of Enhanced = $384

Basic has $2000 deductible each, then 60%-80% on Medical, $550 deductible each on prescriptions. Out of pocket limit of $5000 each. Routine preventive is 100% with no deductible. We're also getting the Dental, paying the full cost. Vision is offered, we will get this every other year or every third year. We'll try the Basic plan for the first 2 years and see if we need to upgrade. I'm sure the costs will change, too.
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Old 03-30-2010, 11:00 AM   #28
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Quote:
Originally Posted by Sue J View Post
One more revelation he's had about retiring - he doesn't have enough "weekend" clothes now that he needs to dress down 7 days a week!
Congratulations again Sue

Isn't this a nice problem to have?
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Old 03-30-2010, 11:27 AM   #29
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[re:"Multiply by .77 for 100% Survivor benefits... "]

Something is not right or Mega Corp is simply vicious. The actuarial calculation, (supported by lots of studies) for a spousal pension at age 55 is closer to 10 %.
I can't comment on the rationale, but it is what it is. I double checked. And that is if the spouse is within an age band of the pensioner. It is adjusted downward as the delta increases. I've heard others say you might be able to buy LI for the difference and come out ahead. I will certainly review those options near age 65.

Quote:
Also a multiplier of 1.3 is fairly low even at megacorp, unless it is a non contributory pension.
Yes, non-contributory.

Quote:
I would also point out the obvious, that salaries are typically higher at Mega Corp than at Ohio Counties
Very tough to determine - there are so many variables in comparing jobs. Certainly won't be able to come to any agreement in this setting, and I won't try. Gut level though, I will say that when I look at the publicly posted salaries for municipal jobs that I am very familiar with, I am not saying 'ohhhh, poor babies...', often, I think their salaries are high compared to what might be equivalent in the public sector. But again, this can swing both ways, and is not something we are likely to get any agreement on. But I won't accept that it is 'obvious'.


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Originally Posted by Sue J View Post
We definitely do appreciate this and know that pensions like this are likely not going to be available in the future.
Thanks for taking this in the spirit it was given. People do get emotionally charged on this subject, and sometimes get very personal and defensive, and that is not where I was going at all. Just getting the numbers out there for comparison. Personally, I'm very happy for you & your family. Whether this is sustainable is another story.

Quote:
Here's numbers for Health Care - ....
That is quite a benefit compared to my situation also. It won't be apples-to-apples w/o comparing details (no need going there), but rough cut wise, my current medical ins payments run about HALF of what my calculated/adjusted pension number is. So further cut my 15% down to ~ 7%! So now we are talking about a 6~7x multiplier!

So you are getting a $2,000 deductible family medical for $0 out-of-pocket? Good for you!

-ERD50
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Old 03-30-2010, 11:50 AM   #30
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So you are getting a $2,000 deductible family medical for $0 out-of-pocket? Good for you!

-ERD50
$2000 each for the deductible on medical, $550 deductible each on Rx. The insurance costs us nothing because of the amount allowed as a percentage of the Enhanced Plan. Taking the lower cost Basic plan will result in a credit to an RMA of about $70/month. Our out-of-pocket limit on medical expenses is $5000 each.

The availability of decent health insurance is one of the biggest reasons he's retiring now. The alternative would be to find a well paying job with affordable insurance through the employer. If neither of us could find a job with benefits we'd have to buy our own health insurance, easily $1000 -$1200/month for the two us with a couple of medical issues. COBRA for the insurance through his former employer would be $1200, but it's for a really nice plan.
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Old 03-30-2010, 01:15 PM   #31
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[QUOTE=ERD50;920381]I can't comment on the rationale, but it is what it is. I double checked. And that is if the spouse is within an age band of the pensioner. It is adjusted downward as the delta increases. I've heard others say you might be able to buy LI for the difference and come out ahead. I will certainly review those options near age 65.

Just to follow on this one point
yes I agree that if the spouse is much younger it affects the calculation
But just as an example go to
Immediate Annuities - Instant Annuity Quote Calculator.
$205,381 buys a joint lifetime annuity for 1000 a month
$183,050 buys the male a single annuity
So the differential is about 22,300 or 11% of 205 (mental calc)
if the wife is 45 the cost is 214,500
or a differential of about 31,000 which still pushes 15%

So either your spouse is really younger
or Mega corp is playing fast and loose

Interestingly by state law in Md all pensions with spousal benefits have to be the actuarial equivalent of the basic pension.
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Old 03-30-2010, 02:01 PM   #32
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This seems to be a relevant place to mention this thread that was just posted by the site staff if anyone is interested.


NPR seeking input from our community

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NPR has contacted us looking for some background info on a story they're putting together on forced or unexpected Early Retirement.

They are specifically seeking folks in their early 60s who ended up retiring early after a layoff, not because they wanted to, but because they couldn’t find other work.
This article will be examining possible impacts to the Social Security System by folks who begin drawing at 62 rather than waiting as well as how individuals decide whether to start drawing on Social Security at 62, rather than waiting until 65 or 66.

If you are interested in contributing to this story in some way please contact
Tamara Keith, Reporter at National Public Radio.

tkeith@npr.org
desk: 202-513-2761
blackberry: 202-997-4446

While we have dozens of discussions about this topic, they don't serve as interview material and so having members make the choice to contact NPR directly seemed the best course.
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Old 03-30-2010, 02:12 PM   #33
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Interesting
1) Off the books work by the 62+ Social Security set is enormous.
2)The key to waiting for social security is often your Spouse's work situation. Postponing soical security allows you to "buy" an increased inflation protected annuity at an actuarially fair price.
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Old 03-30-2010, 02:21 PM   #34
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So the differential is about 22,300 or 11% of 205 (mental calc)
if the wife is 45 the cost is 214,500
or a differential of about 31,000 which still pushes 15%

So either your spouse is really younger
or Mega corp is playing fast and loose
The .77 factor is for a spouse within 5 years of the pensioner. Like I said, I do not know the rationale, but that is what it is. No amount of research on my part will change it. It is interesting that it seems out of sync though. Makes me wonder if they figure people will choose it for security, w/o comparing the numbers? DO they really hope to 'game' it that way? I dunno. And I will look at alternatives at age 65, that is all I can do.

hmmm, pros and cons to having a wife much younger than I am, but that also is what it is.

edit/add: or maybe they found out that as a group, we took such exceptionally good care of our spouses that they live an exceptionally long life ? < rofl emoticon added by DW! (j/k)

-ERD50
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Old 03-30-2010, 02:39 PM   #35
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We did the numbers and bought 20 year term life insurance. It was a far better deal, even though our reduction number was 11%. We have the insurance till lovely wife is 70. Lovely wife is going to postpone her social security to age 70 when insurance ends. We make out all around.
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Old 07-02-2010, 12:08 AM   #36
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UPDATE.....

So we've just completed our first month of retirement. DH is doing just fine, really got into the World Cup soccer on TV, yard work and taking care of the garden. He has needed a new mower and decided to try a push reel mower instead of gas or electric. So far, so good.

He says he's very relaxed and having a good time. He's staying up later than he ever did before. When he was working he'd have to go to bed around 9:30 because he'd wake up so early. It's so odd to see him reading in bed after midnight.

Money wise we did better than I expected. Only spent about 85% of the pension payment so I was able to save some money toward whatever unexpected expense comes up in the next couple months.

His last paycheck from his employment included his payoff of his vacation pay, sick time and a couple of personal hours. We used a good hunk of this cash to pay off our last debt which was our son's student loan. He had a Direct Student Loan but we always made the payments and said it was our obligation. Now that's gone and we are DEBT FREE! Both sons have no other debt, no credit cards or car loans so all four of us are debt free now. Took them out to dinner for a little celebration for that one!

I had some medical expenses that haven't been processed through the insurance yet. I'm hoping that it's discounted the same as in our other plan, but with the new insurance we will have to pay for the balance. I have an ING checking account with a debit card and we set aside a year's worth of deductibles.

While we were aware of our reduced income and tried to be careful I didn't do anything drastically different than before E.R. DH's choice of a reel mower was based on wanting to simplify but also being aware of prices. I asked him a few times if he felt deprived or constrained budget wise and he basically feels that if he has some personal spending money, the bills are paid and plenty of groceries in the house then he's fine. We ate out a few times, used the AC when needed, didn't really have to change how we were living before he lost his job.

He stayed home a lot more than I expected. At first I thought maybe he was trying not to be tempted to be out buying things but instead I think it was all the soccer on TV!

In the works for July is trimming the back bushes and planning a garage sale. He needs to go through things in the attic and prepare items for sale. Or maybe that will be in August because there's no rush.
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