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help with pension choice
Old 04-14-2008, 08:49 PM   #1
Confused about dryer sheets
 
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help with pension choice

I have a decision to make concerning a pension I can begin drawing now or wait and receive about 4% more per year until age 62 when it would be at it's maximum level. In other words there is a 4% per year (actually .33% per month) penalty for getting it between age 55 and 62. This isn't a large pension and will only be about 12 to 15% of our total combined pension. We don't expect to really need the income at this time.
I may be looking at this the wrong way but I feel it would be right to collect it as soon as possible and if not needed save or invest it.

Any ideas?

This pension has no COLA
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Old 04-14-2008, 09:55 PM   #2
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Do you have a spouse?
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Old 04-15-2008, 07:00 PM   #3
Confused about dryer sheets
 
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Notmuchlonger, yes I am married but we were not planning on taking a spouse surviver benefit since this is a small amount anyway.
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Old 04-15-2008, 07:42 PM   #4
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Without knowing any of your other financial information. I would take it now as its non cola. Maybe smarter people than me could chime in.
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Old 04-15-2008, 09:10 PM   #5
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Just some questions to encourage thinking.
Does it push you near a higher tax bracket?
Does it interfere with converting some IRA $ into your Roth IRA?
What are you going to do with the money, spend it or invest it?
So far, I've done well with delayed gratification, so I favor waiting but only for that reason. I don't have any math to back up that opinion.
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Old 04-15-2008, 09:40 PM   #6
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Quote:
Originally Posted by wintergolf View Post
I have a decision to make concerning a pension I can begin drawing now or wait and receive about 4% more per year until age 62 when it would be at it's maximum level. In other words there is a 4% per year (actually .33% per month) penalty for getting it between age 55 and 62. This isn't a large pension and will only be about 12 to 15% of our total combined pension. We don't expect to really need the income at this time.
I may be looking at this the wrong way but I feel it would be right to collect it as soon as possible and if not needed save or invest it.

Any ideas?

This pension has no COLA
I was in a similar position, and did some basic calculations using a spreadsheet and waiting would probably better if lived longer than age 76 for my situation. I decided to take the lower payment at age 52 instead of 65 and it goes straight into my portfolio. Bird in the hand and all that
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Old 04-15-2008, 09:42 PM   #7
Confused about dryer sheets
 
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I should have included more information about this situation.
My wife and I will have enough pension income whether I take it now or wait. We have no debt and about $900000 in diverse portfolio to supplement the pensions. This small pension will not move us up the tax bracket. I really feel like it is a coin toss, like it is actually worth the same no matter when I decide to take it.
But it's always nice to hear other's opinions on these matters.

Also not planning to convert IRA to Roth. Have about half deferred and half in taxable. Makes me feel hedged for future tax changes.
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