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Old 09-02-2015, 07:14 PM   #61
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I often look at Mill Valley CA. Certainly one gorgeous place to retire to if one has at least 5 million. It is heaven on earth for people who can afford it.
I reckon there are plenty of beautiful but much less expensive places to retire when your choice of location is no longer limited by how long it takes to commute to work. In those locations, $100K might actually feel like $100K again.

On a side note, commute is one reason we couldn't buy a home in CA. There are still nice areas where you can buy a house for $300-400K but that would require at least a 1-hour freeway commute one-way (assuming minimal traffic). I'd rather forgo the property appreciation and questionable joys of home ownership in exchange for a commute of 10-25 minutes on surface streets and 5-10 minutes on the freeway. Alas, house prices for such areas start at $600K. Given the ridiculous house prices, I'll probably end up buying my first house upon retirement when I can afford to relocate.
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Old 09-02-2015, 09:33 PM   #62
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Did the OP even mention WHEN he thought 100k was a big deal?
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Old 09-02-2015, 10:12 PM   #63
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Did the OP even mention WHEN he thought 100k was a big deal?


2000. I'm not saying you were uber-rich at 100k salary but seemed to be a lot more rare. Obviously inflation has something to do with that.
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Old 09-02-2015, 10:12 PM   #64
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Rather than gaze wistfully at the greener grass of industry salaries you can value your pension directly as part of your compensation. Friends of mine teaching college in the CA state system make about $100K/yr, and sometimes make envious comments about the somewhat higher salary I receive in industry (though my pension is much worse and will freeze after this year). The annual pension they will receive, however, increments by about $5K for each additional year they work. The value of a $5K pension as an annuity is about $70K (depending somewhat on the age of the recipient). So I believe they could think of their total compensation as comparable to that of someone making $170K with no pension - right in the range of what their industry peers make.

And suddenly the disparity between industry and government compensation levels disappears (if not reverses).

When working future pensioners never really associate an "implied accrued cash balance" to the value of that pension. Thus its easy to think "I wish I had that persons salary". Many just see the pension only in terms of a monthly paycheck in retirement. I was guilty of that myself. I knew my pension was good but I truly didn't realize (or really bother to think about it) its "annuity" value until forum members here had me punch the cola pension and my age into a calculator to determine its true "hidden" value. I was very surprised. Now I just have to keep breathing for a few decades to get the true worth out of it.


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Old 09-02-2015, 10:29 PM   #65
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When working future pensioners never really associate an "implied accrued cash balance" to the value of that pension. Thus its easy to think "I wish I had that persons salary". Many just see the pension only in terms of a monthly paycheck in retirement. I was guilty of that myself. I knew my pension was good but I truly didn't realize (or really bother to think about it) its "annuity" value until forum members here had me punch the cola pension and my age into a calculator to determine its true "hidden" value. I was very surprised. Now I just have to keep breathing for a few decades to get the true worth out of it.
We were also pleasantly surprised at how much the net present value of our Social Security benefits and pensions were when we added them all up.

The 30+ year thinking about SS / pensions and expenses really opened our eyes to focusing more on increasing passive, recurring income and reducing recurring expenses over than length of our retirement rather than working one more year or two.
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Old 09-03-2015, 12:14 AM   #66
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When working future pensioners never really associate an "implied accrued cash balance" to the value of that pension. Thus its easy to think "I wish I had that persons salary". Many just see the pension only in terms of a monthly paycheck in retirement. I was guilty of that myself. I knew my pension was good but I truly didn't realize (or really bother to think about it) its "annuity" value until forum members here had me punch the cola pension and my age into a calculator to determine its true "hidden" value. I was very surprised. Now I just have to keep breathing for a few decades to get the true worth out of it.
Curious, what calculator did you use? I found a calculator that gives you PV based on gender, age, actuarial mortality table, setback, monthly payments and interest rate but there's no input to add a COLA factor.

It's true about a lot of folks not including the value of pension. Granted, for non-SS govt, since you're also contributing part of your salary to your pension and will likely receive reduced or no SS, the PV of pension should be discounted based on contributions in excess of SS 6.2% and PV of SS benefits.

Another thing most folks don't consider when computing the compensation package are leave, medical and other fringe benefits. Having worked briefly at a place where we only got 3 holidays a year (Thanksgiving, Christmas and New Year) and knowing plenty of nurses and retail employees who have to work even on those days, I must say I love the paid holidays we get at work on top of the earned vacation leave.
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Old 09-03-2015, 07:50 AM   #67
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I've stepped back in "it" and we try to balance wor!* and life. Went to an easy to commute by train place & DW is part time at home (3 days, 20-25 hrs). We will likely do around $125-150k total this year, but being back in Dallas near the lake & DD with a paid for home makes it easier to deal with.

We have been a 1 car (13 yr old Avalon) family for 4 years and our expenses are appx. $2000-2500 / month. So our savings / year should be $90-100k. "Made it", not by many here. We feel comfortable...
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Old 09-03-2015, 09:51 AM   #68
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Curious, what calculator did you use? I found a calculator that gives you PV based on gender, age, actuarial mortality table, setback, monthly payments and interest rate but there's no input to add a COLA factor.

It's true about a lot of folks not including the value of pension. Granted, for non-SS govt, since you're also contributing part of your salary to your pension and will likely receive reduced or no SS, the PV of pension should be discounted based on contributions in excess of SS 6.2% and PV of SS benefits.

Another thing most folks don't consider when computing the compensation package are leave, medical and other fringe benefits. Having worked briefly at a place where we only got 3 holidays a year (Thanksgiving, Christmas and New Year) and knowing plenty of nurses and retail employees who have to work even on those days, I must say I love the paid holidays we get at work on top of the earned vacation leave.

It has been since 2010 when I checked it. I used an online one. I just did a cursory look and from my quick glance it looks like now you can put some numbers in but they will "send you the results". I used one that just spit out the results based on age you wanted to start, sex, 2% yearly adjustment, and monthly amount you want drawn. So I just typed in my initial monthly pension. It gave me a number around $2 million that I needed to send to them to get that monthly check with 2% yearly adjustment.


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Old 09-03-2015, 09:52 AM   #69
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When working future pensioners never really associate an "implied accrued cash balance" to the value of that pension. Thus its easy to think "I wish I had that persons salary". Many just see the pension only in terms of a monthly paycheck in retirement...
Not true in my case. My DB pension had a vested lump sum value, to which I was entitled upon leaving Megacorp. Throughout the accumulation phase, this value and specifically it's projected growth was carefully tracked in order to properly value my total compensation vs other career options. I also included it as a component of net worth.
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Old 09-03-2015, 09:59 AM   #70
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Not true in my case. My DB pension had a vested lump sum value, to which I was entitled upon leaving Megacorp. Throughout the accumulation phase, this value and specifically it's projected growth was carefully tracked in order to properly value my total compensation vs other career options. I also included it as a component of net worth.

Yes, I imagine there are as many types of pensions and processes behind them as there are fleas on a dog. The government ones I am familiar with do not usually provide any realistic options but taking the monthly check. Since I am single, I guess I had 2 "options". Take my yearly pension with 2% cola (was about 75k when I retired) or take a 300k lump sum instead. Since I retired at age 45, the 300k option didn't look too appealing!


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Old 09-03-2015, 10:10 AM   #71
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Yes, I imagine there are as many types of pensions and processes behind them as there are fleas on a dog. The government ones I am familiar with do not usually provide any realistic options but taking the monthly check. Since I am single, I guess I had 2 "options". Take my yearly pension with 2% cola (was about 75k when I retired) or take a 300k lump sum instead. Since I retired at age 45, the 300k option didn't look too appealing!
Since the lump sum option for most government pensions tend to just be return of employee contributions plus interest earned based on Treasuries (basically, just your money with no employer contributions at all), it's no wonder the annuity with COLA works better.

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It has been since 2010 when I checked it. I used an online one. I just did a cursory look and from my quick glance it looks like now you can put some numbers in but they will "send you the results".
Meh, sounds like an invitation to receive lots of spam. I'll just base the PV on the market cost of SPIA from http://www.immediateannuities.com.

Interestingly enough, using the calculator I found on http://www.pensionbenefits.com, lump-sum value based on our pension system's actuarial assumptions is ~$800K. That's a lot less than the ~$1.2M for SPIA.
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Old 09-03-2015, 10:19 AM   #72
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Since the lump sum option for most government pensions tend to just be return of employee contributions plus interest earned based on Treasuries (basically, just your money with no employer contributions at all), it's no wonder the annuity with COLA works better.

Yes, that pretty much sums it up as it isn't really designed to provide a lump sum option. My pension is a true funded "trust". The equally matched employer part will never leave the system. A lot of attrition occurs before vesting, and that money is never returned staying in the trust.


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Old 09-03-2015, 10:32 AM   #73
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I responded earlier regarding the pay question. However, reading through the discussions on salary/pay reminds me of how "lucky" DH and I always felt about our jobs and pay. We both went to work immediately after graduating HS in 1976 without any real job skills. I was an telephone operator for the local phone company and he worked building canopies for trucks. We worked hard, improved our skills and watched our spending. We always marveled at what we had in life considering we graduated HS with average grades and no job skills (I did earn my BS in Bus. Admin. through tuition aid at work and he will retire from USPS). And, here we are today - I retired last August and he will retire next June. We will be debt free once we sell primary residence and live full time at our retirement home on the puget sound.
Can't complain!


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Old 09-03-2015, 12:57 PM   #74
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Yes, I imagine there are as many types of pensions and processes behind them as there are fleas on a dog. The government ones I am familiar with do not usually provide any realistic options but taking the monthly check. Since I am single, I guess I had 2 "options". Take my yearly pension with 2% cola (was about 75k when I retired) or take a 300k lump sum instead. Since I retired at age 45, the 300k option didn't look too appealing!
Not sure my point came across. It doesn't matter what type of pension you have or whether there's a realistic lump sum option. In my case, the lump sum was just a convenient ongoing measure of current value, and I ultimately elected the annuity option. The larger point is, it's never a good idea to ignore the true intrinsic value, and particularly its growth potential, when evaluating career alternatives. Thus, I took exception to your suggestion that...

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...future pensioners never really associate an "implied accrued cash balance" to the value of that pension. Thus its easy to think "I wish I had that persons salary"...
All the future pensioners I know (with and without lump sum options) are keenly aware of its true value, growth curve, and resulting retention effect.
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Is $200k the new $100k?
Old 09-03-2015, 01:10 PM   #75
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Is $200k the new $100k?

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Not sure my point came across. It doesn't matter what type of pension you have or whether there's a realistic lump sum option. In my case, the lump sum was just a convenient ongoing measure of current value, and I ultimately elected the annuity option. The larger point is, it's never a good idea to ignore the true intrinsic value, and particularly its growth potential, when evaluating career alternatives. Thus, I took exception to your suggestion that...







All the future pensioners I know (with and without lump sum options) are keenly aware of its true value, growth curve, and resulting retention effect.

I don't think we are disagreeing on any points. Maybe my wording has been clumsy. And certainly the people are aware of the impending yearly value of the pension in retirement and its retention effect also. My only point was they are shocked at how much money out of pocket they would have to pay to receive the same yearly income in an annuity in place of that pension. They understand "I need to stay 5 more years so I can get my X amount pension", but they did not know the "X" cost for an immediate annuity of that value. And they certainly didn't know the whole successful mechanism behind it all being 70% of the pension comes from the investment returns not just the contributions.
But then again, my acquaintances aren't math people either.
Also, in review my original comments were directed from an earlier poster who commented on how lower paying workers wished they had that other persons higher salary. Not realizing the higher income person has to self finance their retirement to a greater degree.
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Old 09-03-2015, 01:30 PM   #76
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I don't think we are disagreeing on any points. Maybe my wording has been clumsy. And certainly the people are aware of the impending yearly value of the pension in retirement and its retention effect also. My only point was they are shocked at how much money out of pocket they would have to pay to receive the same yearly income in an annuity in place of that pension. They understand "I need to stay 5 more years so I can get my X amount pension", but they did know the "X" cost for an immediate annuity of that value. And they certainly didn't know the whole successful mechanism behind it all being 70% of the pension comes from the investment returns not just the contributions.
But then again, my acquaintances aren't math people either.
Also, in review my original comments were directed from an earlier poster who commented on how lower paying workers wished they had that other persons higher salary. Not realizing the higher income person has to self finance their retirement to a greater degree.
Agreed. Yes, future pensioners value their future pension and it certainly does have a positive effect on employee retention.

However, I don't actually know of any of my co-workers who puts a present/cash value on that future pension. They think more in terms of working 5 more years means I get an extra $5,000-10,000 annual pension not in terms of $5,000-10,000 in extra pension will cost me $125,000-250,000 (based on 4% SWR).

Some of my mom's co-workers are even worse. They don't save anything and likely won't be able to retire if not for the pension.
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Old 09-03-2015, 01:36 PM   #77
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Agreed. Yes, future pensioners value their future pension and it certainly does have a positive effect on employee retention.

However, I don't actually know of any of my co-workers who puts a present/cash value on that future pension. They think more in terms of working 5 more years means I get an extra $5,000-10,000 annual pension not in terms of $5,000-10,000 in extra pension will cost me $125,000-250,000 (based on 4% SWR).

Some of my mom's co-workers are even worse. They don't save anything and likely won't be able to retire if not for the pension.

ARGHH! I cant proof read any better than I can type. The word "NOT" did not get put in my key thought. And I will edit it....
Therefore we agree 100%!


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Old 09-03-2015, 03:37 PM   #78
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Now, you have made it when your federal tax bill averages 100k.
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Old 09-03-2015, 05:07 PM   #79
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I reckon there are plenty of beautiful but much less expensive places to retire when your choice of location is no longer limited by how long it takes to commute to work. In those locations, $100K might actually feel like $100K again.
That was a large part of why we moved to WV. It's not all Appalachia and coal mines! The house we're in now would be in the "many many millions" range where we used to live. We wrote a check for it, and it wasn't anywhere near seven figures.
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Old 09-04-2015, 01:42 PM   #80
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I don't know when you started working...that's even a bigger factor than where you live.

The answer is "no" ($200K is not the new $100K) if you started working after 1994, and is "yes" if equal to or less than 1994. That is, if you think gauging the answer based on Medicare withholding salary limits is a valid assumption.

I considered the number of days where I got an end of year "raise" because I surpassed the Medicare salary limit a "big deal", but not until later in my career.

Through the magic of Exel I'll paste my justification.
+1

If you started working in 1994, you'll find that average wages have about doubled since you started working, so $200k is about as far above average today as $100k was above average in 1994.

Or, if you use the CPI, it took a little longer to double. So $200k buys about as much today as $100k did in 1988. (before taxes, ignoring differential inflation rates on different baskets of goods)

There's a little more to it than that. The skewed bell curve that depicts wages as stretched out a little, so the top 1% is somewhat further from the mean than it used to be. Getting into the top _% requires that you get a little further from the middle.

But, I think a lot of the perception that $__ isn't as much as it used to be is where you're standing. Age 75 doesn't sound nearly as old to me today as it did 40 years ago. Yes, longevity has increased slightly, but my perception mostly reflects my own change in age.

Similarly, when I started working as a teacher, 2x a teacher's salary sounded like a ton of money. After I had spent a couple decades working as a financial analyst, 2x a teacher's salary would have been a significant wage cut. It took one more zero to impress me.

(edit: note that the "Medicare" in the quoted post should be "Social Security")
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