stepford
Thinks s/he gets paid by the post
One of the ways I'm whiling away my ever so slow OMY is by considering how to take the pension I will get from Megacorp upon my, hopefully soon, ER at age 55. The main question is whether to take a straight Single Life Annuity (constant payments for life), or the "Accelerated Income" option which offers increased payment of roughly 1.14 x the SLA amount for the 7 years from 55 to 62, but decreases thereafter to about 89% of the SLA amount.
Neither version is COLA'd so the relative merits depend strongly on inflation. Doing a quick calculation it looks like the break-even time between the two options as a function of inflation is as follows (assuming a constant inflation rate over the entire period):
0% 16 yrs (i.e. the Single Life Annuity provides a greater total after age 71)
2% 18 yrs
4% 21 yrs
6% 27 yrs
8% Infinity (i.e. the SLA never catches up)
I'm generally big on the concept of delayed gratification and both parents lived past 90, so I'd always assumed I'd just take the constant Single Life Annuity, but realistically assuming inflation around 4% gives me a break-even age of 82. So I'm wondering whether I should more seriously consider taking the Accelerated Option.
Other relevant info: I expect pension to be about 60% of my income initially at 55, but decline as inflation takes hold and spending from my nest egg grows - and then decline still further when I take SS at 70. Since the pension is most important in the early years of my retirement this also seems to argue for the accelerated option, but my delayed gratification instincts are quite strong and I remain unsure of the best course.
I imagine this sort of thing has been discussed to death around here over the years and I wonder what the consensus is.
Neither version is COLA'd so the relative merits depend strongly on inflation. Doing a quick calculation it looks like the break-even time between the two options as a function of inflation is as follows (assuming a constant inflation rate over the entire period):
0% 16 yrs (i.e. the Single Life Annuity provides a greater total after age 71)
2% 18 yrs
4% 21 yrs
6% 27 yrs
8% Infinity (i.e. the SLA never catches up)
I'm generally big on the concept of delayed gratification and both parents lived past 90, so I'd always assumed I'd just take the constant Single Life Annuity, but realistically assuming inflation around 4% gives me a break-even age of 82. So I'm wondering whether I should more seriously consider taking the Accelerated Option.
Other relevant info: I expect pension to be about 60% of my income initially at 55, but decline as inflation takes hold and spending from my nest egg grows - and then decline still further when I take SS at 70. Since the pension is most important in the early years of my retirement this also seems to argue for the accelerated option, but my delayed gratification instincts are quite strong and I remain unsure of the best course.
I imagine this sort of thing has been discussed to death around here over the years and I wonder what the consensus is.