Pension equate to bond allocation?

[FI_RElater]

....3 M

(my early calcs had us get to 2.5 for real security, assumed drop of equities, limited SS, ...but really needed to insure HC in retirement....
the “later” is because the R was at 60)

...we also didn’t feel paying the 33% rate plus state was necessary... further savings wasn’t going to move the needle

 

[target2019]

Still working, and use pension survivor benefit as part of bond AA.
When I take it out of the AA, stocks jump from 52% to 63% of AA.

I don't include the amount when running retirement calculators.

 

[Perryinva]

Well then I feel better knowing I’m not the only one in the same income range that felt the need to really pad their income relative to expected expenses. Even only 3% of $3M is $90k + $28k+ $50kSS is $168k or almost double your $85K (net?) comfortable level. I am shooting to have 1.6 to 1.75 times mine and may go higher if I decide in a (1/2 time) phased retirement. HC would go from $155/mo to $1200/mo until 65, (plus wife still has some dental issues) if I go full retirement vs phased, and phased allows the pension to rise $35/mo for every month I delay. If 1/2 time gives me the time I want, it may be the ideal mental compromise.

 

[deserat]

I'm in the streams of income camp....will have three pensions, one non-COLA'd, two COLA'd, all turning on at different ages. The scenario reminds me of the arrow diagrams in financial engineering class many years ago....

So, what do you need when and how can the AA support that? You can be conservative or more risky...take your pick. FireCalc allows you to model this as well as different spending scenarios (constant dollar, Bernicke's assumption of reduced spending as you age, the 95% spending of 4% rule if portfolio down)....look at all and then decide. You can also decide if you are a suspender, belt and elastic pants person or some other combinatorial facsimile thereof when looking at the success rates (75%-100%). Then pick a number to start and iterate each year seeing how good a prognosticator you are

I suspect that most here on this board will do *just fine* and can moderate their consumption as need be being amazed or irritated at how much time they spent in the uber analysis phase......I speak from experience.

 

[Gearhead Jim]

In today's world, I don't think there is any such thing as a truly secure pension. Especially if things get really bad in the financial world and equities go in the tank and stay there for a while.


SS is reasonably secure once you are actually drawing it, for maybe 75% of your current benefit.


That's not advice for OP, just a comment.

 

[Mulligan]

In today's world, I don't think there is any such thing as a truly secure pension. Especially if things get really bad in the financial world and equities go in the tank and stay there for a while.


SS is reasonably secure once you are actually drawing it, for maybe 75% of your current benefit.


That's not advice for OP, just a comment.

I certainly think my pension is secure, and it is funded well. Responsible pension funds are built for multiple generations, not to stress over near term gyrations. They do the “bucket allocation”many individuals do here...cash, short term bonds/treasuries etc. They are designed to be funding for the subsequent generation, not the present one. Of course if they are not funded correctly or use incorrect assumptions, then yes it would be time to worry.

 

[imnontrad]

Yes and no -

1) If I wanted a bond fund to be a source of cash to be able to buy stocks in a downturn then counting a pension as a "bond-like" equivalent would not work.

2) But if I view a bond fund as a way to get steady income to avoid having to sell stocks during a downturn, then it is equivalent. (Social Security payments would also be a "bond-like" equivalent.)

I have a pension and I view it as reason #2. I do not calculate its value (annual amount/0.04) as part of my net worth. But I do include its value in the stock/bond ratio to determine when (if ever) I should consider buying bonds. Right now, the pension covers my monthly expenses plus a healthy fund for travel.

 

[pb4uski]

In today's world, I don't think there is any such thing as a truly secure pension. Especially if things get really bad in the financial world and equities go in the tank and stay there for a while. ...

Most pensions are backed predominantly by bonds rather than stocks.

 

[imnontrad]

In today's world, I don't think there is any such thing as a truly secure pension. Especially if things get really bad in the financial world and equities go in the tank and stay there for a while.


SS is reasonably secure once you are actually drawing it, for maybe 75% of your current benefit.


That's not advice for OP, just a comment.

It depends on the source. Yes, with companies that may go under, companies privately owned that may be easily dissolved/sold, are not secure. And if it is a municipal or state provided pension, it depends on their fiscal stability. But if it is a federal pension or one from a large publicly traded company company (as om Lockheed Martin, Boeing, Microsoft, etc) I think it would be safe to say that a pension would be funded and most likely won't go away.

 

[gooddog]

I count my pension as a fixed bond paying 5.6%. Having been retired for the last 6 years, I keep 90% of $ in dividend paying stocks & a Schwab income fund - the rest cash. Can do that because, like you, I have an income coming in that I can count on no matter what the markets do - and quite frankly I will never touch the $ that are in stocks except for mandatory withdraws. Your plan is good.

 

[Huston55]

It depends on the source. Yes, with companies that may go under, companies privately owned that may be easily dissolved/sold, are not secure. And if it is a municipal or state provided pension, it depends on their fiscal stability. But if it is a federal pension or one from a large publicly traded company company (as om Lockheed Martin, Boeing, Microsoft, etc) I think it would be safe to say that a pension would be funded and most likely won't go away.

+1 on security of federal pensions. They are as (or more) secure than SS IMO; same guarantor & less likely to be fiddled with.

 

[arch57]

I view it as an annuity

My fixed pension (non-Cola adjusted) currently provides 80% of my basic living expenses at age 61 and I would need to put $1M in an annuity to get the equivalent monthly cash flow so yeah I count it as an extra million in a fixed income investment and it allows me to be more aggressive with the rest of my portfolio about 75% equities. Social security for me and my wife will kick in as well as a small pension she has at 65 so I planned it as a “ladder” with increasing cash flow until we both reach 65 and then Medicare kicks in reducing our ACA insurance outlays.