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View Poll Results: Assuming the NPV of all options are equal, how would you prefer to start retirement?
Social Security, Pension, Personal Savings 67 61.47%
Social Security, Pension 4 3.67%
Social Security, Personal Savings 13 11.93%
Personal Savings 25 22.94%
Voters: 109. You may not vote on this poll

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Old 01-04-2014, 10:33 AM   #21
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Assuming the NPV of all options are equal, how would you prefer to start retirement?

In order to start retirement with all three legs, we would have to be older when we retired. We didn't want to do that, so we retired with a non cola'd pension and savings. SS for both of us will be available in the near future.
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Old 01-04-2014, 10:34 AM   #22
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Quote:
Originally Posted by timwalsh300 View Post
I'm a young dreamer who is on track to have all three, but I've always said that I'd rather receive cash to save and invest on my own today (discounted appropriately, of course) than vague promises of cash decades from now.

When people say, "I wish I had a pension," they really mean to say, "I wish I got paid more and/or saved more money for retirement." There is nothing to envy about a pension. It involves "golden handcuffs," hoping that you don't get laid off before vesting, hoping that the organization doesn't renege on its promises, etc. Just a couple weeks ago, congress and the president suddenly reduced the value of our pension without any grandfather clause or protest from the general public. That made me feel awesome about the future. The only upside to a pension - protection from longevity risk - can be achieved through buying a SPIA with your savings, as others have pointed out.

That said, I do realize that I'm an outlier (like everybody else on this forum) with my propensity to save and invest. I know that most folks would be destitute in old age without the forced savings of things like SS, pensions, and home equity.
Actually, when I said "I wish I had a (COLA'd federal) pension (w/health insurance), I am not saying that I wish I had been paid more and/or saved more for retirement. Rather, I am simply saying that I wish I had the additional security and peace of mind that a pension would provide, especially a federal pension w/COLA. Alas, I don't have a pension (federal or otherwise), and I was quite diligent about saving for retirement. I was diligent even when I was on track to receive a megacorp pension. As it turned out, after I had been working for the megacorp for about 10 years, the megacorp suddenly eliminated their pension plan in one fell swoop.
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Old 01-04-2014, 10:37 AM   #23
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3 leg stool

Savings
SS
S&W
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Old 01-04-2014, 10:56 AM   #24
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Originally Posted by aim-high View Post
Assuming the Net Present Value of a, b, c, and d are equal at the beginning of your retirement, which would you rather have?

a) Social Security, Pension, Personal Savings
b) Social Security, Pension
c) Social Security, Personal Savings
d) Personal Savings
For me, the key phrase is the part I bolded above. I retired 5 years ago at age 45 so all I had available is personal savings (choice (d)). And by that I mean non-retirement savings so an IRA is excluded for now.

That being said, I will eventually be able to access what I have often described as my "reinforcements" - that is, unfettered access to my IRA, my frozen company pension, and Social Security, starting at ~ age 60, 10 years from now.

So, to translate the OP's thread title into a number of legs, I would say it is ONE for now but I will soon grow 2 or 3 more legs in the next 10-15 years.
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Old 01-04-2014, 11:00 AM   #25
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Although ds just started a private sector job that still offers a pension, it wasn't one of his search criteria.

I wonder how many pensionless people really would buy an annuity to create the third leg.
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Old 01-04-2014, 11:05 AM   #26
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I wonder how many pensionless people really would buy an annuity to create the third leg.
Not many of us I suppose. While it is something I consider for the future, the future never seems to arrive. I'm beginning to suspect I'll be dead by the time it gets here.
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Old 01-04-2014, 11:08 AM   #27
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Given the same amount of money, I would prefer just SS and personal savings.

The reason is that of the 3 only SS and personal savings are tax advantaged. The pension even interferes with the other two and make them more taxable.

To be more explicit, 15% of SS income is tax-free for everybody. It could be more if one was lower income. Of personal savings, return of capital is tax-free, Long-term capital gains may be tax-free, and qualified dividends may be tax-free. One can juggle all these to reduce one's income tax burden to essentially zero. However, if you throw in a pension, then it mucks up everything.
Very good points. Never thought of that.
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Old 01-04-2014, 11:08 AM   #28
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I know that different people have different perspectives, but for me option a) seems so obviously superior that I almost consider it borderline irrational to pick one of the alternatives.
As others have mentioned the more money you allocate to pensions and SS the harder it may be to ER early as it may be locked up.

The other drawbacks to pensions and SS are that you completely cutoff the upside on portfolio gains. At most I guess you could expect a COLA that matches inflation but even now with high PE10 the expected returns of the market is still higher than inflation.

With pensions and SS you also lose ability to manage your income. This may be important if you are near various cutoffs for ACA.

Finally, you also have less of a liquid stash (i.e. may be more difficult to buy a house in cash, etc.).
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Old 01-04-2014, 11:08 AM   #29
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Two things:

1. Anyone who has Social Security at the beginning of retirement has not retired early.
2. This is aim-high's first post. How long will it take before the annuity ads commence?
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Old 01-04-2014, 11:09 AM   #30
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None of the options fit my situation. I retired with a COLA'd pension and am not eligible for SS. I haven't tapped any of my retirement accounts yet. My stool balances on 2 legs.
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Old 01-04-2014, 11:10 AM   #31
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The OP asked about preference, but some posters voted according to their actual situation.

Talk about want, why stop at 3? I would like something like a 4-legged stool please (a 5-legged stool would be weird!). But as it is, I am living on my savings, drawing from after-tax accounts first, then adding IRAs and 401k's in a couple of years. SS is anywhere from 5 years to more than 10 years down the road, depending on how we want to delay it.

So, instead of the 4-leg stool, right now I am balancing and hopping on a pogo stick. My portfolio does bounce like one for the last 15 years. When I can draw SS, it will be like walking on stilts. An improvement!
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Old 01-04-2014, 11:17 AM   #32
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Originally Posted by Meadbh View Post
Two things:

1. Anyone who has Social Security at the beginning of retirement has not retired early.
2. This is aim-high's first post. How long will it take before the annuity ads commence?
Aim-High has 92 posts and has been a member since August....

As for having SS at the start of retirement, DH was 62 when he retired. He certainly feels he retired early, since he had originally thought he would work until FRA which was 66 in his case. Of course, definitely a different situation than someone retiring at 45 for sure.
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Old 01-04-2014, 11:17 AM   #33
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Originally Posted by Meadbh View Post
Two things:

1. Anyone who has Social Security at the beginning of retirement has not retired early.
2. This is aim-high's first post. How long will it take before the annuity ads commence?
I see aim-high has 92 posts -- this thread would have started with no. 88 or so?
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Old 01-04-2014, 11:20 AM   #34
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Pardon me, I made an error. I mistook post #1 in the thread for post #1 of the poster. Still unfamiliar with the details of the new app. Apologies, aim-high!
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Old 01-04-2014, 11:20 AM   #35
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The OP asked about preference, but some posters voted according to their actual situation.
For some people we had a choice on this in our actual situation. That is, when DH retired he had the choice of receiving a pension or have receiving actuarily same lump sum which basically becomes like personal savings. In his case, he took the lump sum. (One problem I had with the poll was that it talks about a pension, but doesn't address the situation where one could take a lump sum).
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Old 01-04-2014, 11:21 AM   #36
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While I understand the many reasons to not prefer an annuity, when I reach 60-65, I definitely would look into some of the 'delayed' annuities, where you pay a lump sum now, and (if you're still alive) receive a giant payout starting at 80 or 85. It would solely be for longevity insurance.

Obviously, it would depend on the health of myself/future wife, as well as interest rates, economic climate, and my personal portfolio situation at that time.

In addition to providing portfolio insurance, it would also help reduce against making stupid moves due to senility interfering with investment decisions at that ripe old age, if I already have it 'locked in' to a certain degree and have one less thing to worry about.

But other than the longevity annuity insurance, I most likely will stick with personal portfolio + a bit from SS.
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Old 01-04-2014, 11:22 AM   #37
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Actually, when I said "I wish I had a (COLA'd federal) pension (w/health insurance), I am not saying that I wish I had been paid more and/or saved more for retirement. Rather, I am simply saying that I wish I had the additional security and peace of mind that a pension would provide, especially a federal pension w/COLA.
Then go convert your savings by purchasing one. I guess it wouldn't be "federal," but a contract with a private insurance company for a COLA'd SPIA might actually be safer than what military personnel have, as evidenced by the recent legislative actions.

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Old 01-04-2014, 11:41 AM   #38
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Seems an odd poll, why would anyone choose other than option A - everything? Soc Sec and pensions (where offered) aren't really optional, IOW who would turn either down if available? And it appears most folks are voting for what they'd like while others are voting what they actually have...
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Old 01-04-2014, 11:41 AM   #39
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I would prefer 3 legs, however we won't have a pension. For now, I replaced that missing third leg with rental real estate. I'm thinking that, eventually, I might sell the rentals and buy a SPIA to create a pension-like stream of income.
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Old 01-04-2014, 11:52 AM   #40
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I guess I have a 5-legged stool in my plan:

1. federal FERS pension
2. TSP (essentially 401K) savings, which are in the G Fund that cannot lose share price value, and from which I am taking equal monthly payments. This is sort of like a second pension.
3. taxable investments
4. social security, not yet claimed
5. Possibly a small SPIA to supplement the above, to be purchased when I am in my 80's

One of my goals when planning my retirement, was to get a number of different income streams from different sources in place. I think of this as diversification in income sources, which I think is desirable as well as diversification in my investment portfolio.

With many income streams from different sources, I can survive even if one of them goes belly up. I can't even articulate how much this sort of approach helps a worrier like me. It has helped me to relax and enjoy my retirement.
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