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Old 05-29-2016, 03:11 PM   #21
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When I saw the payout rate and the COLA I immediately thought it was some sort of non commercial pension benefit. I just used $279k to buy into a state employee pension scheme that starts paying out in 4 months time when I reach 55. It's single lifetime, has a 2% COLA and pays $19.6k per year, so an initial payout rate of 7%. There is also a lump sum death benefit if I die before age 70. If you can use a portion of your retirement savings to buy a secure income stream at a good rate......and the only ones left are from Government and some mega corp DB schemes.....it frees you up to keep an aggressive asset allocation with the remaining funds. I don't think Id buy a commercially available annuity today because they are just too expensive and there are better alternatives.

But the OP made a good buy IMHO.
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Old 05-30-2016, 05:51 AM   #22
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Sounds like a smart move. When I retired I had the option of deferring my "retirement allowance" into an enhanced non cola pension. I did this and very happy I did. Nothing beats a generous pension in retirement. Wish mine was Cola, but I rely on my divs growing to cover inflation. My payout was deferred for 6 years (retired at 56 pension started at 62) but as I recall the increase in annual pension was about 9% which sounds very generous. Especially since it is on joint lives and my wife is 7 years my junior.
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Old 05-30-2016, 06:43 AM   #23
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Just running some numbers for the OP's pension and assuming an 35 year joint lifespan and 3% COLA the IRR is 6.5%, so this is a good deal
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Current AA: 65% Equity Funds / 20% Bonds / 7% Stable Value /3% Cash / 5% TIAA Traditional
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Old 05-30-2016, 07:36 AM   #24
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When I saw the payout rate and the COLA I immediately thought it was some sort of non commercial pension benefit. I just used $279k to buy into a state employee pension scheme that starts paying out in 4 months time when I reach 55. It's single lifetime, has a 2% COLA and pays $19.6k per year, so an initial payout rate of 7%. There is also a lump sum death benefit if I die before age 70. If you can use a portion of your retirement savings to buy a secure income stream at a good rate......and the only ones left are from Government and some mega corp DB schemes.....it frees you up to keep an aggressive asset allocation with the remaining funds. I don't think Id buy a commercially available annuity today because they are just too expensive and there are better alternatives.

But the OP made a good buy IMHO.
Is this through TIAA CREF? Although I haven't had any money actually at TIAA CREF in over 15 years; I still have my contracts and can transfer funds there at any time.

thanks,

Marc
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Old 05-30-2016, 02:44 PM   #25
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No, it's a state define benefit pension plan. In fact I took money from my DC plan which was with TIAA-CREF in CREF index funds and used that to buy into the state pension. I still have a balance from an old employer in TIAA-Traditional that is earning 4.5% because of the old vintages of the money. I use that as my fixed income, but have most of my money in index equity funds as my income needs are more than covered by rent and pension.
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Income from pension and rent
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Old 07-14-2016, 10:39 AM   #26
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Just running some numbers for the OP's pension and assuming an 35 year joint lifespan and 3% COLA the IRR is 6.5%, so this is a good deal
I've got a similar option available to me through a state retirement plan (though not as lucrative) and am curious what sort of IRR would be considered good?

There are a couple of complicating factors, but just considering the basics of the additional annuity, I get the following numbers. Buy-in of 100K yields $414/month starting at age 60, with a COLA matching CPI from 0 up to 3%. IOW, it won't go down. Think I did the calc correctly, but I get IRR of 4.5% assuming 25 years (to age of 85 with full 3%/year to match the previous calc).

Thoughts?
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Old 07-14-2016, 11:01 AM   #27
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There are a lot of mixed feelings about Annuities. They are a high profit item that is sold. And they do provide a stable income.
This.

For those of us without access to favorabe buyouts like that of OP, the general consensus I've been able to find is that partial annuitization after age 75 could be considered as part of a sound financial plan. If your temperament is a match for annuities, that is. I will certainly at least consider it when I reach that age.
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