Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Taking Pensions - timing
Old 09-21-2016, 09:18 AM   #1
Recycles dryer sheets
 
Join Date: Apr 2012
Posts: 141
Taking Pensions - timing

I have a couple of pensions (non-COLA'd) and I was trying to determine when to take them as I plan to retire in a couple of months (age 57). I built an Excel spreadsheet. Each pension value increased by about 4-5% per year until the date I start it. To help make the decision, I looked at the cumulative income from the pension based on when I started to take it. Further, I added the ability to add in inflation which changes the 'future value' of each pension.

For reference: Pension #1 = $9.6K at age 58, $11.2K at age 65

What I found was that the crossover point for taking the pension early next year, versus waiting up to age 70, was in my early 80's with no inflation and early 90's with 2.5% inflation. Further, if I looked at the average yearly income with no inflation (best case) the added income was only about $1K/yr even when waiting as long as possible to start!

So ... does this all sound like I calculated correctly?

Seems like I should start these ASAP as part of my income in early retirement.
__________________

__________________
Steelart99 is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 09-21-2016, 09:24 AM   #2
Recycles dryer sheets
FIREmenow's Avatar
 
Join Date: May 2013
Posts: 378
I am in a similar situation.

When I calculated the lost "opportunity cost" of having to spend down (by the pension amount) my savings, it showed that I should go ahead and take it ASAP.

Starting approx. now, mine (also non-COLA) only has a 2-3% per year increase if I waited, so that probably made it swing even more in that direction.
__________________

__________________
Believe me, my young friend, there is nothing - absolutely nothing - half so much worth doing as simply messing about in boats. ― Kenneth Grahame, The Wind in the Willows
FIREmenow is online now   Reply With Quote
Old 09-21-2016, 10:26 AM   #3
Thinks s/he gets paid by the post
gauss's Avatar
 
Join Date: Aug 2011
Posts: 1,603
DWs pension only penalizes ~ 3% per year for starting early relative to age 62. A huge early retirement subsidy from the MegaCorp. Actuarial fair values are more like 6-7%/ year.

My old Megacorp actually penalizes more than is actuarial fair for ages below 60.

Our strategy, of course, will be for DW to start her's early and for me to delay until 100% is payable.

If you are faced with an actuarial fair reduction, you still may wish to delay somewhat if you think you will beat the country "averages" for life expectancy (of which I expect here for many to do because of wealth, education, and social ties).

-gauss
__________________
gauss is offline   Reply With Quote
Old 09-21-2016, 01:05 PM   #4
Thinks s/he gets paid by the post
Big_Hitter's Avatar
 
Join Date: May 2013
Location: In the fairway
Posts: 3,671
I'm wondering how you defer the pension past age 65 if you've terminated employment?
__________________
Swing hard, look up
Big_Hitter is offline   Reply With Quote
Old 09-21-2016, 01:25 PM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 14,275
Quote:
Originally Posted by Steelart99 View Post
I have a couple of pensions (non-COLA'd) and I was trying to determine when to take them as I plan to retire in a couple of months (age 57). I built an Excel spreadsheet. Each pension value increased by about 4-5% per year until the date I start it. To help make the decision, I looked at the cumulative income from the pension based on when I started to take it. Further, I added the ability to add in inflation which changes the 'future value' of each pension.

For reference: Pension #1 = $9.6K at age 58, $15.3K at age 70

What I found was that the crossover point for taking the pension early next year, versus waiting up to age 70, was in my early 80's with no inflation and early 90's with 2.5% inflation. Further, if I looked at the average yearly income with no inflation (best case) the added income was only about $1K/yr even when waiting as long as possible to start!

So ... does this all sound like I calculated correctly?

Seems like I should start these ASAP as part of my income in early retirement.
I had to make a similar decision recently. What made it more difficult for me is that I have been doing low tax cost Roth conversions over the last several years and starting my pension will reduce what I can do in Roth conversions dollar-for-dollar.

When I retired at 56 I obtained the benefit amounts at various ages from 56 to 65. For our plan, the benefits increased steeply from 55 to 60 (9.3% annually on average over that 5 year period) and less steeply thereafter (4.0% annually on average.... ranging from 4.6% if deferring from 60 to 61 to 3.5% if deferring from 64 to 65). As a result, I viewed 60 as the sweet spot.

Another view I took was whether the annual increase in the pension was attractive compared to the benefits I forfeited... as if I was buying an annuity for the increase in the benefits by forgoing a year of benefits. Under my plan, after 60 the increases became much less attractive and less attractive than SPIA pricing on immediateannuities.com, so I decided to start my pension and sent in the paperwork on Monday.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
pb4uski is offline   Reply With Quote
Old 09-21-2016, 01:30 PM   #6
Recycles dryer sheets
 
Join Date: Apr 2012
Posts: 141
Quote:
Originally Posted by Big_Hitter View Post
I'm wondering how you defer the pension past age 65 if you've terminated employment?
Neither pension is deferred past the age of 65; you are correct and I updated the OP. Thanks
__________________
Steelart99 is offline   Reply With Quote
Old 09-21-2016, 01:33 PM   #7
Recycles dryer sheets
 
Join Date: Apr 2012
Posts: 141
Quote:
Originally Posted by pb4uski View Post
I had to make a similar decision recently. What made it more difficult for me is that I have been doing low tax cost Roth conversions over the last several years and starting my pension will reduce what I can do in Roth conversions dollar-for-dollar.

When I retired at 56 I obtained the benefit amounts at various ages from 56 to 65. For our plan, the benefits increased steeply from 55 to 60 (9.3% annually on average over that 5 year period) and less steeply thereafter (4.0% annually on average.... ranging from 4.6% if deferring from 60 to 61 to 3.5% if deferring from 64 to 65). As a result, I viewed 60 as the sweet spot.

Another view I took was whether the annual increase in the pension was attractive compared to the benefits I forfeited... as if I was buying an annuity for the increase in the benefits by forgoing a year of benefits. Under my plan, after 60 the increases became much less attractive and less attractive than SPIA pricing on immediateannuities.com, so I decided to start my pension and sent in the paperwork on Monday.

I'll be juggling income needs/sources, possible ACA subsidies and Roth conversions over the next several years. I do wish there was an "easy" calculator to gave the correct answer ... sigh
__________________
Steelart99 is offline   Reply With Quote
Old 09-21-2016, 07:10 PM   #8
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 781
Quote:
Originally Posted by gauss View Post
DWs pension only penalizes ~ 3% per year for starting early relative to age 62. A huge early retirement subsidy from the MegaCorp. Actuarial fair values are more like 6-7%/ year.

My old Megacorp actually penalizes more than is actuarial fair for ages below 60.

Our strategy, of course, will be for DW to start her's early and for me to delay until 100% is payable.

If you are faced with an actuarial fair reduction, you still may wish to delay somewhat if you think you will beat the country "averages" for life expectancy (of which I expect here for many to do because of wealth, education, and social ties).

-gauss
That's a pretty good deal. I thought mine was like that until I read the document and realized it was 3% per year PLUS the actuarial reduction so I will wait until normal retirement age (65).
__________________
jebmke is offline   Reply With Quote
Old 09-22-2016, 07:38 AM   #9
Thinks s/he gets paid by the post
Big_Hitter's Avatar
 
Join Date: May 2013
Location: In the fairway
Posts: 3,671
Quote:
Originally Posted by jebmke View Post
That's a pretty good deal. I thought mine was like that until I read the document and realized it was 3% per year PLUS the actuarial reduction so I will wait until normal retirement age (65).
never seen that before - you sure you read the spd correctly?
__________________

__________________
Swing hard, look up
Big_Hitter is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Market timing and taking RMDs Goldenmom Stock Picking and Market Strategy 112 03-10-2016 06:44 AM
Taking pensions & SS early? Steelart99 FIRE and Money 15 04-20-2015 06:39 PM
Market Timing Schmarket Timing bob boag FIRE and Money 160 10-20-2014 08:10 PM
Finally taking our business to the next level- nervous about taking a step backward thefed FIRE and Money 16 11-01-2010 11:32 AM

 

 
All times are GMT -6. The time now is 04:54 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.