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Old 11-13-2014, 09:51 AM   #21
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Originally Posted by NW-Bound View Post
Out of curiosity, I looked at the Australian system a while back. As I remember, the wage related part is similar to the 403b or 401k of the US. The basic retirement is a safety net and the only requirement is age. I recall that it was around US$22K, hence more than the minimal US SS benefit. But then, the US has other assistance programs to the indigent, so the big picture is more complicated.
US$22K seems high for a minimum pension as the max US SS at age 66 is currently around US$31k. By comparison the new flat rate UK pension is only US$13k. I know the UK has other benefits too (housing, food, heating allowance) and I imagine Australia does too. The UK also has a DC or 401k type system that has strict Government contribution rules and you can chose your provider or use a public-private trust set up by the Government.
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Old 11-13-2014, 09:59 AM   #22
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Absolutely! One of the reasons I posted the thread was the thought that some folks here, probably not many, but some, might not have training in time value of money calculations. So laying out a specific way to calculate it made the calculation a "cookbook" for anyone to follow.


I figured that this discussion would come-up (COLA vs discount rate). The calculation is sensitive to those values. If you are currently collecting SS payments, then it's really just the difference between those two values.

I calculated using the guidlines in the OP (2.5% for both), and also ran it if the CPI lagged by 1/2 percent (so 2.5% CPI and 3.0% discount rate). That cut the present value by about 12%!
Yes there is a lot of room for assumption and tweeking in these calculations, and the value of a guaranteed monthly check while being high is difficult to assess without knowing someone's full financial situation. I've been doing a lot of this recently as I'm converting my DC retirement account to a state DB pension. It's a great deal as it starts at age 55 and the discount rate is 7%.
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Retired Mar 2014 at age 52, target WR: 0.0%,
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Old 11-13-2014, 10:04 AM   #23
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OK, I found my post a while back reporting what I found about the Australian system. The minimum payment was $20K, not $22K, and was means-tested.

Why Public Pensions Are About To Look Less Healthy

Back on the present value of SS, I do not care about that as much as what cash flow it provides. Even with my savings which have real values, I have to convert it to cash flow to know what I can spend.
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Old 11-13-2014, 10:11 AM   #24
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OK, I found my post a while back reporting what I found about the Australian system. The minimum payment was $20K, not $22K, and was means-tested.

Why Public Pensions Are About To Look Less Healthy

Back on the present value of SS, I do not care about that as much as what cash flow it provides. Even with my savings which have real values, I have to convert it to cash flow to know what I can spend.
OK, if it's means tested that sounds more sensible....the UK US$13k is not means tested, you just have to have at least 35 years of qualifying contribution years.

I agree that the regular monthly check is at least as important as the PV or value that you are getting for it.
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