Well, I have almost finalized the purchase of service. However, my initial method of figuring it out was off base. I misinterpreted that I could buy age of retirement. It turns out that I am buying months of service so the percentages I gave earlier don't apply. The correct calculation gives me a better monthly payment.
So, for close to $52,000 rollover from the 401K plan to the pension plan, I will receive close to $320.00 more per month with my spouse as a 100% CA. Also, there is, as stated above, a COLA of at least 1% per year. The amount of increase would be $160.00 more if I were to purchase only 24 months of service at a cost of almost $26,000. I think the way to go is with the maximum of 48 months.
Does 48 months sound like the best way to go?
Would this be treated as a withdrawal from the 401k such that you also have to pay the taxes on the amount withdrawn? Also, would the penalty apply since you are under 59 1/2? I am not sure how under the ERISA rules you could just transfer the money from one plan to another.
You can transfer this money to a pension fund with no problems. I did it at age 42 to buy some years...actually used after tax money additionally. The after tax money is treated as non taxable income the rest of your life, so $1000 of my yearly pension is tax free. The pretax transferred money gets taxed as part of the pension the rest of my life... Sent from my iPad using Tapatalk
Nun, in response to your last post, my local governement public employer has 2 plans, a DB 401(a) and a voluntary DC 401k. Participation in the 401(a) DB plan is mandatory with a small percentage of the funding provided by the employee and the rest by the employer.
I will be buying "qualified service" I'm my employers pension plan soon. It will cost me a specific amount and so I have the money sitting in a stable value in my 457. I have enough to cover the buy in and don't want any ups and downs. My reasoning is if you have a large purchase within the next year the money should be in something close to cash.Update: The Rollover went through and I was very fortunate regarding the timing. The account grew around $8,000.00 between the time I signed the paperwork and the actual rollover. This is due to the stock market going up after the day I signed the paperwork. I feel very fortunate as the market could have gone down.
I have been struggling with the math for a similar situation. I can buy up to 24 months of service. Each year adds 2.5 % to my pension. The pension has a 3% cola. Salary pension is based on is 100k, so that math is easy. The hard math is it cost 41k per year so for 82k for two years Of credits, I can receive 5k a year additional in pension. Pension goes from 60k to 65k.
So bottom line for 82k I receive 5k with a 3% cola. So the first year is aprox. 6% .
I'm torn. Leaning towards not buying any. I retire June 3, 2016. Any comments, suggestions??
Thanks.
Not that much if this is very accurate, but I just put $82K 58 yo male wisconsin single life non-cola into immediateannuitys.com and it came up to $4740/yr. A COLA annuity would be worth more.
With the PE10 at historical highs, I'd be more inclined towards buying it than if it weren't so high. But you would be giving-up some ability to control your income, and presuming two people, the 60K is already pretty close to the ACA cliff, and the extra 5K would certainly put you over. But maybe your company has great retiree healthcare benefits and you don't need to worry about the ACA?
I have been struggling with the math for a similar situation. I can buy up to 24 months of service. Each year adds 2.5 % to my pension. The pension has a 3% cola. Salary pension is based on is 100k, so that math is easy. The hard math is it cost 41k per year so for 82k for two years Of credits, I can receive 5k a year additional in pension. Pension goes from 60k to 65k.
So bottom line for 82k I receive 5k with a 3% cola. So the first year is aprox. 6% .
I'm torn. Leaning towards not buying any. I retire June 3, 2016. Any comments, suggestions??
Thanks.
Does that include survivor's benefits? Are you married? What other assets/pensions do you and your spouse have? Social Security? If the above includes survivor's benefits at 100% or 75%, and your pension income is not more than, say, 60% of your total projected income, I'd feel comfortable buying it....but I wouldn't want to have me and my spouse depending entirely on this pension, and then when you pass on they get nothing. Depends on your overall portfolio and what % this pension represents of your other cash flow sources.
Very good points all of them. You can see why I'm unsure what to do. It's a Illinois Firefighter pension so it is within control of a corrupt, bankrupt state. That is another issue entirely.
With businesses and people of means leaving in droves, betting on Illinois is not prudent either.
54% funded.