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Old 02-11-2014, 10:02 AM   #81
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Indeed. Sometimes it may be possible to buy a life insurance policy on the pensioner which is enough to replace the survivor income, for less than the monthly cost of taking the joint-and-survivor option. When that is the case it can indeed make sense to forego all survivor income, take the higher pension payout and get some life insurance with the increased pension payments.
And I will put a spreadsheet to this when the time comes (~ 5 years away for me). But a quick back-of-the-envelope check a while back indicated that the pension adjustment is just a straight actuarial calculation based on a large group. Which seemed obvious in hindsight - the pension managers aren't really trying to 'bet' one way or the other, they want that choice to be revenue neutral to them. So I'm doubting that any insurance company is going to offer me anything better, after their profit/overhead. But I will look, maybe there are other factors involved.

I'm also assuming that spousal benefits are the default for corporate pensions, this might be baked into the pension laws? My MegaCorp pension is that way, with the spouse needing to sign off for reduced benefits. Again, I'll need to do the math, on one hand I lean towards a high spousal benefit to provide 'longevity insurance' for DW. OTOH, seeing as it is not COLA'd, maybe I'm better off taking the money now to build the nest egg. It's not going to be cut and dried, now you've got two separate lifespans affecting the numbers, and real return assumptions, inflation, etc Maybe I'll just flip a coin.

Another consideration - if I'm thinking through this clearly, there is a side benefit to delaying a pension if you can (assuming the rates go up each year). My pension (and I assume others), will default to a 50% survivor if I die before taking any pension. So that seems like somewhat of a (morbid and long-shot) freebie. DW would get the higher benefit, and I never took a reduction in pension payments (of course, I didn't get ANY payments!). But the higher amount for life could easily outweigh a few years of payments.

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Don't forget about the change from MFJ to single filing status. That can sometimes increase your tax bill rather massively, even on modestly lower income.
Wait a minute, weren't we talking about the 'marriage penalty' in another thread? Now there's a 'singles penalty'!!?? Those Feds think of everything! We can't win!

OK, so I guess the 'marriage penalty' kicks in at high incomes (deduction limits and tax brackets), and the 'singles penalty' kicks in at low/moderate income (not sure - standard deduction/allowances make the difference?)?



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Old 02-11-2014, 10:18 AM   #82
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Wait a minute, weren't we talking about the 'marriage penalty' in another thread? Now there's a 'singles penalty'!!?? Those Feds think of everything! We can't win!
I think the marriage penalty applies to two income couples. If there is only one pension, that seems more like a one income couple to me.

But, your right, we probably can't win.
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Old 02-11-2014, 10:50 AM   #83
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I have a CSRS (federal) Cola'd pension that was reduced 6% for taking it early and is further reduced for a survivor benefit for DH. He has a smaller partial Cola'd pension from his ex-employer that is reduced for survivor benefits for me, he receives social security and will receive a teeny tiny pension from a former employer at 65 I think. If I finish getting my 7 quarters of coverage that I need for social security, I will receive $60-$70 per month from Social Security due to WEP. We have health insurance through my former employment with the Federal Gov. We also have Roth and Traditional IRAs, TSP and his 401K. We feel very fortunate.
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Old 02-11-2014, 10:50 AM   #84
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Yep, we made out on the pensions:

I retired Active Duty USAF in 1996; Cola'd
I receive 30% disability VA; Cola'd
DW, will get FERS retirement when she retires (18 months); Cola'd
DW will get FERS Supplement when she reaches MRA @ 56, two years after retirement
DW receives 20% disability VA; Cola'd
DW will get 35 year Military pension at 60; Cola'd
DW will get a small pension from MegaCorp $60/Month @ 65; non-Cola'd

Then add in SS for both @ 62

DW has healthcare @ current rate into retirement and we both have TRICARE and VA as needed.

All expenses covered and only withdraw from post tax accounts for 5 years before positive cash flow on pensions.

We will need to plan for RMD avoidance by tax planned withdrawals or conversion to ROTH IRA.
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Old 02-11-2014, 11:00 AM   #85
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Pension with a capped COLA.
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Old 02-11-2014, 11:20 AM   #86
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Small pension...I've run the amounts based on different retirement ages and the 'sweet spot' hits at 55 for about $1500/month.

My company abolished pensions several years ago, so based on years of service, it isn't a whole lot - but it sure helps!
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Old 02-11-2014, 11:22 AM   #87
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I have a delusional friend who thinks he is going to get to take option 1 to maximize his pension. Wife has no benefits and neither have any money saved, but the pension will be very generous. He is still 10 years away from retiring but he thinks she can just find another husband if he dies. Ya, I'm sure she will go for that, and he hasn't yet mentioned this "plan" to her either...
Maybe she will divorce him first and lock in "her" half.
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Old 02-11-2014, 11:40 AM   #88
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Wife and I both have a pension with megacorp. Megacorp has closed it off form future enrollments.

Couple things I don't understand about the pensions. Our pension site says I can begin withdrawing in 2040, but she can't until 2047 with out a reduction in benefits. I am 2 years older than DW and I have i have worked with megacorp 2 more years. But I found it strange I could begin withdrawing at 60 and she has to wait until 65. Does that mean they changed the rules between when we each started working.

She was hired directly into megacorp, where as I was acquired through an acquisition. Could this be related to the takeover?

Also, if we have closed off new enrollments, is that a good or bad thing? My thought is bad in the long term as I'm likely towards the end of the line of receiving benefits. My thought is as more and more Leadership isn't in the pension plan, it will look all the more inviting to change plan rules.
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Old 02-11-2014, 12:05 PM   #89
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Originally Posted by chicago_meatball View Post
Wife and I both have a pension with megacorp. Megacorp has closed it off form future enrollments.

Couple things I don't understand about the pensions. Our pension site says I can begin withdrawing in 2040, but she can't until 2047 with out a reduction in benefits. I am 2 years older than DW and I have i have worked with megacorp 2 more years. But I found it strange I could begin withdrawing at 60 and she has to wait until 65. Does that mean they changed the rules between when we each started working.

She was hired directly into megacorp, where as I was acquired through an acquisition. Could this be related to the takeover?

Also, if we have closed off new enrollments, is that a good or bad thing? My thought is bad in the long term as I'm likely towards the end of the line of receiving benefits. My thought is as more and more Leadership isn't in the pension plan, it will look all the more inviting to change plan rules.
Previous empl*yer froze pensions some years ago, but did up the 401k match to compensate. That is currently the only retirement benefit for newer empl*yees, and the health insurance plan is no longer available, as of a few years ago. Luckily I was "grandfathered". Same with new empl*yer: some longer-term empl*yees have better pension/HI bennies, mine are reduced somewhat, and even newer empl*yees get even less.

Edit to add: It's not so much that retirement benefits were reduced, but the bar to qualify has been raised.
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Old 02-11-2014, 01:04 PM   #90
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DH has a non cola'd pension (75% survivor)
Both of us are covered with low cost medical, dental and vision benefits for life.
We'll both receive social security.

We are fortunate DH was able to take a smaller pension and a partial lump sum. We took the mid six figure partial lump sum and invested it.

If the pension goes away, it won't hurt us as we looked at it as a promise. We saved enough money to live well without it.

As far as whether Megacorp is offering the same to new hires, we don't know. We don't plan on going back to w*rk.
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Old 02-11-2014, 02:29 PM   #91
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Very small non-Cola pension from a MegaCorp that I worked for a couple of decades ago. It probably isn't offered any more. I can fill up my gas tank and eat out a couple of times each and every week!

My Dad, starting in the 1930's, worked for a MegaCorp that eliminated their pension in favor of profit sharing after he was there for about 5 years. After he passed (at nearly 90) we kept getting checks for about $25 a month from an insurance company who could not explain what they were for. I finally found someone who linked them to his former employer of 40 years. I worked for the same company at the time and even with my inside access it took awhile to find a senior benefits dept. employee who remembered that the company had a pension plan at one time but had sold it's liabilities to an insurance company when they eliminated it. My Dad come out WAY ahead with the profit sharing plan.
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Old 02-11-2014, 03:24 PM   #92
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I am getting $400/month total from two pensions, and that wont last.
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Old 02-11-2014, 03:29 PM   #93
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Three pensions. One military, COLA, one county, NON-COLA, one Bank, NON-COLA.
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Old 02-11-2014, 03:47 PM   #94
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Small pension based on 2.5@55 but I only have 16 years in and am leaving at 54. The COLA is up to 3%. Pay 8% of my income to receive that benefit and pay into Social Security. Have worked 34 years full-time so want to pull the plug before the Angel of Death pulls the plug on me. The stress is getting to me so I want to escape while I still can!
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Old 02-11-2014, 04:05 PM   #95
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Have a Military pension with COLA, otherwise just 401K and ROTH IRA.
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Old 02-11-2014, 04:06 PM   #96
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Yes, the spouse does have to sign off. For a lot of reasons it can make sense, depending on the circumstances.
I knew of one guy at work who took the bigger pension but didn't leave anything for his SAHM wife. He gets The Big Ache two years later and she was left with... nothing. What a jerk.

Last I heard of it she was suing the employer but I don't know how that turned out.

So there is good reason the spouse has to sign off on it. No spousal benefit can work just fine if she has another source of income but there are some who apparently figure "I'll be dead so I won't care".
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Old 02-11-2014, 04:25 PM   #97
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Wait a minute, weren't we talking about the 'marriage penalty' in another thread? Now there's a 'singles penalty'!!?? Those Feds think of everything! We can't win!

OK, so I guess the 'marriage penalty' kicks in at high incomes (deduction limits and tax brackets), and the 'singles penalty' kicks in at low/moderate income (not sure - standard deduction/allowances make the difference?)?
When there are two decent-sized and relatively comparable incomes, it tends to be a "penalty". If only one has income, or if there is a large discrepancy in relative incomes, it tends to be advantageous to file jointly.
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Old 02-11-2014, 04:27 PM   #98
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Three pensions. One military, COLA, one county, NON-COLA, one Bank, NON-COLA.
Sounds like the triple-dippers I used to work with at a defense contractor. Put in 20 with the military, retire, put in another 15-20 at a defense contractor, "retire" but stay on as a contractor getting a high hourly wage plus retiree health insurance and two pensions....

Those were the days....
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"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

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Old 02-11-2014, 04:31 PM   #99
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Old 02-11-2014, 04:33 PM   #100
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"As an attorney put it I am a "financial dinosaur". DB pension, 100% COLA, medical/prescription coverage, SS, and enough savings/investments to meet all but catastrophic events. Assuming I pass first DW gets 70% of the pension and SS when she reaches FRA. Not wealthy (rest assured it is nowhere near six figures) but comfortable by most standards. The pension plan is fully funded or very close to it at all times so no worries there."

Very similar for me, having worked at the same agency for 34 years. Not 100% cola but close. Cherry on top is DW is also a pensioner, but no SS for her. Yes, I do know how fortunate we are.
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