|
01-26-2006, 01:33 PM
|
#1
|
Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 1,645
|
value of pensions?
Hello all,
* * *I've been working on my investment/retirement planning and found this website.
* * *Here is a question I have:* Whenever I use a retirement planning calculator it never has an option for adding in the value of a pension.*
* * *How do I value a pension for retirement planning purposes?*
* * *
Thanks,
Bill
|
|
|
|
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!
|
01-26-2006, 02:01 PM
|
#2
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2003
Posts: 18,085
|
Re: value of pensions?
Quote:
Originally Posted by Bimmerbill
Hello all,
* * *I've been working on my investment/retirement planning and found this website.
* * *Here is a question I have:* Whenever I use a retirement planning calculator it never has an option for adding in the value of a pension.*
* * *How do I value a pension for retirement planning purposes?*
* * *
Thanks,
Bill
|
The best way I can think of is to pricce a payout annuity that matches what you would get from the pension. So if it is a COLAd pension, price an inflation adjusted pension that pays the same amount.
__________________
"All animals are equal, but some animals are more equal than others."
- George Orwell
Ezekiel 23:20
|
|
|
01-26-2006, 02:03 PM
|
#3
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
|
Re: value of pensions?
Doesnt firecalc have a way to put in additional income at a predetermined year, optionally inflation adjusted?
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
|
|
|
01-26-2006, 02:10 PM
|
#4
|
Thinks s/he gets paid by the post
Join Date: Feb 2003
Location: Nomadic in the Rockies
Posts: 2,720
|
Re: value of pensions?
http://fireseeker.com/
FIRECalc can handle new income sources as "(Cute Fuzzy Bunny)" says. This calculator is designed to take a portfolio balance at the beginning of retirement, an inflation-adjusted yearly withdrawal and an stock/bond allocation mix and uses historical returns sequences to test the portfolio survivability over 30-year (or more/less) periods.
Others have been creative with it and made it do some other things.
Is this a defined benefit pension or defined contribution? If the former I'd just calculate it as an income stream. If the latter you could assume an annuity payout and project an income stream or just add the balance to your portfolio I suppose.
Are you trying to see how it will affect withdrawals / spending during retirement?
|
|
|
01-26-2006, 02:11 PM
|
#5
|
Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 2,450
|
Re: value of pensions?
People have suggested multiplying your annual pension income x 25 for a cola pension. Seems like a good rule of thumb.
__________________
- Hurry! to the cliffs of insanity!
|
|
|
01-26-2006, 02:33 PM
|
#6
|
Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 4,391
|
Re: value of pensions?
Just a warning about ORP. It is not up to date with respect to current tax law.
Use it as a guide but don't rely on it's numbers as gospel.
|
|
|
01-26-2006, 02:37 PM
|
#7
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
|
Re: value of pensions?
You can put any tax rates you want in. Its only inaccurate if you're making a good chunk of change. Its about 2 tax brackets away from being inaccurate for me
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
|
|
|
01-26-2006, 02:38 PM
|
#8
|
Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 4,391
|
Re: value of pensions?
The ORP tax brackets (internal) are wrong.
Just run an ORP case and look at the tax brackets it uses.
everything in it is suspect !
|
|
|
01-26-2006, 02:46 PM
|
#9
|
Moderator Emeritus
Join Date: Jul 2005
Posts: 2,811
|
Re: value of pensions?
Quote:
Originally Posted by (Cute Fuzzy Bunny)
...Its only inaccurate if you're making a good chunk of change.* Its about 2 tax brackets away from being inaccurate for me
|
Nice problem to have!
__________________
Work? I don't have time to work....I'm retired.
|
|
|
01-26-2006, 03:02 PM
|
#10
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
|
Re: value of pensions?
From the calculator:
After-Tax Account Estimated Federal Tax Rate (leave blank to use default = 20%):
State Personal Income Tax Standard Deduction and Exemption:
State Personal Income Tax Rate:
Will EGTRRA be repealed in 2010 and tax code reverts to 2001?:
You can put in whatever rate you wish. If you do leave these blank, the product uses tax tables from a few years ago before the top rates were reduced.
Otherwise, if you put a rate in the calculator will produce perfectly accurate results. I use the tool all the time.
Quote:
Originally Posted by MasterBlaster
everything in it is suspect !
|
Uh...ok...it hasnt been updated for tax bracket changes, so the whole thing is suspect. What other areas of basic math have been changed to result in the calculator not working properly, or what other internal tables have you found to be flawed?
By that logic, isnt firecalc 'suspect' as well because it doesnt have the latest return data implemented or because it uses synthesized data for some asset classes that didnt exist until recently?
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
|
|
|
01-26-2006, 03:38 PM
|
#11
|
Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 4,391
|
Re: value of pensions?
You are just too smart for me. ORP was supposed to be an Optimal planner. Now that the levels and brackets and maybe other rules have changed how can it be optimal ?
You go right ahead and use it. You are just too smart.
|
|
|
01-26-2006, 03:43 PM
|
#12
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
|
Re: value of pensions?
Sorry you're upset, but if I have a tool that lets me put in whatever numbers I want it to use, then simply multiplies, subtracts and whatnot with those numbers and give me a set of answers, I dont discard the tool or label it 'suspect' if the numbers it uses if I dont give it any arent good.
(shrug)
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
|
|
|
01-26-2006, 03:47 PM
|
#13
|
Thinks s/he gets paid by the post
Join Date: Jun 2005
Posts: 4,391
|
Re: value of pensions?
Well are you going to use the ORP withdrawal amounts to get "optimum"* tax efficiency ?
Is the after tax income correct ?
If you are just projecting forward then there are many calculators that will give you a future number.
It sounds like you aren't really using ORP for what it was designed for, and if you did the answers that it gives are wrong.
By the way - go back and read my first post in this thread. What did I say ?
|
|
|
01-26-2006, 06:05 PM
|
#14
|
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2003
Location: Losing my whump
Posts: 22,708
|
Re: value of pensions?
The cute and fuzzy bunny thinks you're trying to say that a tool that creates a make-believe future full of numbers that may or may not be right will be influenced by a few percentage points of taxation at the highest bracket levels, providing the user doesnt supply his/her own tax rates for it to use.
The cute and fuzzy bunny agrees the numbers might not be completely right and that nobody should count on them. For this or any other calculator.
__________________
Be fearful when others are greedy, and greedy when others are fearful. Just another form of "buy low, sell high" for those who have trouble with things. This rule is not universal. Do not buy a 1973 Pinto because everyone else is afraid of it.
|
|
|
01-27-2006, 05:43 AM
|
#15
|
Thinks s/he gets paid by the post
Join Date: Jan 2006
Posts: 1,645
|
Re: value of pensions?
Well, I have 3 pensions in the works right now. One is an annuity from a severance package I deferred when I was laid off from a major Telcom company in 2002. One is a national guard retirement, payable at age 60 and the other is a FERS retirement, payable at age 57 min, age 60 max.
I'm a bit fuzzy on whether they are defined benefit pension or defined contribution plans.
|
|
|
01-27-2006, 01:16 PM
|
#16
|
Thinks s/he gets paid by the post
Join Date: Mar 2005
Posts: 2,603
|
Re: value of pensions?
Quote:
People have suggested multiplying your annual pension income x 25 for a cola pension. Seems like a good rule of thumb.
|
John Bogle says use 14x the annual payoff. 25 seems a little heavy .... can we really expect to live to 90 (65+25). Seems a little optomistic.
__________________
FIRE'd since 2005
|
|
|
01-28-2006, 01:37 PM
|
#17
|
Full time employment: Posting here.
Join Date: Oct 2003
Posts: 961
|
Re: value of pensions?
Quote:
Originally Posted by Bimmerbill
Well, I have 3 pensions in the works right now. One is an annuity from a severance package I deferred when I was laid off from a major Telcom company in 2002. One is a national guard retirement, payable at age 60 and the other is a FERS retirement, payable at age 57 min, age 60 max.
I'm a bit fuzzy on whether they are defined benefit pension or defined contribution plans.
|
FERS consists of three things: The defined benefit [for which you pay something like 0.80% of your salary]; The Thrift Savings plan [a defined contribution plan]; and Social Security [a defined benefit pension].
I'd bet my right eye that the national guard retirement is a defined benefit pension. I'd also bet that the Telecomm annuity that you deferred is a defined benefit pension. Usually, anything that is quoted to you as a X dollar per year/month payment, it is a defined benefit pension, and it usually says something like "your benefit is defined by [insert formula]." Anything that says "your benefit is defined on the market value of your investments of your choosing" is a defined contribution plan.
- Alec
|
|
|
01-30-2006, 01:08 PM
|
#18
|
Confused about dryer sheets
Join Date: Jan 2006
Posts: 3
|
Re: value of pensions?
Quote:
Originally Posted by tryan
John Bogle says use 14x the annual payoff.* 25 seems a little heavy .... can we really expect to live to 90 (65+25).* Seems a little optomistic.
|
FYI, 25x has nothing to do with the number of years you are going to live in retirement. It is based on studies that show 4% to be a 95%(+) safe withdrawl rate from a 70/30 stock/bond portfolio for over a 30 year span. My familiarity with this is through Intercst's work with the Trinity data at retireearlyhomepage.com. 25x a pension stream, if inflation adjusted, will give you the "lump sum" amount that this pension stream would be "worth" if it were part of your principal.
|
|
|
|
Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
|
|
Posting Rules
|
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts
HTML code is Off
|
|
|
|
» Recent Threads
|
|
|
|
|
|
|
|
|
|
|
|
|
» Quick Links
|
|
|