Rich_in_Tampa said:
Just curious: how did retiring improve your financial status (easy to see how it might improve your life). Did you have very high expenses related to work itself?
One of the best and most obvious points I gleaned from this forum is that it is meaningless to defer retirement because it is financially better to wait. Heck, it's always financially better to wait - right up til the day you die on the job.
In your case, it sounds like it was not only personally better, but financially better to FIRE. Slam, dunk.
It’s a little complicated, but I’ll simplify it for brevity. You’re right that I would make more money if I stayed until I died (or gosh darn near it), but if I had stayed one day more (literally) it would have cost me money on the retirement side that I never could have made up.
My employer was (is – I’ll explain later) one of the top ten largest municipal governments in the country, which means our compensation (directly) and retirement packages (indirectly) were under the control of elected officials. Occasionally our pay or retirement became a political football to be booted around on the public stage depending on the state of services we provided or the fiscal state of the city.
When I came here the only places I could have gone and made more for the same kind of work were Los Angeles or Anchorage. I’d rather set myself on fire than live in LA and the Anchorage thing was an illusion soon clarified by the cost of living. A decade later the local economic situation and political situation had greatly eroded that through force reductions and pay cuts. The next decade saw a slightly different picture in which the pay began to improve slightly, but the friendlier administration delayed their costs by pushing most of the raises to the later years of the contract. They also overcompensated for the meager raises in the front, and tried to protect themselves from a huge retirement age bubble, by doing some wonderful things for us on the pension side.
They asked us to renegotiate a couple of times and the result was we let them keep pushing the big bucks farther back while they gave us small and medium raises. The quid pro quo was further building a lot of pensions to the point where people started to get giddy in anticipation of retiring. For a lot of reasons it all became sort of Byzantine – my paycheck stubs look like menus from Chinese restaurants. Eight or more categories of pay and five or six different categories of leave – all depending on the pay cycle, time of year, etc.
The result was a lot of people like me sitting on huge lump sum payments and vastly increased pensions. Most of my raises had already been factored in because of promotions and personal initiative (language pay, hazardous duty, shift differentials, acting promotion pay, etc., etc.) that had doubled my salary and pension in the last few years.
With a final “temporary for an indefinite period” promotion I started seriously considering retirement. That spreadsheet had 27 rows and went to column “DL”
Then the new administration came in and immediately declared there was not enough money in the till to pay the pending raises and their contribution to the pension system. Intense renegotiations took place. A dozen different scenarios were possible, none of them as attractive as what was already in place. At the same time my temporary promotion (and all that extra pay) was ending at the same time that I got two great job offers followed rapidly by orders to take a horrible one. The good jobs kept most of my extra pays but the bad one allowed only one.
The final contract was presented for a vote and it took away a lot on the pension side for more on the salary side (that was again pushed off into the future) while preserving most of the already promised immediate raises. The pension changes were also phased in. What that meant for everyone eligible to retire was leave now, real soon, or stay for a decade or more. Anything else resulted in huge losses on the pension and associated payouts.
It was “fish or cut bait” time for a lot of people.
I built another spreadsheet looking at all the scenarios and calculating both present values and total anticipated future payments (using age 72 life expectancy). If I stayed one year longer I would retire at a greatly reduced pension and lose almost $600K in future payments. My salary would eventually recover to where it was then but that would take eight years. My pension payments would not be equal to what they would be if I left in 2004, and those figures are before adjusting for inflation. My pension is adjusted for inflation based on the local CPI. No realistic future pay raises were going to get my pension back to where it is right now or where it will be based on minimum COLAs using the historic rates of inflation.
A second clincher was that I had a one time guarantee that if I left right then I could take all of my accumulated vacation and leave and go on a long term “vacation” while still collecting almost full salary. If I didn’t grab it then I might have a later shot, but might not. The alternative was to take a lump sum payment of the cash value of all that time as it was accumulated at a much lower salary. The difference between the two choices was roughly $150K before taxes. So, I’ve been on paid vacation for almost two years and have about another year to go. At the end of my “vacation” I can opt to leave some of the value there and let it fund five additional years of health insurance at active employee rates.
The last decision point was the fate of a lump sum payment that is associated with my pension. It will be between $360 and 400K at the time my “vacation” ends. It would be the same amount if I kept working. It is in a tax-deferred account and I will roll it over into an IRA. If I kept working I would continue to add to that amount by payroll deduction. However, it’s a very tempting target for the bean counters at city hall and as long as I was working it was at risk for disappearing in some as yet unspecified way. The day I really retire it is all zooming off to the IRA far away from here. Besides, the new contract had already butchered that so much that I could stick it all in munis or treasuries and do as well.
Sure, I could keep working forever (I’d rather throw myself in front of a bus) and the more money I made in salary vs. pension would eventually exceed the value of the benefits that I have locked in now. But I got tired of adding columns to my spreadsheet before I ever got to that point in my planning.
The personal side is all gravy. 20% of the workforce left when I did and it really sucks to still be there. I’ve spent almost two years just enjoying the heck out of my family and that’s something money could never buy
