papadad111
Thinks s/he gets paid by the post
- Joined
- Oct 4, 2007
- Messages
- 1,135
HELP. Was just looking at mega corp pension web site. For grins and running some numbers. Plan to FIRE next year in mid 40's.....
It shows a tiny little pension available to me. It also shows that I can take my entire 401K and turn it into an annuity starting right now.
The math says that the annuity pays approx 5.6% annually.. Just for grins, I ran some numbers - eg a $500K balance will return $2300/month (28K/yr) for life starting at age 46 . But No cola!! There are a few survivor options as well which will be considered for DW's benefit.
What might a rule of thumb be to determine what percentage of savings should be annuitized? I like the idea of being able to access money now in mid 40's via the annuity that I would otherwise not be able to be accessed til age 59.5 as a 401K .....at least, that's what I'm thinking. Is that how it works? Presume this is a form of 72T ...
The drawback of course is pension stability (going concern risk, but it's a well funded mega corp pension). Also the money is no longer growing tax deferred in equities. 5.6% is relatively low compared to long term historic stock market returns. That seems to be an average annuity rate today. Nothing special there... Aside faster access to 401k money ... (Not sure on that though).... There is no COLA feature, once locked that;s it. Inflation hopefully stays low for at least the first decade of FIRE. ?
The positive is annuitizing a percentage of retirement income now..at a younger age..and being able to use it now for FIRE... and therefore reducing risk associated with a black swan of a "long and protracted market down turn in the early years of retirement" by reducing overall total asset exposure to equities. Also I fear regulatory changes to 401K's... and of course tax rates could change in the future.
The monthly annuity payout covers ~ 30% of current estimated post - FIRE budget (pre tax). Remainder ~60% of expenses would be funded near term via post-tax account via annual withdraws (@ 3% SWR), and the remaining 10% expenses via rental income. Longer term, I woudl expect to cover inflation increases using IRA/Roth IRA withdraws (starting as early as 15 years from now) and then take SS @ 70. Finally for late life expenses/ longevity , would sale rental condo and primary residence and/or draw down of taxable asset accounts (SWR 4%-6%).....(leaving no inheritance as worst case scenario is an option too)...
Tell me what questions i need to ask, what am I missing, what is a reasonable percentage of total income to annuitize for an early retiree mid 40's (exclude SS since it's so far off) and am I crazy for going with a 5.6% return (hopefully many many years) vs keeping lump sum in the market and letting it ride....
My gut tells me that I have enough in taxable accounts that having some annuity "security" in addition to social security is a good, risk averse/safe approach.
Please chime in. thank you all.
It shows a tiny little pension available to me. It also shows that I can take my entire 401K and turn it into an annuity starting right now.
The math says that the annuity pays approx 5.6% annually.. Just for grins, I ran some numbers - eg a $500K balance will return $2300/month (28K/yr) for life starting at age 46 . But No cola!! There are a few survivor options as well which will be considered for DW's benefit.
What might a rule of thumb be to determine what percentage of savings should be annuitized? I like the idea of being able to access money now in mid 40's via the annuity that I would otherwise not be able to be accessed til age 59.5 as a 401K .....at least, that's what I'm thinking. Is that how it works? Presume this is a form of 72T ...
The drawback of course is pension stability (going concern risk, but it's a well funded mega corp pension). Also the money is no longer growing tax deferred in equities. 5.6% is relatively low compared to long term historic stock market returns. That seems to be an average annuity rate today. Nothing special there... Aside faster access to 401k money ... (Not sure on that though).... There is no COLA feature, once locked that;s it. Inflation hopefully stays low for at least the first decade of FIRE. ?
The positive is annuitizing a percentage of retirement income now..at a younger age..and being able to use it now for FIRE... and therefore reducing risk associated with a black swan of a "long and protracted market down turn in the early years of retirement" by reducing overall total asset exposure to equities. Also I fear regulatory changes to 401K's... and of course tax rates could change in the future.
The monthly annuity payout covers ~ 30% of current estimated post - FIRE budget (pre tax). Remainder ~60% of expenses would be funded near term via post-tax account via annual withdraws (@ 3% SWR), and the remaining 10% expenses via rental income. Longer term, I woudl expect to cover inflation increases using IRA/Roth IRA withdraws (starting as early as 15 years from now) and then take SS @ 70. Finally for late life expenses/ longevity , would sale rental condo and primary residence and/or draw down of taxable asset accounts (SWR 4%-6%).....(leaving no inheritance as worst case scenario is an option too)...
Tell me what questions i need to ask, what am I missing, what is a reasonable percentage of total income to annuitize for an early retiree mid 40's (exclude SS since it's so far off) and am I crazy for going with a 5.6% return (hopefully many many years) vs keeping lump sum in the market and letting it ride....
My gut tells me that I have enough in taxable accounts that having some annuity "security" in addition to social security is a good, risk averse/safe approach.
Please chime in. thank you all.
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