FIRECalc: pension vs. lump sum

[mistermike40]

When I run FIRECalc trying to mirror my pension (it's in two stages, with a stipend before age 62) and compare it to FIRECalc using the lump sum offered, the lump sum comes out 30-40K higher. I realize keeping my pension also allows me to keep benefits (assistance with health insurance, etc) but that seems like a very large delta. I use the Bernicke reality retirement and select the same time frame (35 years, 100% success). Has anyone else noticed this? Maybe I'm not modeling my pension correctly...

 

[mistermike40]

I realize it's not proper to reply to my own post but I think I figured it out

Using simple (made-up) numbers:
Age: 55
Monthly pension (before 62 yrs old): $1500
Monthly pension (after 62 yrs old): $1000
Lump Sum option: $250,000
401k: $100,000

When I tried comparing pension vs. lump sum in FIRECalc the disparity was *much* larger than I anticipated. This gap closed considerably when I set my pension at $18,000 per year (1500x12) then, seven years later I made a negative adjustment of $6000 (the difference between 1500 and 1000, times 12). I didn't realize you could input a negative "pension income".

 

[MichaelB]

I realize it's not proper to reply to my own post but I think I figured it out

Using simple (made-up) numbers:
Age: 55
Monthly pension (before 62 yrs old): $1500
Monthly pension (after 62 yrs old): $1000
Lump Sum option: $250,000
401k: $100,000

When I tried comparing pension vs. lump sum in FIRECalc the disparity was *much* larger than I anticipated. This gap closed considerably when I set my pension at $18,000 per year (1500x12) then, seven years later I made a negative adjustment of $6000 (the difference between 1500 and 1000, times 12). I didn't realize you could input a negative "pension income".

Yes, yearly pension numbers, and apparently they can be negative.

So, in your example, you have a pension that will decline at age 62 by $500 per month?

 

[mistermike40]

Yes, yearly pension numbers, and apparently they can be negative.

So, in your example, you have a pension that will decline at age 62 by $500 per month?

Yes... my company's pension includes an extra amount before you hit 62 (and eligible for Social Security). Once you turn 62 this extra amount goes away and your "normal" (smaller) pension kicks in.

I had a difficult time accurately reflecting this in FIRECalc until I tried a negative pension at age 62 (to adjust my original pension to the correct post-62 amount).