Need help including pension into retirement calculator

[Stillwater007]

I am having trouble finding an online calculator to calculate what the recommended asset allocation should be when receiving a defined benefit pension. It would be nice to be able to also calculate how much I need to have invested + my pension to meet my overall financial needs when I retire as well.

I received great advice to use an online calculator, but my google searches have not helped me find a retirement calculator that meets what I'm seeking, especially the pension.

With my beginner knowledge, I figure that my pension will act like my bonds allocation. If so, I think I should be nearly 100% stocks and then what index fund should be my target? All in VTSAX for example?

I'm about 5 years away from claiming my retirement pension but plan to work in a different career/field for at least another 5 years.

Anyways, if someone knows a great online calculator that includes a place for a defined pension, I am all ears.

Thank you in advance.

 

[Midpack]

Other than https://www.firecalc.com/? It allows users to enter pensions and different AA among many other inputs…

 

[brett]

I took the commuted value of my pension, treated it like other investments but tagged it as fixed income.

Every year or so I estimate the revised value of the pension by looking at the annuity rates. Purely for investment allocation purposes.

As a result we have been heavy on equities for the past ten years...thankfully.

I do not use firecalc or anything similar since retiring. Our only calculation is investment allocation and annual after tax burn rate.

 

[target2019]

Flexible Retirement Calculator and many others will let you add a pension and other types of cash flow to project outcomes over a long period. Pensions are either COLA or not. Including pension as a bond allocation is something that is debated.

 

[stepford]

Is the OP asking for a retirement calculator to recommend an AA? Most don't do this per se, but will forecast income and assets over time for various AA's the user may choose. It's then up to the user to choose the AA that gives the combination of spending power and risk they are comfortable with. So whether a pension is considered "bond-like" doesn't matter. It is simply modeled as a guaranteed income stream and reduces the withdrawals from other assets required by projected spending accordingly

Both FIRECalc and Fidelity RIP work like this, and I assume most others.

 

[old medic]

Your annual Wants/Needs - your projected annual pension = what you need to make up. Plan your investments and AA to meet that number... But I'm new to this too.

 

[TheWizard]

You may not need an online calculator.
End-game retirement planning should focus on your income streams firstly.

For example, if your desired retirement income is $6000/month and your pension will be $4000/month, then you need to get $2000/month from elsewhere, most likely from your investment portfolio.
If you expect to have $1M in investments at start of retirement, then that's a 2.4% withdrawal rate, which is safe.

And then if you start SS a few years later and get $2500/month, then you may not NEED to do portfolio withdrawals at all henceforth. In that case, you can invest 100% in stocks if you want.

So plug in your own numbers and see what you get...

 

[Exchme]

No tool and no person one can recommend an asset allocation that is right for you, that is a personal decision and involves not only the details of your life situation and your goals, but also your emotional response when stocks go down. Some investors panic and sell at the bottom, some ride it out and some buy more when the market is down.

Directionally, yes a fixed income stream means your assets have to support a lower withdrawal rate and so you can withstand higher stock allocations without a measurable increase in the chance of going broke. So if you are at 100% success in FireCalc even with all stocks, you might as well load up on stocks as long as you can emotionally handle the bumpy ride.

As for a fund, yes, Vanguard Total Market is a great choice, though you might want the ETF version, VTI. Vanguard is advising clients that they should have 30-50% of their stocks as international since it has been so horrible recently and they figure that it should bounce back. If you want international spice, something like Vanguard Total International is a good choice.

 

[mrfeh]

With my beginner knowledge, I figure that my pension will act like my bonds allocation. If so, I think I should be nearly 100% stocks and then what index fund should be my target? All in VTSAX for example?

I would certainly not do this.

Your pension is an income stream, not part of your portfolio. I would subtract the amount of the pension from your expenses and work from there.

 

[pb4uski]

... It would be nice to be able to also calculate how much I need to have invested + my pension to meet my overall financial needs when I retire as well. ...

FIRECalc will tell you how much you need to have invested in addition to your pension to meet your overall financial needs. Put in your information and on the Investigate page chose "Starting portfolio value" where it says:

Given a success rate, determine spending level for a set portfolio, or portfolio for a set spending level
Search for settings that will get a success rate of as close to [95] % as possible (usually within 1%) by changing... O Spending Level or O Starting portfolio value

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... With my beginner knowledge, I figure that my pension will act like my bonds allocation. If so, I think I should be nearly 100% stocks and then what index fund should be my target? All in VTSAX for example? ...

I would certainly not do this.

Your pension is an income stream, not part of your portfolio. I would subtract the amount of the pension from your expenses and work from there.

+1

Two schools of thought and no right answer.

One school of thought is that AA doesn't change and retirement investments are ring-fenced to provide the gap (spending less pensions less SS). This school of thought is more prevalent because it is easier. IMO this school of thought is preferable.

The other school of thought is to value the pension as a asset and include in in your AA as part of your fixed income allocation.

If you want to value your pension, I suggest immediate annuities.com for fixed benefit pensions... analogize to a SPIA. If you have a COLA pension you could use opensocialsecurity.com.

 

[Chuckanut]

I view my pension as a phantom asset. It provides income but nothing else. I can't spend it, borrow against it, or leave it to my heirs.

I view pension as part of the now nearly obsolete three legged stool of retirement funds - personal savings, pension, Social Security. I want to be able to live on any two of the legs if needed. So for that reason I have not taken any extra risk with my personal investments even though I have the pension. But, that's me.

 

[old medic]

I view pension as part of the now nearly obsolete three legged stool of retirement funds - personal savings, pension, Social Security. I want to be able to live on any two of the legs if needed. So for that reason I have not taken any extra risk with my personal investments even though I have the pension. But, that's me.

THANKS.... now to play with two legged stool numbers....
But with the Wife added at least we are starting with 6 legs.