Should I stay or should I go now? This indecision's buggin' me.

[Jimonlimon]

I’m curious what the real dollar difference is between retirement this year vs next. See below for details on salary, pension, and cash-out of accrued leave.

Age 58, still working at a government job with a defined benefit pension for self and spouse lifetime that includes 2% annual COLAs and healthcare coverage after retirement. Lots of travel plans for next summer whether I’m retired or not.

The financial situation is complicated, this question is a simplified subset.

Basics: apples to apples comparison of salary vs pension is after removing all items that expire upon retirement such as FICA, pension contributions, union dues, etc. I’ve also removed the cost of medical insurance which is slightly different. COLA effect is simplified too. $ values are before income taxes. Any of the scenarios would allow us to increase spending by at least $15% over current levels (including accounting for future inflation)

I’m not sure how to accurately calculate present value of the future pension so I just ballparked it assuming 25 times the annual amount.

Retire 12/30/23:
No ongoing salary
Pension $8600/mo
Deferred leave cash-out $50,000

Retire 5/1/24
Salary 1/1-4/30 $11,100/mo
Pension $8700/mo
Deferred leave cash-out $47,000

Retire 12/30/24
Salary 1/1-12/30 $11,200 (average)
Pension $9100/mo
Deferred leave cash-out $4000 (use most up during summer starting late May)

If I use the 12/2023 numbers as baseline:

5/2024- lifetime pension increases by $100; salary above pension is $10,000; leave cash-out decreases by $3000; net immediate cash difference +$7000; net present value difference +37,000.

12/2024- lifetime pension increases by $500/mo; salary above pension $31,200; leave cash-out decreases by $46,000; net immediate cash difference -$14,800; net present value difference +$135,200.

Although I can take 3 months off work next summer and then return through year’s end, there would be some amount of stress dangling over my head. OTOH my wife prefers that I wait. That’s why I’m considering deferring to May even though it appears least financially beneficial. I think time when I’m younger is more important than money when I’m older.

 

[pacergal]

Why does your wife want you to wait?

Have you run firecalc?

 

[Midpack]

I think time when I’m younger is more important than money when I’m older.

If you do, there's your answer...

 

[aaronc879]

After seeing $8600/mo pension none of the other numbers matter. I would retire immediately before they realize they are crazy to give that much money for not working.

 

[Jeffman52]

OMY+ almost always makes your financial position better. You aren't drawing from any of your retirement, and you continue to put money toward retirement. That is true at 52, 55, 58, 62, 65, 67, 70, (insert age to retire here) etc etc.


But you hit the money on the head. Time > money. You can always tighten your budget as needed in the future, but you can't add another second of healthy life. Or another way to look at it. Are you trading time you can never get back for money you won't spend?

 

[MarieIG]

Is your DW working? If so what is her plan for retirement. What are her concerns.

 

[LateToFIRE]

Not enough info to think about it within the context of your overall financial picture. If it were me, strictly based on the NPV's, I would opt for retiring 12/31/23 because $135K is not going to make or break my 30-year plan. And also because likelihood of me being alive and/or giving a hoot in 30 years is not great.

 

[Unpaintedhuffhines]

Stop trading time you'll never get back for money you'll never need.

As Jeffman52 says, OMY will almost always make your financial situation better. I left about 10 months ago, and if I had chosen to stay (for 3.5 more years), I would have vested six figures in RSUs (not to mention the salary, bonuses and commissions over those 3.5 years). But I would have been miserable. We did the math, determined we have more than enough (like you), and I pulled the rip cord.

Now I do what I want, when I want. Retirement is glorious.

 

[Greenblue]

Nothing stands out to me as incorrect about your numbers, but I'd be interested in hearing why your wife recommends waiting. More money in the long run to do awesome stuff with? Or does it just "feel" right to hold off a little longer?

 

[Irishgirlyc58]

[mention]Jimonlimon [/mention] are you in CalPers or a an independent retirement system like LACERA?
I know CalPers pretty well and I that the other retirement systems in CA are similar.

I retired from county employment in December 2021.
I had the same struggle as you in deciding the actual year/month/day.

What I did was set up a simple excel spreadsheet and ran different scenarios in CalPers giving me my estimated benefit amount.
Put that number into the spreadsheet and then added other variables.
Don’t forget that you get a 2% COLA in your second year of retirement in May. Your first year is the year you retire- even if it’s 12-30. I retired 12-29-21 and got my first COLA May 2023.
Had I retired 1-2-22 my first COLA would not be until May 2024.
COLA is cumulative.

Also, your quarter birthday can make a difference depending on your retirement formula.
My formula 2%@55 maxed out 2.5% at 63.
I ran a retirement scenario for right before my 63 birthday and right after. Big difference.
I started doing that with my quarter birthday and that wasn’t as big a difference but it still helped narrow down a month.

I also added the value of my leave balances based on how much I thought I would use if I stayed an additional 4 months or whatever.
It wasn’t worth it- the additional pension wasn’t enough to cover the loss of payout. It was mostly a wash.

It was such a hard decision for me but I don’t regret it one bit.
I hope that this is helpful to you.

 

[NgineER]

What are your spending needs? Is your pension alone covering your projected spend? Do you have additional income sources?

I just hit FI but have a plan to stop working in 7 years when half my brood is done with college. For every year I stay working I gain another $10k to spend (conservatively) and when I hit 55 in seven years I can access 401k and stock options go from 90 day exercise window to the full ten years exercise window. But if I get tired of w@rk I might pull the plug sooner, but it'd come with $500k less in savings and no lake cabin that we have plans for.

But we are healthiest now, and my kids are home...

 

[MikeWillRetire]

"One day it's fine and next it's black."

 

[Route246]

Dumb question. Excuse my ignorance as I know nothing about government defined benefit pensions.

Do you start collecting $8600/mo next year 2024 if you retire 12/30/23 at age 58/59? No waiting until you are age 65?

This seems to me like a no-brainer to retire ASAP, as in your "net pay" is $3400/mo beginning next year. I must be misunderstanding something here?

I’m curious what the real dollar difference is between retirement this year vs next. See below for details on salary, pension, and cash-out of accrued leave.

Age 58, still working at a government job with a defined benefit pension for self and spouse lifetime that includes 2% annual COLAs and healthcare coverage after retirement. Lots of travel plans for next summer whether I’m retired or not.

The financial situation is complicated, this question is a simplified subset.

Basics: apples to apples comparison of salary vs pension is after removing all items that expire upon retirement such as FICA, pension contributions, union dues, etc. I’ve also removed the cost of medical insurance which is slightly different. COLA effect is simplified too. $ values are before income taxes. Any of the scenarios would allow us to increase spending by at least $15% over current levels (including accounting for future inflation)

I’m not sure how to accurately calculate present value of the future pension so I just ballparked it assuming 25 times the annual amount.

Retire 12/30/23:
No ongoing salary
Pension $8600/mo
Deferred leave cash-out $50,000

Retire 5/1/24
Salary 1/1-4/30 $11,100/mo
Pension $8700/mo
Deferred leave cash-out $47,000

Retire 12/30/24
Salary 1/1-12/30 $11,200 (average)
Pension $9100/mo
Deferred leave cash-out $4000 (use most up during summer starting late May)

If I use the 12/2023 numbers as baseline:

5/2024- lifetime pension increases by $100; salary above pension is $10,000; leave cash-out decreases by $3000; net immediate cash difference +$7000; net present value difference +37,000.

12/2024- lifetime pension increases by $500/mo; salary above pension $31,200; leave cash-out decreases by $46,000; net immediate cash difference -$14,800; net present value difference +$135,200.

Although I can take 3 months off work next summer and then return through year’s end, there would be some amount of stress dangling over my head. OTOH my wife prefers that I wait. That’s why I’m considering deferring to May even though it appears least financially beneficial. I think time when I’m younger is more important than money when I’m older.

 

[Go-NoGo]

"One day it's fine and next it's black."

The Clash

 

[brett]

My spouse never thought that I could retire at 59. In the end my job was eliminated and I happily negotiated a golden handshake from a wonderful employer.

I was going to go back, I was speaking with contacts in my industry.

Then DW made a comment to the effect that we had more than enough money to retire and to do whatever we wanted.

She asked....do you want to go back to work or do you want to start knocking off those places to travel on our respective bucket list. It took five seconds to make a decision. We have never looked back.

After 12 years of retirement I realize every day that good health is a gift to be appreciated to fullest whilst one can. Just ask anyone in poor health what they would give for another year of perfect health.

 

[2HOTinPHX]

My spouse never thought that I could retire at 59. In the end my job was eliminated and I happily negotiated a golden handshake from a wonderful employer.



I was going to go back, I was speaking with contacts in my industry.



Then DW made a comment to the effect that we had more than enough money to retire and to do whatever we wanted.



She asked....do you want to go back to work or do you want to start knocking off those places to travel on our respective bucket list. It took five seconds to make a decision. We have never looked back.



After 12 years of retirement I realize every day that good health is a gift to be appreciated to fullest whilst one can. Just ask anyone in poor health what they would give for another year of perfect health.

You are so right. Don't take good health for granted. One retirement YouTube guy I follow often states when you reach 60 you probably only have about 1000 weeks of good health left.

 

[cyber888]

You should Go now. Your pension is big enough nore

 

[Jimonlimon]

Why does your wife want you to wait?

Partially due to kids in college and potential impacts to financial aid. If I retire end of this year I'd end up with 13 monthly paychecks and cash-out of accrued leave which would bump our gross income by about 50%. Even if I roll it into deferred comp (both 401k and 457b) the colleges might consider it as a big income increase. That's why I'm considering next May since it would be after all the forms for 24/25 year are due, which should be their final undergrad year.

Our first 2% pension COLA comes after a full calendar year of retirement, so going January 1 vs. December 30 results in a permanent 2% reduction since the first COLA is delayed a year. Retiring between January 1 and late March results in a pension cut (after the first year due to missing the COLA). The other benefit to retiring in December is I'll have just hit the Social Security tax cap, so that 13th paycheck and vacation cash-out aren't subject to the 6.2% tax, saving about $4000.

 

[Jimonlimon]

[mention]Jimonlimon [/mention] are you in CalPers or a an independent retirement system like LACERA?
I know CalPers pretty well and I that the other retirement systems in CA are similar.

I retired from county employment in December 2021.
I had the same struggle as you in deciding the actual year/month/day.

....

Yes, I have CalPERS. Did the online all-day seminar, have an official estimate for 12/30/23, etc. I ran estimates on the website for all the permutations which is why I narrowed it down to 12/1 (not mentioned up-thread) 12/30 or 5/1.

May date is really about coming back up past the lost 2% COLA and hitting two birthday quarters but not needing to burn leave for my long string of trips which start that month. Kids in college give me a little concern over retirement this December due to income spike right about when financial aid forms are due.

 

[UpQuark]

Between end of December and first of May is just 4 months, which is a pretty short time if there is a significant financial benefit. Especially if you plan to take some weeks of vacation during that period I'd think the time might pass fairly quickly. Though I guess once I decided I was retiring time slowed a lot while waiting for the day to arrive.

 

[Northforker]

How much is your time worth? Ive had 3 friends/coworkers drop dead at 61, 49, 63. They were all in decent health.

 

[Midpack]

How much is your time worth? Ive had 3 friends/coworkers drop dead at 61, 49, 63. They were all in decent health.

Sad as that is, those are still exceptions, so not a sound basis for a retirement planning.

 

[Jimonlimon]

Between end of December and first of May is just 4 months, … I'd think the time might pass fairly quickly. Though I guess once I decided I was retiring time slowed a lot while waiting for the day to arrive.

True, but next May is twice as far as Christmas!

Financially I’d be working those 4 months for very little benefit. Logistically it makes a few things easier and gives more time to wrap things up.

OTOH my work stress seems higher lately and jumping ship is appealing!

 

[Jimonlimon]

I like replying to myself.

Just re-ran the numbers on my pension. Delaying until late next year increases the amount more than I thought. I wish it didn’t because it tempts me to delay!

Stay the course.

 

[FlaGator]

You are so right. Don't take good health for granted. One retirement YouTube guy I follow often states when you reach 60 you probably only have about 1000 weeks of good health left.

Anecdote of 1 - I'm closing in on 64 and still doing what I want. Not as fast on a bicycle as 5 years ago, but still ahead of the majority of my peers.

Now, if I dropped 15 pounds and ride as frequently as I did 5 years ago, I'd get most of that back.

Anecdote of 2 more-my closest friends, same age, still active and doing what they like.

More anecdotes - wife died of cancer at 54. HS acquaintance died suddenly at 62. College friend killed himself at 58.

Lot of stories, Maybe YouTube of today is "the internet" of 10 years ago

To the OP, for another $4-6K/year and assuming you have no terminal conditions, I would travel next year, burn down the PTO and take the higher pension 12 months later. Says the guy who called it quits at 55.