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Choices,  Considered Opinions?
Old 03-27-2004, 04:38 PM   #1
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Choices,  Considered Opinions?

OK, Hello ER Friends. Here is my situation. I'm just about 49. I have 20 years plus with a County Government Agency. The Retirement benefit is defined (see chart) and includes a Cola awarded (somewhat ironically) each March 31. In fact it is somewhat popular to retire just before that day so one can acquire the Cola benefit almost immediately. My wife works for the same County, different Agency, and has more years, she is 1/2 year younger.

We began our life together a bit over a decade ago. Our personal finances at that time and for a while after where a shambles. Bottom line. We had no money in the bank, no assets other than small home equity and our good looks (hehe) OK to be honest, She looks really good. I'm just so-so.

We started planning ER as a 7-year plan 5 years ago. The County minimum's are 5 years of service and minimum age of 50. A few years before our ephiphany as to the virtues of ER the County instituted a voluntary Deffered Compensation Plan, which my research seems to call a 457 plan. Most employees use the 457 as a place to shelter their Cafe excess. We draw our health benefits from a pool of about $340 a month that pays for the average family's Health, Dental, Vision, and minimal Life Ins. Typically when a couple both work for the same County, one covers the other, and the non-cafe participant gets to stuff a couple hundred into the deferred comp with nothing coming out of their check. Cool. A nice benefit.

We have been attempting to increase our contributions (tax deferred) ever since. Also an added benefit is our County continues to pay the Medical.Dental.Vision AFTER we retire. We won't have to worry about finding and paying for insurance in ER. Way cool.

Using my own numbers to represent about half of what we can expect in ER, I've included a Table that shows about what I could expect if I didn't bow out gracefully as planned when I reach 51, and she is 50 1/2, pretty close to the soonest we go both pull the plug. The table illustrates what I'm sure many consider when they think about the What If's? Should I work, just one more year? A couple more would be nice... etc.

We're pretty commited to the earliest ER possible. I don't hate my job, but it has become just that a job. I am not defined by it, I don't socialize with co-workers, and I have many hobbies that I don't have sufficient time to properly enjoy. I enjoy making music, I have more guitars than some ladies have shoes. My wife is extremely artistic and we plan a small, very small jewelry business to run at a break-even level to keep us out of trouble. We will acquire all the tools and raw materials to pursue this before we stop bringing home the big checks. We live fairly modestly, don't require fancy digs, or new cars. We think we could survice on 40 grand a year take home.

My main question is this. There are rumours of a program similar to what many teachers unions provide. The ability to buy extra years of service to increase the retirement benefit. I haven't been able to find a calculator yet to determine the added benefit with any accuracy. Ball park figure seems to be in my case:

If I transfer about 60 grand from my 457 plan back to County coffers, they will reward me with about $500 more per month than the figures in the table. Does this seem like a worthy trade? On face, that sounds like I'd get $6000 per year more, or a 10 percent return with no risk and forever, regardless of other economic factors. That is about the total amount I have in the account right now, although I hope to add 30 G's more in the next 2 years. So there is, I'm an open book. What you do?

Pick a ER age from the table, and do you trade the 457 money for a permanent spike in the monthly retirement check or do you leave it invested? And here I would add the spouse's contribution while arrived at in a slightly different way, will be about the same, or maybe a bit more than mine.

Inquiring minds want your HO's

Retire Monthly Increase over
Age Retirement Previous Year
51 $2,367 $231
52 $2,624 $256
53 $2,851 $227
54 $3,130 $280
55 $3,434 $303
56 $3,763 $329
57 $4,122 $359
58 $4,427 $305
59 $4,743 $316
60 $5,069 $327
61 $5,407 $337
62 $5,755 $348
It's about the music
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Re: Choices, *Considered Opinions?
Old 03-27-2004, 05:06 PM   #2
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Re: Choices, *Considered Opinions?

Hi JohnyM,

Some would kll for a guaranteed 10% return with
a COLA. If you check out
you will find that $60k invested in an immediate
annuity at age 49 would bring you only $300 per
month and a joint immediate annuity would only
bring about $273. Take it and hide!


Charlie (aka Chuck-Lyn)
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Re: Choices, *Considered Opinions?
Old 03-30-2004, 05:30 PM   #3
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Re: Choices, *Considered Opinions?

I'm in the same boat as you except I must decide to retire by July 2004 to get a 2 yr service credit. If I don't take it no raise that year but a 3% raise in the second year. There won't be another golden handshake for five years.

On top of that I must decide whether or not to buy 1 to 5 years of service credit before I retire. For five years the cost would be about 82k. At .02156% X 5 would give me 11% added to my retirement which has a 2%cola cap.

Advantages are steady predictable income and security for my wife as 100% survivor. Disadvantages are loss of control of the money, loss of liquidity, and I would have to live over 11 years to break even.

All this came about in the last month. My original plan was to retire Oct 9, 2005 at 59.5 with my house paid off.
I'll be crunchin numbers now until the deadline.

I should probably buy the time since both my wife and I are nonsmokers, joggers and our parents (except for wife's mom) are alive & well in their upper 80s low 90s.

Keep my eye on these bulletins - you'll find there are alot of sophisticated investors with good ideas here.
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Re: Choices,  Considered Opinions?
Old 04-03-2004, 05:15 PM   #4
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Re: Choices,  Considered Opinions?

Riverrat wrote "I'm in the same boat as you except I must decide to retire by July 2004 to get a 2 yr service credit. If I don't take it no raise that year but a 3% raise in the second year. There won't be another golden handshake for five years."

I can't see that there is any decision to make as to when. The two years of service should more than make up any meager 3 percent raise while you actually WORK those two years. You've got colas built in. It's a matter of IHMO not that you receive an increase of 11 percent, but a literal math solution as to what is the return on that 82 grand. If you think it is in the ball park of what you could expect investing it yourself, or to be super conservative, based on the popular 4 percent rule touted on this and other boards, if your return is considerably better than that, and the risk is close to Zero, you have to give credence to the buy back.

Either way, you're good to go. so go for it.

It's about the music
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