How much minimum monthly retirement income should be enough for retire?

[Old Microbiologist]

Quote:

Originally Posted by rk911 we have three public pensions two of which are mine. we each have one from the illinois state govt, my other is municipally based. the state pensions are worrisome as they represent 37% of our monthly income but they are roughly only 40% funded. less worrisome is my municipal pension. it's managed much better and is 91% funded and represents 40% of our monthly income. SS fills in the remaining 22%. but our net worth is in the low 7-figures with an asset allocation ratio of about 70/30. a review by a fee-only financial advisor a few years ago was of the opinion that, given our ages, life expectancy and our standard of living, we should should be able to maintain our lifestyle should all three pensions and SS disappear and the nest egg somehow survives which, IMO, is unlikely. so i have quit worrying about that. it's out of my control.

We are in a similar situation except 100% of our needs are met from the pensions and we haven't tapped a single dollar from anything else in over 12 years. Instead, we are underspending our pensions roughly $40k a year. We are also aging and it is impossible to estimate life spans but assuming worst case we live to 100 we have enough to carry us for that long without pensions. Our actual spending is especially low due to COVID and not traveling for the foreseeable future.

[watchman3135]

Just curious to get others opinions, which is a better scenario?
1. John & Jane Doe's Pension, social security and $500,00 in 401k/IRA investments or
2. $1.5 million in 401k/IRA investments, social security with no pensions?

I always say pensions beats a higher retirement savings because it's mostly guaranteed income minus the possibility of bankruptcy or other default. I truly envy those with pensions theses days. The fact is, the 401k origins was never intended as a means to save for ones retirement. It was a tax shelter derived for the rich to shelter wealth. It became the instrument of choice when employers found out how much more they could save.

[Winemaker]

Quote:

Originally Posted by watchman3135 Just curious to get others opinions, which is a better scenario? 1. John & Jane Doe's Pension, social security and $500,00 in 401k/IRA investments or 2. $1.5 million in 401k/IRA investments, social security with no pensions.

6. His and her pensions, his and hers SS, his and hers 401k/403b/tIRA/Roth IRA, rental income, and oil/gas royalties.

We schlogged and scrimped for 35 years and #6 is working pretty good for us right now. We won't be taking SS for another few years, though.

[cyber888]

As long as you have a budget 20% - 25% below your pension and based on your numbers, I think you can retire. But it actually depends on how you feel .. can you sleep at night with your pension ? If so, you're good. If you feel insecure, then .. you have a lot of thinking to do.

[RunningBum]

Quote:

Originally Posted by watchman3135 Just curious to get others opinions, which is a better scenario? 1. John & Jane Doe's Pension, social security and $500,00 in 401k/IRA investments or 2. $1.5 million in 401k/IRA investments, social security with no pensions? I always say pensions beats a higher retirement savings because it's mostly guaranteed income minus the possibility of bankruptcy or other default.

Impossible to answer without knowing their ages, and how much the pension is worth. One could always buy an SPIA for $1M to get a pension-like annuity. Do you always make decisions without considering the math, or even knowing the numbers to make an educated guess with?

[ncbill]

Quote:

Originally Posted by watchman3135 Just curious to get others opinions, which is a better scenario? 1. John & Jane Doe's Pension, social security and $500,00 in 401k/IRA investments or 2. $1.5 million in 401k/IRA investments, social security with no pensions? I always say pensions beats a higher retirement savings because it's mostly guaranteed income minus the possibility of bankruptcy or other default. I truly envy those with pensions theses days. The fact is, the 401k origins was never intended as a means to save for ones retirement. It was a tax shelter derived for the rich to shelter wealth. It became the instrument of choice when employers found out how much more they could save.

Pensions are nice...a COLA pension plus free retiree health care plus a modest, paid-off house allowed my in-laws to retire 25+ years ago with low five figures in liquid assets.

No reason you can't do both...my oldest plan to stay the 20 years needed for a military pension plus is saving ~1/3 of their base pay into the Roth TSP & receiving a 5% match into the traditional tax-deferred TSP.

[MarieIG]

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Originally Posted by Shinge1233 The following are my conditions: My monthly pension can covers the most current average monthly basic expenses plus 20% extra. Also, approximate 30% of extra 457k monthly fund for emergency and vacation uses ( 4% of my total assets). Therefore, I have 1.2x 1.3 = 1.56. 56% extra fund can be used every month and set aside. SS doesn't count on yet because it requires 62 yrs above to collect it. house has been paid off Pension covers medical insurance. I can pick PPO or HMO. Is it safe to retire? Or still wait....

Your plan has NOT addressed your spouse in the event you are first to die. Is your pension 100% J&S? Will your spouse be able to continue your health insurance?

[SumDay]

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Originally Posted by Shinge1233 Not yet... Let me try it first... Thanks for your info

I was terrified before we retired, and I found a Fee Only Financial Planner who confirmed we were good to go. I went back the next year and she said the same, and the third year she almost yelled at me, and then I retired.

I found her here: https://www.napfa.org/

It was worth it to have a 'pro' confirm what I already knew, I just didn't trust myself.

[NXR7]

Quote:

Originally Posted by watchman3135 Just curious to get others opinions, which is a better scenario? 1. John & Jane Doe's Pension, social security and $500,00 in 401k/IRA investments or 2. $1.5 million in 401k/IRA investments, social security with no pensions? I always say pensions beats a higher retirement savings because it's mostly guaranteed income minus the possibility of bankruptcy or other default.

Depends on life expectancies, depends on expenses, and assumes you move the savings into a cash fund with zero risk and zero appreciation (or loss). Or a fireproof, theftproof mattress.

You're talking about a million dollar in savings difference so:

$1,000,000 *.8 (for taxes) / 20 years / 12 months = $3,333 in spendable cash per month.

At age 65 that gives a life expectancy of 85 before the savings runs out.

Interestingly, that is almost precisely how much my current SS + a pension gives me today.

In your scenario you would get SS on top of that.

Wanna trade?

Ray

[watchman3135]

Quote:

Originally Posted by RunningBum Impossible to answer without knowing their ages, and how much the pension is worth. One could always buy an SPIA for $1M to get a pension-like annuity. Do you always make decisions without considering the math, or even knowing the numbers to make an educated guess with?

Ok, fair enough. Say in this example they are both 62 and the combined pension is $2,300 per month + a 4% annual withdrawal rate on 1 & 2's savings.

I say I am a bit jealous of those with pensions as my last employer, while great to work for and I was compensated reasonably well, dumped their pension plan 4 years later in 2005 in favor of a 403b. Because I was grafted in for the 4 years, my projected pension at 65 is $53 per month. If I took it now at 55 it's $33 per month no COLA or a current lump sum of $7,600.

Luckily I caught on early and began saving more than 25% of my annual income early on and nearly 40% in my last 5 years in the 403b and left with a decent sum.

[1242Vintage]

If you are a State Worker there are also several other considerations

If you have substantial vacation saved up and you will be cashing it out at retirement you’ll want to retire in November or December. The State will spread that out over two years into a 457 and 401(k) plan to minimize tax implications.

And if you are covered by CalPERs, working 10 months in your last year counts as a full year. So if you started your career say in June many years ago, in your last year you only need to work to April to get that full year of credit.

And keep in mind the timing of when the State provides the COLA adjustment. The mass exodus happens typically in December 31 every year. This gives the shortest time to the first COLA adjustment.

If you had any time working directly for the State as a student assistant, that time counts towards retirement if you can substantiate with timesheets or other documents.

And if you have a disabled dependent there’s some paperwork you can do to set them up to receive your survivor benefit upon your passing. My adult child is disabled (she’s deaf) and discovered by chance that as long as she is unmarried she will be eligible for approx $3k per month for life plus health care after wife and I pass.

Direct message me if you have any questions. Been through the retirement process recently.

[Miarocks]

Besides the income taxes on your pension, don’t forget that your $1500/month withdrawal from your 457 plan will be taxable as well. Good ol’ Uncle Sam.
We are converting much to Roth these days to avoid these tax torpedos later, especially as tax rates will assuredly be higher than today, and before RMD’s hit. DH has 5 years until age 72, and I have 12. Gettin’ after it NOW!!