Traditonal Pensions

[cnocmmz]

Hi new to this group and thought I would chime in a little here, just because I can
So, I see a lot of folks have over 1M in accumulated wealth. I just asking and wondering here. I am 55 yrs old in July, we will have two guaranteed monthly pensions that total about 4,500 (COLAd!) and presently have about 500K in annuities (should be over 600K by 60), 401Ks, and a little cash. Would like to retire at age 60 but not sure if we can? Only one major bill will be a 1,600 monthly mortgage. Any thoughts out there. (I am sure there are)
Thanks in advance

 

[MichaelB]

Welcome aboard, cnocmmz. Here are a few you may find helpful http://www.early-retirement.org/for...-answer-before-asking-can-i-retire-69999.html

 

[nun]

We need to know more about your expenses to comment sensibly.

Also what are the "annuities" you mention? SPIAs or variable annuites? If the latter who are the with....someone like TIAA-CREF etc

 

[38Chevy454]

Agree, it all comes down to your expenses. If I take your estimated total $600K and use the 4% rule, that gives $24K/year or $2K/mo as potential income. Add that to your $4500/mo pension and you have around $6500/mo available. Out of the $6500 you need to pay some income taxes, your $1600 mortgage, property taxes, health and house insurances, utilities, and the rest of your expenses to live.

Without your expenses detail, the answer is not able to determine.

 

[jim584672]

How many gold chains do you buy a month? How do you take care of your entourage? Without the $$$ shown you many need 10MM we just don't know.

 

[JoeWras]

Agree with above. And I think you are eluding to something.

Yes, having over $1M without a traditional COLA'd pension is very different than having much less with a traditional COLA'd pension.

With your pension, you need less saved, but just how much less depends on expenses. We have people on this forum with yearly expenses that range from $15k to $300k.

 

[cnocmmz]

JoeWras, you hit it ion the head. Just because you have 1M or even 2M will not give you your wish of retirement if you are not smart with it. Ok then, more details:
- Our COLA'd pensions are guaranteed as govt employees. I guess I forgot to mention in my last post that my wife is 6 years older so she will have her 1,000 SS by my 60th birthday and hopefully retirement, so looking at 5,500 with monthly pensions, Again with about 500K in 401Ks and two hybrid annuity, one which is a Roth and they will pay out 1,500 total monthly. Expenses monthly will be about 4500k. I guess just the thought of not having the steady bi-monthly check coming in is scary. A lot of folks on here are a lot younger than I and they are doing it. God bless them

 

[nun]

I guess I forgot to mention in my last post that my wife is 6 years older so she will have her 1,000 SS by my 60th birthday and hopefully retirement, so looking at 5,500 with monthly pensions, Again with about 500K in 401Ks and two hybrid annuity, one which is a Roth and they will pay out 1,500 total monthly. Expenses monthly will be about 4500k. I guess just the thought of not having the steady bi-monthly check coming in is scary. A lot of folks on here are a lot younger than I and they are doing it. God bless them

Mr Mcawber says you are ok to go.

"Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result happiness. Annual income twenty pounds, annual expenditure twenty pounds nought and six, result misery."

In fact you should still be accumulating in retirement.

 

[ERD50]

Just for reference...

So, I see a lot of folks have over 1M in accumulated wealth. ...

we will have two guaranteed monthly pensions that total about 4,500 (COLAd!) ...

$4,500 monthly COLA'd is roughly equivalent to over $1M in accumulated wealth. Using the 4% 'rule of thumb' for inflation adjusted withdrawals -

(4500 ⋅ 12) ∕ 0.04 = 1,350,000

or over $1.5M at a more conservative (or realistic, IMO, for an early retirement) 3.5% -

(4500 ⋅ 12) ∕ 0.035 ≈ 1,542,857

-ERD50

 

[Bamaman]

You don't say where you live, and how close you are at paying off your house.

When retiring early, it sure helps to have a house that's free and clear--your ace in the hole.

It also helps to live in a place with low taxation and an inexpensive cost of living. For example: Property taxes alone on my house in New Jersey would exceed my total housing costs--normal monthly payments, taxes and insurance.

Your present financial resources may be insufficient if you live in an expensive city. There are many great places to live in this country where you could have a nice life on what you'll have.

 

[JoeWras]

I guess just the thought of not having the steady bi-monthly check coming in is scary.

This is something we must all face.

Personally, I haven't faced it myself. I'm a classic OMYer.

 

[ERD50]

...

When retiring early, it sure helps to have a house that's free and clear--your ace in the hole.

...

Sorry, but that is just not true.

It's been discussed ad nauseam on this forum. Bottom line, it's probably one of the least important considerations for an ER, assuming you have a decent interest rate (easy in this environment - and a plus), and that you don't leave yourself with too little liquidity by paying off the mortgage (a negative).

-ERD50

 

[nun]

Sorry, but that is just not true.

It's been discussed ad nauseam on this forum. Bottom line, it's probably one of the least important considerations for an ER, assuming you have a decent interest rate (easy in this environment - and a plus), and that you don't leave yourself with too little liquidity by paying off the mortgage (a negative).

-ERD50

Let's not let this become another "pay off mortgage or not" discussion. The OP gave an estimate of monthly expenses and I trust that it includes everything. As those expenses are covered by the COLAed pension and there is still SS and income from other investments to consider the OP can say good bye to the daily grind.

 

[cnocmmz]

Just for reference...




$4,500 monthly COLA'd is roughly equivalent to over $1M in accumulated wealth. Using the 4% 'rule of thumb' for inflation adjusted withdrawals -

(4500 ⋅ 12) ∕ 0.04 = 1,350,000

or over $1.5M at a more conservative (or realistic, IMO, for an early retirement) 3.5% -

(4500 ⋅ 12) ∕ 0.035 ≈ 1,542,857

-ERD50

I would actually have 5500 with my wife's SS

 

[cnocmmz]

Let's not let this become another "pay off mortgage or not" discussion. The OP gave an estimate of monthly expenses and I trust that it includes everything. As those expenses are covered by the COLAed pension and there is still SS and income from other investments to consider the OP can say good bye to the daily grind.

Correct that includes the monthly Mortgage and everything as well
So I am thinking I should be good with the present schedule of 59.5 or 60 years old. I will hold off to age 70 to collect my SS and then that should be an extra 1900 looking at the estimate. I guess there is the grandkids to consider, that is what I am really holding off for

 

[NgineER]

Looks like you are good to go!
Congratulations!

Since you have cola'd pension, which I'd consider a fixed income/bond, I would invest your other assets in equities/mutual funds.

 

[Rustic23]

I may have missed it in your expenses, but when you say Everything is covered by the $4,500, do you really mean Everything.

Example, new car, new roof, new appliances, new HVAC, unexpected health expenses, unexpected Kids expenses, Increase travel.

I have posted that our expenses are a little over $4,000 a month, for everything included travel. However, it does not include a sinking fund to replace the car, appliances etc. I figure another thousand dollars a month to cover those things.

Your numbers show you have that extra $1,000, but only you know if that is enough. I would not stop savings.

 

[pb4uski]

OP, have you run your numbers through firecalc? Off-the-cuff, it looks like you are all set since your cola'd pensions cover you living costs and you just need to verify that the numbers work and decide how much you want to leave as a legacy and how much more you can spend.

 

[nun]

I'm in a similar situation to the OP as my expenses are covered by a DB COLAed pension and rental income and I have SS checks from the UK and the US to add when I hit 66. For a long time my AA has been 60/40, but now I'm going to something like 80/20, with the only bonds I have are in balanced funds like Wellesley.

 

[cnocmmz]

The stand budget does account for a 500.00 monthly savings
At age 62(2 years after planned ret), the fun really begins with another 600.00 monthly pension -

Sent from my SM-N910T using Early Retirement Forum mobile app

 

[Lakewood90712]

Kind of sounds like you could go a lot sooner if your mo. spending is so low. Maybe I missed it , is your healthcare cost in retirement factored in ?

 

[cnocmmz]

Kind of sounds like you could go a lot sooner if your mo. spending is so low. Maybe I missed it , is your healthcare cost in retirement factored in ?

Yes, I factored healthcare in. To note, I am retired military so I pay minimal in comparison for healthcare.

 

[ziggy29]

One can't use the 4% rule to determine the "value" of a pension. You can use it to approximate the needed income stream to replace a pension, but the two are not the same.

A pension has no value once the recipient(s) kick the bucket. The 4% (or 3% if you prefer) rule is designed to still preserve the original capital, adjusted for inflation, even after those drawing from it are deceased.

Therefore we can't say that a $20K pension is "worth" $500K just because 4% of $500K is $20K. The pension is worth less than that because it has zero value once the beneficiaries are dead, where as the investments outside the pension will probably still be worth $500K or more, adjusted for inflation, and can be passed on to your heirs.

 

[Greg V]

As part of your analysis, I recommend you ensure that the income for each of you as a surviving spouse is also adequate for your needs.

Even if you've chosen a Survivors Benefit Plan, that will only replace 50-55% of the pension amount earned by the deceased spouse. If you've chosen to use another strategy, such as insurance, for income replacement, you need to project the income that lump sum/strategy would generate. If you've chosen neither, then the survivor's income is reduced by the total pension amount earned by the deceased spouse.

Also remember that the survivor would also lose the amount of a spousal social security payment being collected by the spouse with lower lifetime earnings.

Best of luck.

 

[cnocmmz]

As part of your analysis, I recommend you ensure that the income for each of you as a surviving spouse is also adequate for your needs.

Even if you've chosen a Survivors Benefit Plan, that will only replace 50-55% of the pension amount earned by the deceased spouse. If you've chosen to use another strategy, such as insurance, for income replacement, you need to project the income that lump sum/strategy would generate. If you've chosen neither, then the survivor's income is reduced by the total pension amount earned by the deceased spouse.

Also remember that the survivor would also lose the amount of a spousal social security payment being collected by the spouse with lower lifetime earnings.

Best of luck.

All great points..My wife is 6 years older than I so I have not really been prudent enough. I will say that we have a living will and so the 500K plus annuities will go to her anyway. She has her own SS and pension so she should be fine If were to pass on first. Thanks