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Another Update and Asking for Advice
Old 07-03-2017, 01:19 PM   #1
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Another Update and Asking for Advice

I am writing an update to our retirement situation. I’ve posted twice before….March 2014 and then again in September 2015. I have appreciated the comments and suggestions and am figuring it’s time for another update.

I look at our assets in three different ways:
Defined benefits: This will be the bulk of our monthly spending. Currently, we would plan to have the 100% beneficiary plans.
Major 401K/IRA Savings: We will use this to supplement our defined benefits. This is something dh and I need to continue to discuss-specifically the rate of withdrawal. He is fine with zeroing these accounts after 35 years. I want to leave a large sum to the kids.
Misc Savings: the plan for me is to eventually zero out these accounts if needed. This would be for “extra” things: an especially expensive trip, maybe a car, things like that.

Defined Benefits:
In terms of defined benefits, dh has pension that will be about 75K per year when he retires in 2 years (targeting summer 2019). If for some reason he were to be laid off now, that pension would be 62K if he chose to retire immediately. We’ve always had a layoff in the back of our minds, but now it seems less and less likely. This has no inflation adjustment.
My pension is still a moving target. If I retire at 61 with my current salary, it would be about 78K. If I retire earlier, or have pay increases between now and then (6 years) it will change. It will have about 2% inflation adjustment. If, in the next 6 years, my pay becomes 15% more than it is now, my pension could be as high as 90K.
I also get a secondary amount. I can take it as a member only annuity for $323 per month, or period certainty for 3,5 or 10 years. (3 years = $1400 per month, 5 years = $900 or 10 years = $525).
Dh will receive SS. I will not (CA teacher) not will I receive any benefits via my husband. Given that, we plan to have dh start SS at age 62.

401K/IRA
We have an IRA that is currently worth about 655K today (from dh’s previous job). His current 401K is worth almost the same. It is still being contributed to, by dh and the company match.

Misc.
Then we have misc saving. This includes my 403b money, some inheritance money, savings, etc. It was at about 310K but I’ll be honest, I haven’t checked in at least a year. I know dh would have said something if they went down, but he doesn’t tend to pay much attention to these as long as they are doing okay. I guess figuring out the current value is an action item. We also have a “wedding” account, which will be at about 65K when dh retires.

I will likely receive an inheritance from my mom (my dad died last summer). I don’t expect mom to have much cash when she’s gone (I think the bulk of her money is SS, and annuities my dad got. She probably just has 200-300K in cash). She does have LTC insurance and we could probably rent her house for about 5K per month if she needed to move to some kind of assisted living. But even just the sale of the house would be a pretty big amount for myself and my two siblings (house is worth about 1.7 million). I have not (and will not) make any plans based on what might or might not occur.

Plans
My dh plans to retire at about 60.5 years, basically when our youngest graduates college (2019). That’s in 2 years. I am expecting to work until 61 (2023). I am thinking I may begin to work part time in fall 2019 (when dh retires). In my state, for teachers/certificated staff, there is something called the Reduced Workload Program. While there are some parameters to fill, if you meet the criteria, you can work part time at the end of your career, and you and the school district contribute to the pension as if full time. You also only pay medical at the full time rate. So, you get credit for a full year at full time towards retirement, but the pay is part time.
I really like my job and following a school schedule gives me lots of down time. I can’t really imagine retiring now, but I realize what I want may change. If I work until 61 (full or part time), then we’ll have medical. When dh hits 65, he can go on medicare and I can get medical coverage for myself for 4 years from the school district (part of the retirement deal). I would pay the regular group rate.

We currently take home (after taxes, retirement savings etc) is about 161K. Dh would like us to have about 107K after taxes. That’s our current income, minus what we are currently paying for college (30K) plus mortgage (24K).

Our home will be paid off when dh retires. We owe about 50K. It’s currently worth about 1.1 million.

Our three kids are doing okay. Oldest ds lived with us for two years after finishing college. He now lives about 130 miles away and while doesn't make a lot, is doing okay. We still pay for his phone service and his car insurance. My concern for him is medical insurance when he turns 26 next May. Our only daughter is in grad school, which we are paying for. She finished college in 3 years and went very inexpensive, so we were willing to pay for grad school. She received in state tuition at her grad school as well as grants and work study so tuition has been a bargain. When she graduates she will definitely have a job-her major is in short supply across much of the country. Youngest ds just finished his 2nd year of college. We pay for tuition (WUE grant), room and board. He works during the summer at a Boy Scout Camp and essentially pays for all of his incidental expenses.

Questions:
What we need to consider/discuss/start deciding
How will we access/withdraw our major retirement savings.
Should we consider the employee only benefit and get an insurance plan to protect the benefit? For example, if my pension is $7500 per month with 100% survivor, I could get $11,500 solo. That’s a big differential. At my current salary, the differential is about $3500 per month. For dh, the differential at age 60 is about 16K per year.
How do you figure the amount of insurance needed? For example, what if one of us dies young (in our 60’s). That means the other will need a larger fund of money.
I need to make sure I know all about the workload reduction program, so I don’t make an uninformed decision.
I have to run scenarios for a variety of situations., because I don’t know what I will want to do about my work. How much planning is “too much”?
I need to start deciding what I should do about my “extra” pension. Member certain, or for a fixed amount of time,
We also need to have a trust made. I was thinking of buying a Nolo Press book, to learn more about them, so we can be knowledgeable as we go through the process. Any advice?
We need to maybe think more pro-actively about the help we will give our kids. For example, ds makes a low salary, but is saving money and contributing to an IRA, but not the max. I suggested to dh we give him the additional $1500, to max it out. It's a way of helping him out, but not really changing his day to day independence.
Any other misc advice or suggestions?

Thanks, as always.

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Old 07-03-2017, 01:43 PM   #2
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Solo pension vs spouse gets 100 %, this is a subject i came across. If your in good health, get a life insurance policy. Its cheaper. My company's actuary told me that my pension was worth about 2.4 million. Years later when i found this forum i was told to put my numbers into an immediate annuity for the real answer. But the actuary was close. I took out a 30 year 2.5 million policy term. As usual that wasn't the best idea. I should have gotten and 833k 30 year term, a 833k 20 year term and a 833k 10 year term I would have saved money and accomplished about the same thing.
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Old 07-03-2017, 02:03 PM   #3
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Quote:
Originally Posted by Blue Collar Guy View Post
Solo pension vs spouse gets 100 %, this is a subject i came across. If your in good health, get a life insurance policy. Its cheaper. My company's actuary told me that my pension was worth about 2.4 million. Years later when i found this forum i was told to put my numbers into an immediate annuity for the real answer. But the actuary was close. I took out a 30 year 2.5 million policy term. As usual that wasn't the best idea. I should have gotten and 833k 30 year term, a 833k 20 year term and a 833k 10 year term I would have saved money and accomplished about the same thing.
Thank you. That is good advice.
I will look into what the costs might be.
Currently dh and I are in pretty good health (ie, no diabetes, high blood pressure etc) so that could work for us.
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Old 07-03-2017, 03:11 PM   #4
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Quote:
Originally Posted by Blue Collar Guy View Post
Solo pension vs spouse gets 100 %, this is a subject i came across. If your in good health, get a life insurance policy. Its cheaper. My company's actuary told me that my pension was worth about 2.4 million. Years later when i found this forum i was told to put my numbers into an immediate annuity for the real answer. But the actuary was close. I took out a 30 year 2.5 million policy term. As usual that wasn't the best idea. I should have gotten and 833k 30 year term, a 833k 20 year term and a 833k 10 year term I would have saved money and accomplished about the same thing.
Good stuff here. DW and I are in position where we need to elect spousal benefit for my military pension here in the next year. I'm definitely leaning toward term life. I already have a 30 year term policy in place. May look at adding an additional 15-year in the event I die early. Chances are, she'd be fine with savings plus SS plus life insurance.
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Old 07-25-2017, 10:51 PM   #5
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Hey quick note! You can likely stretch the tax liability of those inherited annuities (if there is any). Something you should look into.
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Old 07-26-2017, 03:19 AM   #6
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I didn't do all the math but it looks to me like you are heavily dependent on the pensions with no COLA. That being so, you need your starting budget to be something like 1/2 to 2/3 your starting pensions to allow for 30-35 years of inflation at 2-3% per year. Changing the years or % changes the starting point a lot.
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Old 07-27-2017, 05:41 AM   #7
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Can you take the pensions as lump sums? Considering the shaky finances of many pension plans, I would go that route myself. That'd also give you the opportunity to invest a portion in equities to combat inflation.
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