Converting DC accumulation to DB pension
Well I'm about to take almost a quarter of my tax deferred DC savings and buy into the the MA state pension plan. The numbers look good, but I'll expect a number of comments about the underfunding of state pensions.
I'm 53.5 and will be rolling $263k into the state DB plan which will give me an single life annual income of $19800 starting at 55, or I can take $19600 and have a beneficiary inherit the balance and interest of the pension if I die early. There's a COLA (currently capped at 3%) on $13500 of the pension. The initial payout rate is 7% and interest rate assuming I make it to age 84 is 7.5%.
I was a bit reluctant to "spend" so much on a DB plan just in case I died early as could not leave as much to my grand-niece, but the lump sum benefit is a nice option. If I die early she gets a big payout and if I live a long time the pension will have been a great investment/insurance policy. I intend to change my AA from 60/40 to something closer to 80/20 once the pension is bought.
What do you think?
“So we beat on, boats against the current, borne back ceaselessly into the past.”
Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent