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Old 11-08-2020, 11:51 AM   #21
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It feels like a close call to me. To all of the above comments, the spending does seem to be pretty close to what's possible and you really shouldn't plan on touching any of the $300k in order to have something set aside for future health or other emergencies.
Particularly becuase your income-spending doesn't suggest you'll be adding to that stash after you retire.

Two suggestions:
1) Come up with a specific plan to dial back the spending and create a nice cushion vs. $90k of income

2) Perhaps get some other sort of work for a few years? It would allow you to toss a few more logs on that $300k fire and diversify away from the pension a bit.

I don't have a pension, so I don't spend a lot of time thinking about how I would retire with one in the mix, so perhaps my thoughts are off base.

Good luck.
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Old 11-08-2020, 03:59 PM   #22
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Originally Posted by Sunset View Post
OP - a pension of $90,000 is approx equivalent to having $2 Million in the bank. Which many feel is LOTS.
Except they aren't equivalent.

Money in the bank is, well, money in the bank (or the market). The holder owns it.

A pension, in contrast, is a promise to pay by a third party who typically is funding that promise in a collective manner that also is dependent upon third-party revenues. For public pensions, those revenues may be future tax dollars; for private pensions, those revenues may be future product sales, the use of financial products or insurance.

The other difference between a pension and dollars in the market is the one noted above -- namely, dollars in the market enjoy returns, and run the risk of losses, too, of course.
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Old 11-08-2020, 05:45 PM   #23
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... A pension, in contrast, is a promise to pay by a third party who typically is funding that promise in a collective manner that also is dependent upon third-party revenues. For public pensions, those revenues may be future tax dollars; for private pensions, those revenues may be future product sales, the use of financial products or insurance. ...
Important point though not quite on the mark. IANAL and IANACPA, but I believe that generally the funds to support current and future pensioners are held separately by a trustee and not directly subject to fluctuating revenues of the entity responsible for the pension. Said entity is supposed to be contributing the necessary money to the pension fund as pension obligations are incurred. This money is then invested by the trustee. A pension fund that contains enough money to cover its current and future obligations is said to be "fully funded." The concept of "enough" though is based on an assumed rate of return for the investments. It used to be that 8% was a popular number, now 7% (I think) is more popular.

I don't know what, if any, legal rules require that corporations and governments actually fund their pensions though all seem to do it to degree. In the accounting world, an unfunded pension balance appears as a liability and the funding shortfall amount becomes a discussion item with outside auditors. In the public world the shortfall seems to be handled with smoke and mirrors.

So the discerning pensioner or future pensioner needs to look both at the % funding and at the assumed rate of return. In our state, the state pension funds were happily claiming to be "fully funded" using an 8% figure but auditors told them that they should be using 7% -- derailing the happiness train. For private pensions that are derailed, the backstop is the Pension Benefit Guarantee Corporation (https://www.pbgc.gov/) which sounds wonderful until you read the fine print and discover that the maximum pension amount is about $70K. There are some very unhappy airline pilots whose pensions were transferred to PBGC when their employer failed.
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Old 11-08-2020, 06:24 PM   #24
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I had a spreadsheet with every expense years before retirement. You’d be shocked at the unexpected expenses that add up. Both my husband and I who are very healthy had surprise surgeries. You said you have children. Are they married? Parents of both sons and daughters now contribute to weddings. What about future grandchildren? You state you like to go on trips and you mention Disney. Your children might be too old now, but once the grandchildren come you’ll want to go on family trips. If you move will your children live near you? Parents, siblings? That means traveling home for visits and probably paying for your kids to visit you. This all adds up.

You do have a very impressive pension. But one serious illness and your nest egg could drop considerably.

Best of luck with retirement. You’ll certainly love it!
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Old 11-08-2020, 06:28 PM   #25
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Except they aren't equivalent.

Money in the bank is, well, money in the bank (or the market). The holder owns it.

A pension, in contrast, is a promise to pay by a third party who typically is funding that promise in a collective manner that also is dependent upon third-party revenues. For public pensions, those revenues may be future tax dollars; for private pensions, those revenues may be future product sales, the use of financial products or insurance.

The other difference between a pension and dollars in the market is the one noted above -- namely, dollars in the market enjoy returns, and run the risk of losses, too, of course.
Our pension is extremely safe; low volatility. Over the many years they have never had to lower the incomes of those using the pension.
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Old 11-08-2020, 06:28 PM   #26
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Hi, what are the pension survivor benefits?
Depending on the payout we choose; it could be 25%, 50% or 100%.
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Old 11-08-2020, 06:40 PM   #27
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I had a spreadsheet with every expense years before retirement. You’d be shocked at the unexpected expenses that add up. Both my husband and I who are very healthy had surprise surgeries. You said you have children. Are they married? Parents of both sons and daughters now contribute to weddings. What about future grandchildren? You state you like to go on trips and you mention Disney. Your children might be too old now, but once the grandchildren come you’ll want to go on family trips. If you move will your children live near you? Parents, siblings? That means traveling home for visits and probably paying for your kids to visit you. This all adds up.

You do have a very impressive pension. But one serious illness and your nest egg could drop considerably.

Best of luck with retirement. You’ll certainly love it!
I actually have a very good handle of our expenses. While we make this income NOW, as public school employees it has been very slow coming. We get raises of about $1K/yr each. Putting money away when the children were still in daycare was not even an option. Once they were done with daycare we put that money away toward college expenses. That in addition to the 529s from their grandparents means DS 25 got his Masters & is debt free, DD 22 is debt free with a nice 529 rollover for her own children one day as will DS20.
It is only in recent years we have been able to sock that money away. I recall my parents (also public servants) mentioning they couldn't put money away until they were 50.

We do have a house payment at this time as well as a car payment. Both of these will be paid IN FULL by retirement.

We are not contributing to weddings & our children know this--we believe it is an extravagant waste of money. None are currently dating anyone, so grandchildren are some ways off.

That all being said, I am taking notes & looking at various options. This year with combination remote & live classes is very taxing, physically & emotionally. It makes me want to leap now. But research is my game so I need ALL the information before decisions are made.

Thank you all for giving me things to think about that I may have not.
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Old 11-08-2020, 06:42 PM   #28
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I'm a strong proponent of taking the joint and survivor options in the pensions when available.

My opinion is that a spouse faced with the death of the other spouse, does not need the additional stress of having to redo their budget. Also, one SS stream disappears.

Also, while you can certainly cut your discretionary expenses in early years, you may come up against big ticket items related to care in later years, such as funding a purchase into the CCRC of your choice.

Part time work is fine, but most likely just a little gravy - in that (typically) it won't pay anything near your current job; and will not offer the same benefits.

Just my thoughts YMMV. Good luck!
Would you take 25%, 50% or 100%?
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Old 11-08-2020, 08:47 PM   #29
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Is this enough?

... $90K/year guranteed retirement income combined for 2 of us.
No debt at all.
Yes, that is plenty enough.

Our combined pension income is $20k/year, and we have been able to save around half of that for further investments.
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Old 11-08-2020, 10:00 PM   #30
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State/local governments are all over the map as to how funded their pension plans are. In Illinois/Chicago some pension funds are underfunded by as much as 90% and would run out of money within a couple of years without new money flowing in or subsidized by other tax revenue. To me, the OP really needs to sit down and get a better handle on what they may have to spend on in the future in addition to regular expense - what big expenses may be on the horizon - new car(s), significant home repairs like new roof, new furnace, new kitchen or bathroom?
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Old 11-09-2020, 05:27 AM   #31
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State/local governments are all over the map as to how funded their pension plans are. In Illinois/Chicago some pension funds are underfunded by as much as 90% and would run out of money within a couple of years without new money flowing in or subsidized by other tax revenue. To me, the OP really needs to sit down and get a better handle on what they may have to spend on in the future in addition to regular expense - what big expenses may be on the horizon - new car(s), significant home repairs like new roof, new furnace, new kitchen or bathroom?
Speaking for myself, I am a retired teacher who took early retirement. I took a significant hit on my pension to retire when I did. He is civil service retirement. so two pensions, one social security check, and savings. I have not touched the savings. I have been retired 14 years, have enough income to live on, deferred taking my social security . I took a small 2nd career, ( taxes ) more for the stimulation than for the money. You sound fine to me. Just retire all the debt, and be sure that you can deal with any large expense that will come up. ( car, wedding, travel, )
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Old 11-09-2020, 05:43 AM   #32
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me: pension 16k, DH pension 60k, me projected social security 28k ( if I take it now ) it isn't living high , but plenty of income for travel , car replacement, and whatever else we want to do. earned income while I work is around 18k. no debt, more saved up than you have. apparently when you collect your social security , your retirement income will match your earned income. ( no fica , no retirement contributions ). That is a good place to be. especially if you get a 3% COLA . Take the money you spend on the children out and you will be ahead, spendable income wise. Don 't forget to refigure out your tax ramifications. Normally , and this depends on state tax rules, also, your taxes will likely go down. Do the math to see what you will actually "take home" and then do it again adding the SS income stream. Compare those numbers to what you take home now.
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Old 11-09-2020, 06:25 AM   #33
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Would you take 25%, 50% or 100%?

That depends, at least on part, on the level of expenses you would expect if (when) one of you dies. This is truly a choice that should be tailored to the specifics of your situation. Taking a hard look at expected income remaining when each of you dies is an important part of the analysis.

In our case we each had a pension (one small, one large) and decided 100% survivability for the higher pension and 0% for the lower.
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Old 11-09-2020, 06:26 AM   #34
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Librarian:
The discussion of expenses was hard for us to follow. If you add everything including state and federal income taxes, health insurance, a reserve for major non-scheduled costs (major home repairs, surgeries), are your expenses below your pension? If so, you are good to go, though I would personally defer those up front moving costs, golf course memberships, etc. for a year or two to make really sure your budget was right.

Are you sure you will get SS? It varies state by state, but my daughter is a teacher and so in our state, she contributes to their pension plan, but has not had SS deducted over the years so does not qualify. It's easy to check, just go to the SSA.gov website and if you don't have an account, just create it. They've upgraded the site so now it shows you the benefit you qualify for at various ages.
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Old 11-09-2020, 10:35 AM   #35
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Our pension is extremely safe; low volatility. Over the many years they have never had to lower the incomes of those using the pension.
Sorry, I must not be communicating the issue clearly. I will try once more and then I will shut up.

I have no doubt that your pensions have been reliable to date. Probably that has been the case for the vast majority of public pension funds. No politician wants the bad press that comes from cutting retirees' pensions. So those cuts will only happen with the fund runs out of money or is so close to running out that the problems can no longer be denied.

The situation is kind of like Taleb's Turkey:
: https://www.businessinsider.com/nass...turkey-2014-11 But ... not to rain doom and gloom the risk, if any, depends on the particular financial and political circumstances of the pension fund(s) you are relying on to be "guaranteed."

So IMO the fund needs a critical look so you can assess what risk you may have. Best would be if you have a CPA who can examine it for you. If you know an Accounting teacher, he or she may be a good first stop because they probably have the same financial interest as you do.

Please understand I am not making any predictions about your pension fund, but public employees' pensions are in general very underfunded and hence at some risk. Hopefully yours is the golden case where there is no risk.
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Old 11-09-2020, 11:22 AM   #36
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Sorry, I must not be communicating the issue clearly. I will try once more and then I will shut up.

I have no doubt that your pensions have been reliable to date. Probably that has been the case for the vast majority of public pension funds. No politician wants the bad press that comes from cutting retirees' pensions. So those cuts will only happen with the fund runs out of money or is so close to running out that the problems can no longer be denied.

The situation is kind of like Taleb's Turkey:
: https://www.businessinsider.com/nass...turkey-2014-11 But ... not to rain doom and gloom the risk, if any, depends on the particular financial and political circumstances of the pension fund(s) you are relying on to be "guaranteed."

So IMO the fund needs a critical look so you can assess what risk you may have. Best would be if you have a CPA who can examine it for you. If you know an Accounting teacher, he or she may be a good first stop because they probably have the same financial interest as you do.

Please understand I am not making any predictions about your pension fund, but public employees' pensions are in general very underfunded and hence at some risk. Hopefully yours is the golden case where there is no risk.
In general states change the pension going forward not backwards. They honor the contract they have made with their retirees. (ie). Florida has discontinued the 3% cola going forward, as of 2011). ( Illinois has made some changes to its pension for newer hires ). There is probably minimal risk here, some possibility that they could try to take out the COLA, but unlikely to be successful.

It really is a similar situation as social security. Those at or near social security age are not going to lose or see reductions in their benefits. Going forward , ?
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Old 11-09-2020, 12:27 PM   #37
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In general states change the pension going forward not backwards. They honor the contract they have made with their retirees. (ie). Florida has discontinued the 3% cola going forward, as of 2011). ( Illinois has made some changes to its pension for newer hires ). There is probably minimal risk here, some possibility that they could try to take out the COLA, but unlikely to be successful.

It really is a similar situation as social security. Those at or near social security age are not going to lose or see reductions in their benefits. Going forward , ?
No point in speculating on probabilities in the absence of actual facts. My point is only that the value of "guaranteed" is only as good as the guarantor and that it would be wise for the OP to take a look.
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Old 11-09-2020, 01:01 PM   #38
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Yes, our pension is COLA.
Approx. expenses (could be a bit higher/lower depending on where we land...ie elec/car insurance more if we move to Vegas but house taxes less...)
Utilites: 600-700 (electric, phones, HOAs, streaming subscriptions)
Health insurance: 1100
Car/House insurance: 400
House/car taxes: 400
(Housing--we are budgeting the current value of our home to purchase a home when we move; we have done the research & this is very doable)

DH wants a golf membership when we move--we have budgeted 300-400/mo.

I budget 500/week for groceries/household items/gas/dining out/entertainment. Have for years, and by & large it works.

Travel...family trips stretch the budget...but I'd say $5K/yr...but we have gone up to $10K once in a while. More & more trips are just DH & I and there would likely be no high priced Disneyworld trips at this point...Honestly we would travel as much as our budget would allow...

As far as working in retirement...DH has considered working at a golf course; I have looked into more temporary occasional work--I actually have some feelers out for this. I like the idea of doing something I like without having a regular schedule; works better for travel.
Here is my summary of your monthly list above:
Utilites: 650
Health insurance: 1100
Car/House insurance: 400
House/car taxes: 400
golf membership: 350
household items: 2200
------------------------
Total so far: 5100/mo

Changing to annual basis: 61,200 (total so far)
income tax: 7500
Travel: 10,000
-----------------
Grand total $78,700

So for your 90k income, you have on the surface about $11k/yr flexibility - HOWEVER:

1. As a previous poster commented, nothing is listed for occasional/unexpected, big-ticket expenses. Moving to your new location/house, replacing car, house roof, HVAC, any other big ticket items. Maybe one of your kids gets in a pinch and you decide to help them financially more than you have currently planned. Perhaps you can pay some of these types of items from your $300k savings, but it would certainly be nice if you can pay for all within your normal annual budget. It could easily take $2k-$4k/yr to save/reserve enough money for the years when a big item happens.

2. I missed if you went into any detail about your health insurance. Is this insurance via your teacher benefits, or ACA? Is $1100/mo just premiums or does it include deductible, prescriptions, other out of pocket expenses? What about dental and vision expenses? Do you have a long-term care policy? If your medical is ACA, and ACA is declared unconstitutional (or even as a result of normal raises from year to year), this could balloon. Either way, in a few yrs, this expense could double - which would eat up all the $11k flexibility you currently have in your budget. Hopefully by then you will have reached medicare/SS age.

You will probably be okay, but I don't see a lot of wiggle room. It can be easy to underestimate expenses and be off by $10k/yr, plus the notes above for big ticket items and medical costs.
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Old 11-09-2020, 04:02 PM   #39
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I have read many articles suggesting that you should include in your yearly budget 1% of your home's value to account for maintenance and repairs. The controller on our furnace crapped out early this year and it was a several hundred dollar fix. The dishwasher is also acting up and we'll have the repair guy out later this week. I'm sure that will be another several hundred dollars..

You also need to budget for car maintenance and repair. Just this year, I got a nail through the sidewall on one of my Subaru's tires. Can't be repaired and must be replaced. Since it's AWD, that means replacing all 4 tires. There's a quick $800. Then, a few weeks back, some guy sideswiped the young wife out on the highway. Unless we can get the deductible back from his insurance, we're out $1000 to fix that. We don't drive all that much, and our cars are almost brand new, so I don't know if we need to have a sinking fund for replacement, but it is something to keep in mind.

Do you have any pets? One of our cats developed Hodgkins-like lymphoma early this year. Between the diagnostic testing, surgery and chemotherapy regimen, we're out over $7000. I hope it's not repeated, but it was nice to be in the position where we could just say to the vet "fix her up".

I also don't see anything for personal expenses (haircuts, clothing, drycleaning, hobbies, etc.), nor for gifts or charitable contributions.


Bottom line - really knowing current and expected spending is the key to any retirement plan. That includes accounting for things that are not planned or desired but reasonably should be expected to occur occasionally.
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Old 11-09-2020, 04:28 PM   #40
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I think the best way to determine your budget is to review your spending. So, rather than catalog $x for Y, etc., just pull out your bank statements.

Even if you use multiple credit cards, most people pay those and everything else out of a smaller number of checking accounts. So just dump out all the debits for a few years and add it all up.

That way you'll include your property taxes, home owners insurance, annual things that don't show up regularly. And yes the big hits that aren't every year. The repairs and replacements that are easy to miss when looking at a short term of expenses.
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