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Pension Election
Old 07-07-2017, 08:53 AM   #1
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Pension Election

I am retiring end of August and will need to choose a pension election.
We should have more than enough outside to sustain our projected lifestyle
(i.e. 34x expenses, can be flexible, 71x non discretionary expense not counting a pension). I am 55 DW 54 (she has 7K pension starting next year 100% survivor)

Question how to determine which to elect:

1) 50% survivor vs 75% vs 100%?
2) Level Income option (increase to 62 than decreased to mirror SS) vs traditional distribution

Numbers:
Level income option at 100% survivor:
55,572 to April 2024 and than 33984 to end of lives

or

40812 to end of lives

Level income option at 50% survivor:
57,516 to April 2024 and than 35928 to end (50% survivor)

or

43020 to end of lives (50% survivor)

Looked at year to break even but difficult as more $$ early is probably worth more due to inflation etc...

Plan on taking SS at 70 years of age

Sorry hoping some Math Savant is out there with an estimate?
Also we have longevity in both our families All parents alive at 80 to 87 currently.
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Old 07-07-2017, 10:07 AM   #2
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I guess it's a person decision based on how much income you need now.

I had similar decisions to make regarding my pension. I didn't like taking the level income option. I didn't want my pension to go down when I started drawing my social security. You never know what can happen to SS in the future.

I ended up taking a $55,000 cola pension with a 50% survivor. I also have 80% of health care paid for by employer.

Sorry, I'm not math guy, I just wanted to give you what my choice was. Good Luck
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Old 07-07-2017, 10:23 AM   #3
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Originally Posted by AlbaCrush View Post

I ended up taking a $55,000 cola pension with a 50% survivor. I also have 80% of health care paid for by employer.

WOW! I worked for the wrong organization!
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Old 07-07-2017, 11:01 AM   #4
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Both DH and I took 100% survivor options for each of our pensions. We wanted to have the constant income for both of our lives. Ours has a limited COLA, but it at least has one.
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Old 07-07-2017, 11:11 AM   #5
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By way of comparison, my wife and I are 56 and looking at non cola pension options. We don't have all the options you outlined, but are leaning to this choice:

Level pension of $38k until 65, then $17k. No survivor benefit, but I got attractive term life quotes this morning to provide a death benefit to DW at 20 and 10 years. My SS at 67 would be $36k, DW half of that.
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Old 07-07-2017, 11:58 AM   #6
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What result are you looking for? Are you wanting to find the choice that would result in the largest lifetime dollar amount? In other words, what will be the deciding factor for you?

We have something similar to consider. The way I was able to compare our options was to choose an 'end date' and tally the numbers up and see which was the best "deal". For the numbers you gave, the way I compared things would look like this:

100%
55,572 to age 65 (seven years at this rate) then 33,984 to end of life. I used 87 simply because your oldest parent is that age. This gives you 22 years at $33,984).

55,572 x 7 = 389,004
33,984 x 22 = 747,648
Total payout $1,136,812

Level $40,812 to end date of age 87 (29 years) = $1,183,548

50%
57,572 to age 65 then 35,928 (again, using age 87 as the end date)

57,572 x 7 = 403,004
35,928 x 22 = 790,416
Total $1,193,420

Level $43,020 to age 87 = $1,247,580

I am not a math savant nor do I profess to have any idea of what I'm doing. This just seemed like one way of comparing like numbers. I'm putting this out there in the hopes that someone can affirm my method or critique my method and offer a better way of comparing the options.

I did not bother with inflation and I did not bother with looking at income taxes and trying to keep AGI low. I just tried to find a 'back of the napkin' way of looking at apples to apples.
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Old 07-07-2017, 12:41 PM   #7
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Thanks for the responses.

I tried to model a purchase of an annuity using immediate annuity.com

The 100% survivor:

40,812 would cost $799,425 premium

The level income option would cost (had to fudge this one)

33984 for life would cost $665,868 plus

21588 for 6.5 years $136,585

TOTAL is $802,453

So basically a wash in Premium. I was leaning toward more income early as it would help offset any bad market behavior (Sequence of return) resulting in bad investment behavior by me

DW: thinks should do 50% survivor as assets are enough to live off of
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Old 07-07-2017, 12:54 PM   #8
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Quote:
Originally Posted by always_learning View Post
What result are you looking for? Are you wanting to find the choice that would result in the largest lifetime dollar amount? In other words, what will be the deciding factor for you?

We have something similar to consider. The way I was able to compare our options was to choose an 'end date' and tally the numbers up and see which was the best "deal". For the numbers you gave, the way I compared things would look like this:

100%
55,572 to age 65 (seven years at this rate) then 33,984 to end of life. I used 87 simply because your oldest parent is that age. This gives you 22 years at $33,984).

55,572 x 7 = 389,004
33,984 x 22 = 747,648
Total payout $1,136,812

Level $40,812 to end date of age 87 (29 years) = $1,183,548

50%
57,572 to age 65 then 35,928 (again, using age 87 as the end date)

57,572 x 7 = 403,004
35,928 x 22 = 790,416
Total $1,193,420

Level $43,020 to age 87 = $1,247,580

I am not a math savant nor do I profess to have any idea of what I'm doing. This just seemed like one way of comparing like numbers. I'm putting this out there in the hopes that someone can affirm my method or critique my method and offer a better way of comparing the options.

I did not bother with inflation and I did not bother with looking at income taxes and trying to keep AGI low. I just tried to find a 'back of the napkin' way of looking at apples to apples.
Seems like a reasonable way to compare the apples and oranges. Looking at it this way, nothing leaps out as "Hey, that's a great deal" or "Hey, that's a rip-off". Not knowing inflation going forward, it would be hard to tease this all out without some assumptions. I'm sure there is a way to take these numbers and see what the company used (%) to see what they expect inflation to be.

In any case, not a bad decision to have to make. By the way, I'm with Chuckanut! I w*rked for the wrong Megacorp! YMMV
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Old 07-07-2017, 01:01 PM   #9
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In any case, not a bad decision to have to make. By the way, I'm with Chuckanut! I w*rked for the wrong Megacorp! YMMV

Agree I feel fortunate (worked for megacorp 28.5 years) and the numbers seem to make it a wash.
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Old 07-07-2017, 04:06 PM   #10
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I worked with pension plans for 34 years. Many many took the single life annuity I assume because it was the highest amount. My husband and I both did the 100% survivor option and I have been pleased with that decision.
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Old 07-07-2017, 08:49 PM   #11
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I took 100% survivor for my pension as we have plenty while both of us are alive but out taxes will likely go up dramatically is one of us dies and the 100% will help cover the increased taxes.
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Old 07-08-2017, 08:22 AM   #12
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Our only choice was between half survivor benefit and one quarter survivor benefit. I don't recall the increase in monthly pension for the lower survivor rate but we took it (DW had to sign off on this decision). To make up for the lower survivor rate, I took SS at 70 so DW's SS survivor rate would be increased. Seems to have all worked out so far. No suggestions for others other than to be sure you feel comfortable with your choices. YMMV
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Old 07-08-2017, 08:30 AM   #13
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I would make the decision on what would happen to spouse if you died...

First, reduced SS.... second, higher income taxes,...... third possible higher Medicare premiums....

If a smaller pension will cover all the bases then it does not matter... but if it does not... then you can make a stupid decision but will never know...
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Old 07-08-2017, 08:32 AM   #14
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I will have similar options for my Megacorp pension. There is no one "right" choice, it is all what you desire for your own situation.

Right now I am targeting the 75% option and not using the level income option. Should I die first (likely) I think 75% is a good balance to leave DW, as expenses will likely not drop in half, and between that an SS survivors benefits she should not have to change her lifestyle.

I have enough cash to tide us to whenever we choose to take SS, so I do not see a reason to front load my pension. I will use it as the consistent "base" for my retirement income.
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Old 07-08-2017, 08:57 AM   #15
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All these choices, I'm envious. Our only choice was between a 55% survivor benefit or zero survivor benefit!
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Old 07-08-2017, 09:48 PM   #16
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Originally Posted by RE2Boys View Post
All these choices, I'm envious. Our only choice was between a 55% survivor benefit or zero survivor benefit!


We had like 5-6 choices, but since I was single none of them applied. Well I guess I could have chosen one of those options and had my 17 year old daughter as beneficiary. But my land it was an incredible haircut to the pension. Plus God willing she might have had to wait 40-50 years before she would ever get a penny from it.
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Old 07-09-2017, 07:26 AM   #17
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Originally Posted by Texas Proud View Post
I would make the decision on what would happen to spouse if you died...

First, reduced SS.... second, higher income taxes,...... third possible higher Medicare premiums....

If a smaller pension will cover all the bases then it does not matter... but if it does not... then you can make a stupid decision but will never know...
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Old 07-13-2017, 07:45 PM   #18
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I am fortunate to be facing this option soon. I am considering taking the payout at 55 with a 10 year certain option. It is close to the full payout. We have lots of option for our payouts.
We also have life insurance death benefits that would help offset the drop in income stream. The 10 yr certain payments would get my DW close to the age where she would be taking her SS.
We also have this other option whereby I could get the full amount, but if either of us dies it would reduce to about half for the survivor .

Thoughts?
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