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Retiring but deferring pension?
05-09-2022, 01:04 PM
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#1
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Posts: 2,053
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Retiring but deferring pension?
As of next year this will be an option for the first time (due to benefit changes). My question I guess is how do I mathematically figure out if it is "better" to live off savings for a year and have the pension increase by 5% or whatever. I have pretty small set of assets but I have never considered this option because it has always been tied to other things like the retiree health insurance. Which i still want and am not at the correct age for yet. I could not last the number of years needed to get me to medicare or even full pension but . . . IDK. Pension is reduced at 55, full at 62.
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05-09-2022, 01:13 PM
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#2
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Thinks s/he gets paid by the post
Join Date: Jul 2011
Location: Reading, MA
Posts: 1,714
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It depends on the size of your savings/portfolio.
If you can live on 6% or less of your portfolio for a year, that might work, but it also depends on the exact increase in your pension for each year of delay...
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05-09-2022, 01:26 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Posts: 2,053
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So yeah 5% pension is something like 2K a year so I had thought not worth staying for (pension wise) other than staying employed making current salary is of course a benefit.
I was sort of thinking could i live on savings (getting about 1%) for a year to get 5% in pension. . . and not touching the rest.
But the more I think about this even generally is that 1. I don't have enough assets for it to matter much. 2. what is the employer up to by making this change? Clearly they want to push some of us out. But what else could it be?
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05-09-2022, 01:51 PM
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#4
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Recycles dryer sheets
Join Date: Dec 2021
Posts: 131
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Seems like the same analysis folks conduct in figuring out when to start SS.
__________________
Some say nothing is impossible, I do nothing every day.
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05-09-2022, 02:05 PM
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#5
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Thinks s/he gets paid by the post
Join Date: Mar 2017
Posts: 1,638
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Do you have an in-between option, such as full retirement with fewer years of service at 60?
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05-09-2022, 02:15 PM
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#6
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Thinks s/he gets paid by the post
Join Date: Jan 2020
Location: Milwaukee
Posts: 3,976
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Is this pension a fixed one, or is there a COLA.
If there is a COLA, I believe it would be worth your while to delay starting the pension. In this case, IMHO, the relevant number to compare the 5% to is whatever portfolio withdrawal rate you are comfortable with). 5% is a pretty high WR, so I would defer.
But if it is not COLAed, then I think it is not worth delaying.
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The closing years of life are like the end of a masquerade party, when the masks are dropped. -Arthur Schopenhauer, philosopher (1788-1860)
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05-09-2022, 02:59 PM
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#7
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Dryer sheet wannabe
Join Date: Oct 2015
Location: South Puget Sound
Posts: 22
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There are indexed earnings where your earnings history is indexed to inflation so that the pension grows with inflation while you wait and then there is a COLA'd pension where once you start drawing the pension it is annually increased.
If your earnings aren't indexed then deferring the pension means it will be worth less every year that inflation is positive. Does the early pension penalty exceed the expected inflation rate?
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05-09-2022, 04:15 PM
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#8
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Posts: 2,053
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Hmm, no COLA. And no in between option that factors in years of service. (I have 32 years but could be fired tomorrow and not "retire"). I have just never though of it before as it was not flexible at all and remains the same until 2023. Starting to think it doesn't really matter except they seem geared to pushing people out.
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05-09-2022, 05:40 PM
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#9
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Moderator
Join Date: Dec 2007
Location: Eastern WV Panhandle
Posts: 25,302
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Quote:
Originally Posted by badatmath
I have 32 years but could be fired tomorrow and not "retire".
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Yikes! If they can fire you tomorrow and say "here's your pension contributions, have a nice day" then I'd retire immediately and not give them the chance to do that to you.
__________________
When I was a kid I wanted to be older. This is not what I expected.
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05-09-2022, 06:44 PM
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#10
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Posts: 2,053
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The older I get the more things I realized I should have done different in life.
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05-09-2022, 07:59 PM
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#11
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 17,173
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One advantage of deferring the pension is that it will make it less taxing to make Roth conversions. I was not able to defer my pension, so I had to limit my Roth conversions quite a bit. First world problems.......
__________________
Comparison is the thief of joy
The worst decisions are usually made in times of anger and impatience.
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05-09-2022, 09:02 PM
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#12
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Posts: 2,053
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Yeah I realized I am overthinking. My employer does not change often or in a good way.
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05-09-2022, 09:15 PM
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#13
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Mar 2005
Location: Chicago
Posts: 13,151
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I started SS at 62 and deferred my private pension until 70 and that turned out to be the right thing to do in my case and with my particulars. OP, you need to plug in your own numbers and your own life situation.
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
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05-10-2022, 05:32 AM
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#14
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Recycles dryer sheets
Join Date: Sep 2019
Posts: 102
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make sure you will not miss out on something valuable by delaying.
for example, the ability to keep retiree health insurance.
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05-10-2022, 07:24 AM
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#15
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Thinks s/he gets paid by the post
Join Date: Jan 2017
Posts: 2,643
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You also have to factor in the money you left "on the table" by deferring.
If you get 5% more for life, you then have to amortize the year of monthly pension checks you didn't take against the additional $$ you make over your remaining lifetime.
It's unlikely that either one will come out drastically better. The folks setting up the pension plans run all the numbers, too. Like you, I suspect that this "new benefit" is something the company actually sees it as a way to reduce benefits.
You mentioned that you could lose the whole thing if you were fired. Given a very strong possibility of an economic downturn, it seems to me that's the bigger factor here. If what you say is true you may be better off locking in the pension by retiring now, and working at some other job (or coming back as a contractor) for a year.
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05-10-2022, 12:40 PM
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#16
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Posts: 2,053
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Quote:
Originally Posted by CaptTom
You also have to factor in the money you left "on the table" by deferring.
If you get 5% more for life, you then have to amortize the year of monthly pension checks you didn't take against the additional $$ you make over your remaining lifetime.
It's unlikely that either one will come out drastically better. The folks setting up the pension plans run all the numbers, too. Like you, I suspect that this "new benefit" is something the company actually sees it as a way to reduce benefits.
You mentioned that you could lose the whole thing if you were fired. Given a very strong possibility of an economic downturn, it seems to me that's the bigger factor here. If what you say is true you may be better off locking in the pension by retiring now, and working at some other job (or coming back as a contractor) for a year.
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Can't retire now and get the retiree health. It is 100% age dependent and I am not the right age yet. But it is precarious as we have ongoing demotions around the department because they say we have "too many" people. Did I mention we are hiring though? What they mean is we have too many "old expensive people" imo. So try to get us to leave voluntarily so they can hire cheaper ones. Just my take who knows the reality. I think I am best served to not think of it again until I am the "right age" or let go.
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05-10-2022, 01:54 PM
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#17
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Dryer sheet wannabe
Join Date: Oct 2015
Location: South Puget Sound
Posts: 22
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Quote:
Originally Posted by badatmath
Can't retire now and get the retiree health. It is 100% age dependent and I am not the right age yet. But it is precarious as we have ongoing demotions around the department because they say we have "too many" people. Did I mention we are hiring though? What they mean is we have too many "old expensive people" imo. So try to get us to leave voluntarily so they can hire cheaper ones. Just my take who knows the reality. I think I am best served to not think of it again until I am the "right age" or let go.
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Whoa, this whole "fire you tomorrow and you get nothing except a return of contributions" thing is very scary. Between lifetime medical benefits (worth what hundreds of thousands?) and a pension (worth hundreds of thousands), you have a huge price tag on your head as a reward for somebody firing you right now. Be good. Take a demotion if it means you can keep your job.
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05-10-2022, 01:59 PM
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#18
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Thinks s/he gets paid by the post
Join Date: Aug 2017
Posts: 2,053
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Yep I think everyone "older" feels like we are a target now.
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05-16-2022, 04:14 AM
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#19
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Recycles dryer sheets
Join Date: Oct 2005
Location: Camillus
Posts: 169
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Erisa
Quote:
Originally Posted by Highbeam
Whoa, this whole "fire you tomorrow and you get nothing except a return of contributions" thing is very scary. Between lifetime medical benefits (worth what hundreds of thousands?) and a pension (worth hundreds of thousands), you have a huge price tag on your head as a reward for somebody firing you right now. Be good. Take a demotion if it means you can keep your job.
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ERISA protects vested benefits so you can't be fired and lose out on what has already vested. What you would lose out on is just the additional pension benefits that would still accrue if you remained working.
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05-16-2022, 07:05 AM
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#20
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,266
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+1 Once you're vested, you're vested. Now for some plans the benefits increase at different rates in different years and some plans have benefits that ramp up at a higher rate over certain ages.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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