Erd50 Perhaps you do not understand that if I die next week, my wife does not get a million dollars. She gets a very small Widows monthly stipend, that is not even close to my monthly pension.Whereas in your analogy the guy taking annually 3.5 % of his million will leave his Widow as a millionaire if he dies next week. We all need to please deal with the facts only.
I understand that isn't a exact comparison, because it isn't the same thing, exactly. But it is one of the options (and most likely option) available to someone who did not go the public pension route. So it still stands as a comparison, and it is based on facts. I might also outlive the portfolio, right?
And do you have other options for the survivor? For my (small, non-COLA) private pension, I can accept a lesser amount and leave 50% or 100% to a surviving spouse.
Apples and oranges to a degree. That 3.5% rule or 4% rule or whatever is designed to give you a certain amount of COLA'd income while leaving the invested balance intact.
A pension, or an annuity, may give such a $35K annual income stream possibly even with a COLA kicker, but when you (and possibly your spouse) kick the bucket, you have nothing left. With the actual investments providing the income stream, you probably still have that million bucks or more to pass to your estate. Big difference.
But there is no guarantee. It isn't 'designed to leave the balance intact', that has happened in a % of cases historically. And even at 3.5%, a significant number of of the portfolios drop to low values, in fact, FIRECalc shows a 4% failure rate for a 47 year portfolio (assume a retiree at 53 with a spouse - a 5% chance of one living to 95).
FIRECalc: A different kind of retirement calculator
OK, so take DLDS approach, and try to buy a COLA'd annuity with that...
Your pension value then is closer to the cost of a single annuity with inflation protection. Look up what it would cost to buy on the private market and that is the value.
We do not need to look up the cost of a private annuity. I do not need an annuity . I have a pension. I thought this was an online early retirement community? Why are some people criticizing their fellow members of this community whom chose to reach early retirement by putting their lives on the line,protecting their fellow citizens for 30 years,and retiring with a pension?
Maybe I missed it, but I didn't see any criticism in this thread. And I sure hope you aren't lumping me in that category (if I said something to offend, please point it out so I can explain and/or apologize if needed). I was merely pointing out that it would take > $1M to replace a $35,000 COLA'd pension. It has nothing to do with what anyone chose for their career, I'm only commenting on the numbers.
There's lots to learn here - but maybe best to stick to the numbers. People made career choices, and here we are. No going back, time to look forward and play your cards, whatever they may be at this point.
PS - are you a firefighter, or an attorney?
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-ERD50