Starting small non-COLA pension

[sengsational]

This appears to be a slam-dunk "take it now" but I thought I'd throw out the scenario and let some smarter people have a look.

If I elect to take the pension now, at age 59, it will be $745.23/mo.
If I elect to take the pension at age 65, it will be $891.87/mo.

If I add-up (ignoring inflation) the streams, the age 65 one catches up at age 95.

The tax consequence is that I'll be pulling a bit less from my tIRA/401k to keep PPACA PTC (for as long as that lasts). But it's only $9K/yr, so not big potatoes.

I went over to i-orp and with the age 95 model, the take it now vs take it at 65 did not show any difference in $K/yr. If I reduced the plan duration to age 90, taking it now showed 0.8% benefit to taking it now.

But it seems like all that is noise if one believes that inflation will persist or get worse.

For instance, if inflation is 2.5%, it doesn't catch-up until age 134

I'm having some cognitive dissonance problems, though since I only just now realized that I could have taken this pension at age 55 My earlier understanding was that 65 was the earliest I could take it, so just put it out of my mind.

So anyway, I see no down-side to taking it now. Thoughts?

 

[Travelfreek]

Take it now!

I say take it now! You never know what health problems will pop up. That's not a significant amount of money difference at all!

 

[sengsational]

I doubt that starting this now vs later will change my spending any. I just don't want to leave any money on the table.

 

[Sunset]

Take it now, you already have left $$$ on the table

 

[Perryinva]

Yup. Now.

 

[Focus]

I faced an almost identical situation. I couldn't find any advantage to waiting until 65. I started taking it at 55. Haven't regretted it.

 

[BeachOrCity]

To minimize the tax issues you can dump slot of it back into an hsa which deducts for the PTC. Don’t let the tax tail wag the financial dog. Now.

 

[DrRoy]

My gut reaction is always to defer, but in your case that does not make sense. Pull the trigger.

 

[FIREmenow]

I have exactly the same thing from a previous employer - non-COLA, moderate amount, very little increase Y-O-Y % to leave it in.

I'm currently still w*rking with considerable income, so it would jack up my income taxes or I'd have taken it 3 years ago at 55. I will start it immediately when I retire this fall at 58.

 

[Red Badger]

Money, Money, MONEY!

Now,sir.

 

[dixonge]

I face similar issues when I run the numbers on SS. Since we will initially be saving/investing (not spending) the money, the break-even point gets pushed out to end-of-life dates, similar to your math.

 

[athena53]

I had a similar decision- was already retired but still had pretty high taxable income. I chose to wait- decided it would be a "safety valve" if my expenses increased. When DH was in his last months I tapped into it to supply income to cover some occasional in-home care (just someone to keep him company and make sure he didn't fall, took his meds, had something to eat, etc. if I'd be out for a few hours). Medicare and hospice don't cover that. At that point, of course, it was a no-brainer to select the option that paid slightly more but had no survivor benefit.

People in my family tend to live a long time so I'm glad I postponed it till age 63- would probably have waited till 65 otherwise.

 

[Z3Dreamer]

I really like that money just appearing in my checkbook on a monthly basis without me having to do anything - no commute, no meetings, not having to make any decisions on what to sell, no meeting with potential tenants. Your decision fits all of those criteria.

If you don't need the cash, then think of it as all of the outflow for a new sports car of your choice. DW would see it as a Viking Cruise every year.

You have not commented on how this would mess up future taxation of RMD, SS, and loss of Premium Tax Credits, so I will assume those are not issues.

 

[FIREmenow]

If you don't need the cash, then think of it as all of the outflow for a new sports car of your choice. DW would see it as a Viking Cruise every year.

I planned to think of it as my health care "subsidy" (cause the employer who is supplying it is the one that may have caused the health problems!).

 

[athena53]

If you don't need the cash, then think of it as all of the outflow for a new sports car of your choice. DW would see it as a Viking Cruise every year.

A person after my own heart! After DH died I started sending monthly payments about equal to that pension to his brother and SIL, which will end after 24 months- I wanted to do something for them and DH and I agreed on this. The last payment will be in November of this year. My major travel is pretty much planned/pencilled in for this year and 2019 but my pipe dream is a Galapagos cruise in early 2020. The pension will help with that!

 

[pb4uski]

Yes, that 3% annual growth in the pension benefit is pathetic... take it now.

 

[ERD50]

I face similar issues when I run the numbers on SS. Since we will initially be saving/investing (not spending) the money, the break-even point gets pushed out to end-of-life dates, similar to your math.

Yes, that 3% annual growth in the pension benefit is pathetic... take it now.

As pb4uski points out, the OPs year-year increase is ~ 3%, while SS is 8% and COLA'd, and may have survivor benefits that affect the decision.

-ERD50

 

[sengsational]

Excellent. Thanks for all of the shared wisdom. It always helps to have that "second set of eyes" (or third set or more), to make sure there's no obvious "gotcha" hidden in there somewhere.

 

[Amethyst]

I'd grab the $$ now! Remember, time > $$ when you are retirement age.

Edit: Disclaimer - I am a champ at leaving money on the table. I retired at 66% of my salary, when I could have worked 7 more years and gotten 80%.

 

[Bogie]

healthcare

Is there some side benefit that you give up by taking now? The wife could have taken here pension a few years earlier but we found out that she had to wait until her years of service + age = 80 to get health care. In her case she had 16 years of service so she has to wait until she is 64 to take her pension if she cares about healthcare. It's not something they tell you unless you ask. It might be worth asking if you are giving up anything by taking your pension early.

 

[Mdlerth]

Holy servitude, Batman!

I'd grab the $$ now! Remember, time > $$ when you are retirement age.

Edit: Disclaimer - I am a champ at leaving money on the table. I retired at 66% of my salary, when I could have worked 7 more years and gotten 80%.

You made the right decision. Wasn't seven years the normal term of an indentured servant back in colonial times? One More Year syndrome we all understand, but Seven More Years isn't a syndrome, it's a disease.

 

[sengsational]

Is there some side benefit that you give up by taking now? The wife could have taken here pension a few years earlier but we found out that she had to wait until her years of service + age = 80 to get health care. In her case she had 16 years of service so she has to wait until she is 64 to take her pension if she cares about healthcare. It's not something they tell you unless you ask. It might be worth asking if you are giving up anything by taking your pension early.

I have scoured the plan document and didn't see anything like that in there, but I'll add that to my list of questions. Although it seems clear that there is no opportunity to take a lump sum, I'm going to ask about that too. And I'm going to say "this conversation is also being recorded on my end", so they'll be less likely to just do some off the cuff remark to move on to the next caller.

 

[RAE]

I'd grab the $$ now! Remember, time > $$ when you are retirement age.

Edit: Disclaimer - I am a champ at leaving money on the table. I retired at 66% of my salary, when I could have worked 7 more years and gotten 80%.

7 years is a long time. I think you made the right decision also. I faced a similar decision, and opted to retire at age 54.5, with the lower pension. No regrets whatsoever. This will be my 8th year of retirement, and it's been great.

 

[Hermit]

Yes, that 3% annual growth in the pension benefit is pathetic... take it now.

Pathetic That is at least 2.75% better that what I was offered for delaying pension start. I retired the end of the month and the pension started the next month.

Now on SS, I am waiting until 70. I am getting a better deal here than most, but even if not, I think I would have looked at it as longevity insurance and opted for 70.

 

[Perryinva]

Hmmm, my pension will increase by 25% if I wait 2 more years until 62, but as a percentage of salary it is only a 7% increase to 38%. (There are other reasons it is lower thannit would have been). Whether the income number meets your retirement goals is what matters, not the percentage, assuming the age is acceptable.