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.
Retiring but deferring pension?
- Thread starter badatmath
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TheWizard
Thinks s/he gets paid by the post
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...
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...
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?
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?
HarryHawk
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Seems like the same analysis folks conduct in figuring out when to start SS.
Out of Steam
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Do you have an in-between option, such as full retirement with fewer years of service at 60?
Out-to-Lunch
Thinks s/he gets paid by the post
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.
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.
Highbeam
Dryer sheet wannabe
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?
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?
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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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.
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.
The older I get the more things I realized I should have done different in life.
Chuckanut
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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.......
youbet
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
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.
grayv
Recycles dryer sheets
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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.
for example, the ability to keep retiree health insurance.
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 $$ you make over your remaining lifetime.
It's unlikely that either one will come out drastically better. The folks setting up the pension plans run all the numbers, too. Like you, I suspect that this "new benefit" is something the company actually sees it as a way to reduce benefits.
You mentioned that you could lose the whole thing if you were fired. Given a very strong possibility of an economic downturn, it seems to me that's the bigger factor here. If what you say is true you may be better off locking in the pension by retiring now, and working at some other job (or coming back as a contractor) for a year.
If you get 5% more for life, you then have to amortize the year of monthly pension checks you didn't take against the additional $$ 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.
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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Highbeam
Dryer sheet wannabe
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.
New Thinking
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Erisa
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.
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.
pb4uski
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
+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.
Are HRA plans protected by ERISA as well?
New Thinking
Recycles dryer sheets
Yes they are
I have also been considering retiring but postponing my pension. The pension grows quite a bit each year I delay. The one thing I give up is retiree health insurance. The first couple years I would pay a considerable amount either for COBRA or Marketplace insurance (other income will keep income up). Then, it would be Medicare plus a supplement or Advantage plan. Work has two retiree Advantage plans for Medicare age retirees, one acts more like a supplement and the other not so much. There is no supplement option through the employer anymore.
Retiring long before Medicare would have made the retiree health insurance very valuable, especially pre-ACA. The retiree insurance for a younger retiree with many years of service like me is subsidized heavily by the employer until Medicare age.
At Medicare age, what is available on the market is roughly equivalent to what my employer provides access to, and it is not subsidized.
I used to have a visceral dislike for Medicare Advantage plans but they have improved greatly over the years and the retirees I know are very happy with them. I don’t know that opting for a supplement over an Advantage plan is necessary anymore.
Not sure what I’ll do, but it’s good to see I’m not the only one mulling over whether earlier retirement or the larger delayed pension is more advantageous.
Retiring long before Medicare would have made the retiree health insurance very valuable, especially pre-ACA. The retiree insurance for a younger retiree with many years of service like me is subsidized heavily by the employer until Medicare age.
At Medicare age, what is available on the market is roughly equivalent to what my employer provides access to, and it is not subsidized.
I used to have a visceral dislike for Medicare Advantage plans but they have improved greatly over the years and the retirees I know are very happy with them. I don’t know that opting for a supplement over an Advantage plan is necessary anymore.
Not sure what I’ll do, but it’s good to see I’m not the only one mulling over whether earlier retirement or the larger delayed pension is more advantageous.
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Luvtoride
Thinks s/he gets paid by the post
What do you mean “I could not last the number of years….” ? Do you dislike your job that much? 30+ years with one company I would think there would be some loyalty/ security beyond what you’re worried about losing your job.
Motivation for them making changes? Cost savings in contribution amounts now and in future years. Actuarial calculations of these pension plans are pretty stringent and assume most if not all to draw at full retirement age. By giving options to defer or retire early, they can adjust the actuarial assumptions for funding future liabilities.
