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-   -   whatcha think about buying service credits? (https://www.early-retirement.org/forums/f28/whatcha-think-about-buying-service-credits-66939.html)

jime444 06-03-2013 08:36 PM

whatcha think about buying service credits?
 
Here's our situation; DW about to retire, guvmint/state job, 30 years of service, looking at buying the 5 additional years of service offered.

Formula is .0057184/mo or 6.8%/yr return (principal and interest); up to 3%COLA (my favorite thing); can get an extra $330/mo for $57k(plus change). Can use deferred savings from 457; think we've got plenty of funding avail with over $1.5M in deferred accounts, as well.

Seems to be a solid, 95% funded pension, this plus 80% of SS for us would meet all basic (and more) needs. The deferred is really living large money.

Whatcha think? Pull the trigger on the extra five years?
Thanks.

brewer12345 06-03-2013 09:34 PM

How much of a payout could you buy from a well-rated (Aa3/AA- or better) life insurer with that 57k?

pb4uski 06-03-2013 10:22 PM

Sounds like a pretty good deal to me. Check out immediateannuities.com and see what you think.

clifp 06-03-2013 11:46 PM

Generally speaking buying the service credits is a good idea, especially if you are married to a younger spouse. Although as suggested you'll want to check to see how much you could get buying an annuity for $57K. Also if you are in poor health or your family doesn't live long than it might not be a good idea. But generally speaking it is worthwhile.

Running_Man 06-04-2013 01:40 PM

I would be shocked if you could get that same cola benefit on an annuity site for anywhere close to 80K so I think at 57K it is a very good deal. Does this include spousal benefit as well?

Chuckanut 06-04-2013 05:33 PM

I bought extra service credits. I figured it was probably the last time anybody was going to offer a guaranteed monthly income, partially inflation protected, in my lifetime. I did look at SPIA's - cheaper but no inflation protection at all. It's a bit of a gamble. If I live less time than I figure and/or the average inflation is low they get some extra dollars from me and my heirs. If I live as long as I hope and /or the inflation average is high I get the extra dollars.

The extra security of this 'old age insurance' does allow one to invest somewhat more aggressively and/or spend a bit more today. My 2 cents.

jime444 06-04-2013 08:45 PM

Thanks, guys. It appears to be a pretty good deal to me when I look at TSP, Berkshire or immediateannuities. Especially, the COLA protection. about 40-50% better, in fact.

Now just trying to figure out if we're going to buy survivor benefits for ME. Just doing livingto100, the DW should outlive me by a minimum of 10 years, and she's 2 years older than me. So, probably not..........

Yep, you're right, "I've been rode hard and put away wet." As my daddy always said, "if you're gonna use candlelight, burn the damn thing from both ends."

Cheers/:dance:
JimBob


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