Through an extraordinary sequence of events, I find myself with many choices to make.
I have been in a position where I could retire when I decided to pull the plug at MegaCorp. FireCalc shows virtually no chance of failure. I will be retiring with a pension from MegaCorp, no COLA. I will have lifetime health care benefits. Not fantastic, but out of pocket is well understood. Everything was on track for a comfortable retirement. I planned to retire perhaps 2014 or 2015.
Through a series of discussions plus being in the right place at the right time, I have been offered a position at a local university to teach full time. I have decided to do this, and thus I will retire from Megacorp in a few weeks.
I will need to make several decisions regarding retirement plans at the university. I plan to teach for 10 years (minimum). This would take me to age 65. I am interested in what others might think about the alternatives.
One option is a defined benefit plan. The pension benefit would be 2% per year of service. I would contribute 5% of my salary to be a part of the plan.
The second alternative is a 403(b) plan. I would contribute 5% of my salary, the university would match $2 for every $1 that I put in.
When I look at these, it looks to me like they break even at about 11 years of retirement. Net value of 11 years of pension is roughly equal to 11 years of 4% withdrawal plus a residual of the starting amount at the end of 11 years. If you live longer than 10 years, the pension is a better deal. If you live less, then the 403(b) is a better deal.
Of course, the big unknowns are longevity and what the rate of return on the 403(b) might be over the life of the investment time plus the draw-down time.
Am I missing anything in the basic analysis? I will need to make a decision on which path to take in the next two months.
Some folks will think I am nuts to be taking a job like this when I could simply retire. I view this as a way to do something that I have always dreamed of doing (teaching at the college level). I believe it will be a low stress environment. It is a 9 month position, so no summer work. It is a beautiful campus, a great facility, and I know a number of the faculty that I will be working with. Besides, if it doesn't work out, I can shake hands and actually retire. At this point, I am going to step outside the comfort zone and take a shot!
I have been in a position where I could retire when I decided to pull the plug at MegaCorp. FireCalc shows virtually no chance of failure. I will be retiring with a pension from MegaCorp, no COLA. I will have lifetime health care benefits. Not fantastic, but out of pocket is well understood. Everything was on track for a comfortable retirement. I planned to retire perhaps 2014 or 2015.
Through a series of discussions plus being in the right place at the right time, I have been offered a position at a local university to teach full time. I have decided to do this, and thus I will retire from Megacorp in a few weeks.
I will need to make several decisions regarding retirement plans at the university. I plan to teach for 10 years (minimum). This would take me to age 65. I am interested in what others might think about the alternatives.
One option is a defined benefit plan. The pension benefit would be 2% per year of service. I would contribute 5% of my salary to be a part of the plan.
The second alternative is a 403(b) plan. I would contribute 5% of my salary, the university would match $2 for every $1 that I put in.
When I look at these, it looks to me like they break even at about 11 years of retirement. Net value of 11 years of pension is roughly equal to 11 years of 4% withdrawal plus a residual of the starting amount at the end of 11 years. If you live longer than 10 years, the pension is a better deal. If you live less, then the 403(b) is a better deal.
Of course, the big unknowns are longevity and what the rate of return on the 403(b) might be over the life of the investment time plus the draw-down time.
Am I missing anything in the basic analysis? I will need to make a decision on which path to take in the next two months.
Some folks will think I am nuts to be taking a job like this when I could simply retire. I view this as a way to do something that I have always dreamed of doing (teaching at the college level). I believe it will be a low stress environment. It is a 9 month position, so no summer work. It is a beautiful campus, a great facility, and I know a number of the faculty that I will be working with. Besides, if it doesn't work out, I can shake hands and actually retire. At this point, I am going to step outside the comfort zone and take a shot!
