I have a vested defined benefit pension (non COLA) from a prior job that won't beginning paying out until I hit age 65, which may be 12-13 years after retirement. The pension is significant, but it certainly won't be the dominant source for retirement funds. I'm trying to figure out how to take the pension into account for purposes of retirement withdrawals prior to age 65. It seems to me that one possibility may be to include some approximation of the present value of it when calculating our overall portfolio. From immediateannuities.com, I can see what it would cost, today, to buy an annuity matching my pension's payment amount but with payments not beginning until age 65. Based on that, it appears that the pension's value would be about 17% of our overall portfolio if the pension is counted as an asset.
Our plan has been to spend 4% of current portfolio balance each year (we understand that spending will bounce around, but this includes a very large discretionary travel budget, among other things). Basing the 4% off of the larger portfolio (including the pv of the pension) would increase available spending in year 1 by 18% or so, which would really be nice to have. I realize the conventional wisdom around here is to think of a pension only as a reduction in needed spending, rather than an asset, but it seems unreasonable to simply ignore the pension between now and age 65.
An alternative might be to take some of the other portfolio assets and buy a period certain annuity, that would just pay until age 65 and then be exhausted, but the pricing on those annuities is so terrible right now that it would be hugely expensive to do that.
Am I crazy to think of the pension as an asset for this purpose? Are there creative ideas others have? Thanks very much.
Our plan has been to spend 4% of current portfolio balance each year (we understand that spending will bounce around, but this includes a very large discretionary travel budget, among other things). Basing the 4% off of the larger portfolio (including the pv of the pension) would increase available spending in year 1 by 18% or so, which would really be nice to have. I realize the conventional wisdom around here is to think of a pension only as a reduction in needed spending, rather than an asset, but it seems unreasonable to simply ignore the pension between now and age 65.
An alternative might be to take some of the other portfolio assets and buy a period certain annuity, that would just pay until age 65 and then be exhausted, but the pricing on those annuities is so terrible right now that it would be hugely expensive to do that.
Am I crazy to think of the pension as an asset for this purpose? Are there creative ideas others have? Thanks very much.