U.S. CitiesCity-Data Forum Index
Go Back   City-Data Forum > General Forums > Retirement
 [Register]
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
View detailed profile (Advanced) or search
site with Google Custom Search

Search Forums  (Advanced)
Reply Start New Thread
 
Old 03-07-2016, 09:08 PM
 
Location: Los Angeles area
14,018 posts, read 17,772,783 times
Reputation: 32309

Advertisements

Quote:
Originally Posted by SportyandMisty View Post
A reasonable defined benefit pension is the equivalent have having $2 million to $4 million in savings.
Quote:
Originally Posted by mathjak107 View Post
except it isn't really the same thing as the money . 90% of the time drawing 4% has left you with more then you started with and that can be passed to your kids . your pension can't .

you also can't pay big expenses that don't conform to the amount of the cash flow .

while a pension of that amount is nice it is no sub for having the cash
Not everybody has kids, so not everybody has that concern about providing an inheritance. A generous emergency fund, say $20,000 or $30,000 will suffice to "pay big expenses that don't conform to the amount of the cash flow".

I believe that a decent and secure pension is indeed a good substitute for "having the cash". For one thing it provides peace of mind - there is no worry along the lines of "Gee, the market is down this year so I should reduce my withdrawals". Likewise there is no worry whether you might live out an unusually long life span.
Reply With Quote Quick reply to this message

 
Old 03-07-2016, 09:42 PM
 
14,013 posts, read 7,471,764 times
Reputation: 25637
Quote:
Originally Posted by Escort Rider View Post
Not everybody has kids, so not everybody has that concern about providing an inheritance. A generous emergency fund, say $20,000 or $30,000 will suffice to "pay big expenses that don't conform to the amount of the cash flow".

I believe that a decent and secure pension is indeed a good substitute for "having the cash". For one thing it provides peace of mind - there is no worry along the lines of "Gee, the market is down this year so I should reduce my withdrawals". Likewise there is no worry whether you might live out an unusually long life span.
So after you hit that emergency fund, then what? You don't have the income stream to replenish it.

Few pensions are designed to survive hyperinflation. Somebody who retired on what looked like a nice corporate or union pension in 1970 was completely F'ed by 1990 after all those years of double-digit inflation.

Unfortunately, you can find an example somewhere in history where any class of investment would be a total disaster.
Reply With Quote Quick reply to this message
 
Old 03-08-2016, 12:46 AM
 
Location: Los Angeles area
14,018 posts, read 17,772,783 times
Reputation: 32309
Quote:
Originally Posted by GeoffD View Post
So after you hit that emergency fund, then what? You don't have the income stream to replenish it.

Few pensions are designed to survive hyperinflation. Somebody who retired on what looked like a nice corporate or union pension in 1970 was completely F'ed by 1990 after all those years of double-digit inflation.

Unfortunately, you can find an example somewhere in history where any class of investment would be a total disaster.
The idea is that you are not spending every dime of the pension for daily life and monthly expenses. So if you have to hit the emergency fund big time, you just build it back up out of the income stream. Living hand to mouth is not a good idea when working, and it remains a poor idea when retired on a pension. If the pension is small, there may be no choice, but in my brief post I specified a "decent" pension. If you have a decent pension and are still living hand to mouth, then the problem is on the expense side of the ledger.

Hyperiniflation can be a huge problem for lots of people, not limited to those living off pensions. Some pensions are inflation protected, but perhaps not completely. With mine I get two percent a year (non-compounded) which has put me well ahead of inflation during the ten and a half years I have been drawing it, but which would be grossly inadequate in the event of hyperinflation, as you point out. As a further protection, if the spending value falls below 75% of the original (as adjusted for inflation), then there are further adjustments which maintain that floor.

Someone is going to object to the "non-compounded" part, so I will explain it. After one year, two percent is added to the original pension amount. After the second year, that same dollar amount is added again, i.e., two percent of the original pension amount, not two percent of the increased amount. So after 30 years, the annual inflation factor is still two percent of the original pension amount, not two percent of the current pension amount. Thus it becomes a smaller percentage amount of the whole with each passing year. I am satisfied with that and glad to have it, so I am explaining, not complaining. In the past, someone has always objected "How can it be non-compounded?".
Reply With Quote Quick reply to this message
 
Old 03-08-2016, 03:53 AM
 
71,951 posts, read 71,997,171 times
Reputation: 49509
Quote:
Originally Posted by Escort Rider View Post
Not everybody has kids, so not everybody has that concern about providing an inheritance. A generous emergency fund, say $20,000 or $30,000 will suffice to "pay big expenses that don't conform to the amount of the cash flow".

I believe that a decent and secure pension is indeed a good substitute for "having the cash". For one thing it provides peace of mind - there is no worry along the lines of "Gee, the market is down this year so I should reduce my withdrawals". Likewise there is no worry whether you might live out an unusually long life span.
ideally you want both and should have both . the old 3 legged stool was based on having all 3 components .

there are times i wish i had a nice juicy pension and times i like having multiple 7 figures saved .

but that does not mean i would want 100% of anyone of them if i had a choice .

we are about 85% dependent on the markets and rates right now . it is all fun and games when markets are going up . but walking in to a downturn and seeing two years of income vanish in the first month of retirement isn't much fun , whether markets eventually rebound or not .

i would like to get that 85% dependency eventually down to about 50% or less by delaying ss and possibly adding some laddered spia's .

delaying ss is the best cola adjusted annuity you can ever buy so for anyone deciding on buying an annuity or not , delaying is your best deal . for what you give up in checks by delaying you could never buy an annuity that gives you what ss does for anywhere near the price .

stress free cash flow is always a good thing , especially when the returns after breakeven multiply as quickly as delaying ss does . by age 90 if you make it that far you can see a 5% REAL RETURN , that is after inflation . but even if you don't live that long making it in to your upper 80's can still give you a 3% real return or so . the fact ss is cola adjusted is quite a powerful edge .

even figuring spending down a balanced portfolio getting 6% as an average return still has delaying ss as a pretty good deal . today it may be tough even seeing 6% nominal returns on a balanced portfolio .




Last edited by mathjak107; 03-08-2016 at 04:40 AM..
Reply With Quote Quick reply to this message
 
Old 03-08-2016, 08:08 AM
 
29,837 posts, read 34,924,704 times
Reputation: 11752
For us we followed a couple of standard guidelines above and beyond our pensions employer provided health care beyond Medicare and SS. First and most importantly having investments in excess of the recommended Fidelity amount for health care overage. Also because our pension COLA is capped at 3%, we felt it imperative to have sufficient investments to be able to fund our own COLA. I have mentioned that over the years. We were old school and wanted three strong legs on our stool. We also felt it important to be able to continue to save and invest in retirement. We never know with certainty the future of any of our sources of assets so depth and breadth of was/is important.
Reply With Quote Quick reply to this message
 
Old 03-08-2016, 08:13 AM
 
Location: OKLAHOMA
1,784 posts, read 3,624,774 times
Reputation: 955
Quote:
Originally Posted by TuborgP View Post
For us we followed a couple of standard guidelines above and beyond our pensions employer provided health care beyond Medicare and SS. First and most importantly having investments in excess of the recommended Fidelity amount for health care overage. Also because our pension COLA is capped at 3%, we felt it imperative to have sufficient investments to be able to fund our own COLA. I have mentioned that over the years. We were old school and wanted three strong legs on our stool. We also felt it important to be able to continue to save and invest in retirement. We never know with certainty the future of any of our sources of assets so depth and breadth of was/is important.
Reply With Quote Quick reply to this message
 
Old 03-08-2016, 08:28 AM
 
Location: Central IL
15,250 posts, read 8,577,039 times
Reputation: 35701
Quote:
Originally Posted by GeoffD View Post
So after you hit that emergency fund, then what? You don't have the income stream to replenish it.

Few pensions are designed to survive hyperinflation. Somebody who retired on what looked like a nice corporate or union pension in 1970 was completely F'ed by 1990 after all those years of double-digit inflation.

Unfortunately, you can find an example somewhere in history where any class of investment would be a total disaster.
Or even regular inflation...I know some get COLA's - mine does not. So while I know I'm in better shape than many it's not overly generous and will fill a smaller and smaller percentage of my expenses over time, especially after say, 20 years as it falls further behind.
Reply With Quote Quick reply to this message
 
Old 03-08-2016, 09:47 AM
 
2,446 posts, read 2,080,440 times
Reputation: 5711
Quote:
Originally Posted by mathjak107 View Post
ideally you want both and should have both . the old 3 legged stool was based on having all 3 components .

there are times i wish i had a nice juicy pension and times i like having multiple 7 figures saved .

but that does not mean i would want 100% of anyone of them if i had a choice .

we are about 85% dependent on the markets and rates right now . it is all fun and games when markets are going up . but walking in to a downturn and seeing two years of income vanish in the first month of retirement isn't much fun , whether markets eventually rebound or not .

i would like to get that 85% dependency eventually down to about 50% or less by delaying ss and possibly adding some laddered spia's .

delaying ss is the best cola adjusted annuity you can ever buy so for anyone deciding on buying an annuity or not , delaying is your best deal . for what you give up in checks by delaying you could never buy an annuity that gives you what ss does for anywhere near the price .

stress free cash flow is always a good thing , especially when the returns after breakeven multiply as quickly as delaying ss does . by age 90 if you make it that far you can see a 5% REAL RETURN , that is after inflation . but even if you don't live that long making it in to your upper 80's can still give you a 3% real return or so . the fact ss is cola adjusted is quite a powerful edge .

even figuring spending down a balanced portfolio getting 6% as an average return still has delaying ss as a pretty good deal . today it may be tough even seeing 6% nominal returns on a balanced portfolio .


Donald, why in the world do you have so much exposed to the stock market at this point?
Reply With Quote Quick reply to this message
 
Old 03-08-2016, 10:20 AM
 
519 posts, read 432,021 times
Reputation: 981
Quote:
Originally Posted by SportyandMisty View Post
A reasonable defined benefit pension is the equivalent have having $2 million to $4 million in savings.
In today's very low interest environment (which substantially increase the NPV net present value) a pension of $100,000 has an NPV of approximately $2.2 million (assuming a 30 year horizon). In more "normal" times, that same pension has an NPV of $1.5 million.

Edit: and these numbers are without regard to taxes, which would significantly decrease the value of pension if you are comparing it to after tax savings (not the case for 401K type pile of $s).

Don't know the statistics but I would imagine that a $100,000 pa pension is fairly unusual (most have substantially lower).

Just saying...

Last edited by larsm; 03-08-2016 at 10:37 AM..
Reply With Quote Quick reply to this message
 
Old 03-08-2016, 11:05 AM
 
71,951 posts, read 71,997,171 times
Reputation: 49509
Quote:
Originally Posted by jasperhobbs View Post
Donald, why in the world do you have so much exposed to the stock market at this point?
why ? because if you need more then a 2% draw to live you have no choice . it becomes very risky taking more than 2% from bonds and cash instruments inflation adjusted .
40% equity's is very conservative and will do the job just fine unless we have something worse then the great depression or 1966 and that group saw . ..

i am not equity heavy at all and actually 50/50 would be ideal , but when you deal with lots of dollars even small moves represent a lot of money
Reply With Quote Quick reply to this message
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.

Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.


Reply
Please update this thread with any new information or opinions. This open thread is still read by thousands of people, so we encourage all additional points of view.

Quick Reply
Message:

Over $104,000 in prizes was already given out to active posters on our forum and additional giveaways are planned!

Go Back   City-Data Forum > General Forums > Retirement
Follow City-Data.com founder on our Forum or

All times are GMT -6.

2005-2019, Advameg, Inc. · Please obey Forum Rules · Terms of Use and Privacy Policy · Bug Bounty

City-Data.com - Archive 1, 2, 3, 4, 5, 6, 7, 8, 9, 10, 11, 12, 13, 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, 30, 31, 32, 33, 34, 35 - Top