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Old 10-20-2016, 01:18 PM
 
991 posts, read 345,408 times
Reputation: 3127

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I've been looking into my husband's pension plan more closely, as we are in the process of re-evaluating our retirement investments and income.

He has a pension from a previous employer (left about 8 years ago). I was running the different age scenarios on the company's benefit tool calculator and was surprised to see at early retirement, his base (ERF1) pension amount would be the same whether he started drawing at 62 or at a later age. He would have a slightly less total pension if he begins at age 62 vs 65 because the excess compensation ERF2 factor does not reach 1 until age 65.

The company benefit calculator is showing a slight decrease in benefit after age 65 (WHAT??).

(.93 x final avg salary x benefit service x ERF1) + (.65 x final avg salary excess of cov'd comp x benefit service x ERF2)

Cov'd comp $100,000 Excess comp $37,000 17 years of service


Here's the table:

AGE ERF1 , ERF2

64 1 , .923
63 1 , .846
62 1 , .769
61 .96 , .731
60 .92 , .692

(ETC)

Online calculations show that it isn't worth collecting the pension earlier than age 60. Especially since my husband is insisting we do a 100% JT survivor benefit. I am 7 years younger than him, and my relatives live very long lives.

I am thinking we should start drawing the pension around age 62 and invest the money in a rental property or another financial instrument - depending on the economy at the time.

Does anyone know of any in-depth calculators that would help me to determine the optimal time to start his pension?

Also, I read over the pension documents and there is no mention of COLA or anything like that, so I am assuming that the payment will remain the same for the lifetime.
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Old 10-20-2016, 01:24 PM
 
Location: Sugarmill Woods , FL
6,235 posts, read 5,892,396 times
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My pension has 3% cola so my early retirement results in checks at same amount as if I waited 5 years!
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Old 10-20-2016, 02:12 PM
 
991 posts, read 345,408 times
Reputation: 3127
Quote:
Originally Posted by froglipz View Post
My pension has 3% cola so my early retirement results in checks at same amount as if I waited 5 years!
I bet a lot of people don't know that about pensions with a COLA.

Under my husband's company pension plan, the benefit would be the SAME at age 62 as age 65 if you don't have any excess covered compensation. That's 36 months of EXTRA payments. That's crazy. The company HR rep promoted collecting at age 65. The company was never very transparent about his pension. Now I know why.

It makes no sense for us to wait until 65 because the payment difference from excess comp is inconsequential given the amount you could collect and invest by taking it earlier. I have to figure out what is the best age to start.
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Old 10-20-2016, 02:26 PM
Status: "Re-edit status" (set 13 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,134 posts, read 1,883,639 times
Reputation: 3154
JMO.
I am in favor of drawing SS and/or pensions earlier rather later.
Because, half of us will have significant health issues prior to expected life expectancy. In fact those health issues are the #1 cause of not living forever.

This is a similar problem in taking SS early vs waiting. Many people see the extra $$ in waiting. For us we saw 5 years of tax free SS and more dollars ultimate total dollars because of a cancer diagnosis (early prostate detection and removal but increasing PSA levels so now looking at radiation treatment).

We needed the extra income at the time. Now we don't need that extra income, so the money is either banked or spent on retirement stuff-traveling, catching up of deferred maintenance, etc.
YMMV
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Old 10-20-2016, 02:40 PM
 
Location: MMU->ABE->ATL->ASH
9,123 posts, read 17,121,718 times
Reputation: 9974
Quote:
Originally Posted by AnnaGWS View Post
I bet a lot of people don't know that about pensions with a COLA.

Under my husband's company pension plan, the benefit would be the SAME at age 62 as age 65 if you don't have any excess covered compensation. That's 36 months of EXTRA payments. That's crazy. The company HR rep promoted collecting at age 65. The company was never very transparent about his pension. Now I know why.

It makes no sense for us to wait until 65 because the payment difference from excess comp is inconsequential given the amount you could collect and invest by taking it earlier. I have to figure out what is the best age to start.
My Pension (If i did not get outsourced this year), Has the 62yo Kicker also. Its a Early Retirement offer,

If you retire on/after your 62nd birthday and Before your 63rd, They calculate your pension as your age is 65yo. So you gain 2% x 3 year of age credit = 6% bigger - 1.5 x 3 year of loss work credits. =

6% - 4.5% = 1.5% bigger pension if you retire when you are 62.

(It does not have a COLA in it, but 2x in the company pension history (long time ago) they did do two, one time COLA's)
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Old 10-20-2016, 02:41 PM
Status: "Re-edit status" (set 13 days ago)
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
4,134 posts, read 1,883,639 times
Reputation: 3154
We set up buckets that can be arranged differently. Buckets overlap in function.
Income buckets.
Risk buckets.
Time buckets.
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Old 10-20-2016, 03:50 PM
 
991 posts, read 345,408 times
Reputation: 3127
Quote:
Originally Posted by flyonpa View Post
My Pension (If i did not get outsourced this year), Has the 62yo Kicker also. Its a Early Retirement offer,

If you retire on/after your 62nd birthday and Before your 63rd, They calculate your pension as your age is 65yo. So you gain 2% x 3 year of age credit = 6% bigger - 1.5 x 3 year of loss work credits. =

6% - 4.5% = 1.5% bigger pension if you retire when you are 62.

(It does not have a COLA in it, but 2x in the company pension history (long time ago) they did do two, one time COLA's)
My husband was grandfathered on the pension. When he started working for the company, they offered a pension and a 401k contribution. I think he worked there for about 3 years (17 years total) when they ended the pension and added an extra 1% contribution to 401k plan for new employees.

The company sold off the division he worked for and he was made redundant. It's possible getting the full pension at age 62 was part of his severance package. He was no where near retirement age.
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Old 10-20-2016, 05:29 PM
 
Location: Central CT, sometimes NH.
3,472 posts, read 5,142,736 times
Reputation: 3528
I am seriously considering an early retirement option as well. Our early retirement option at 55 vs regular at 60 is a 27.5% reduction. That in combination with scheduled increases in payout for additional years of service results in approximately a 41.4% overall reduction in the annual pension payout. However, it is 5 years of payout with an indexed COLA. I have a part-time self employment business that I would like to commit more time ramping up. The one thing that no amount of money can buy more of is time.
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