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Old 05-30-2019, 05:21 PM
 
14,260 posts, read 23,983,382 times
Reputation: 20058

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Quote:
Originally Posted by numsgal View Post
Do you know what your expenses really are? Do you track them? The income question can't be answered without knowing the outflow answer.
Agree that this is most important. The answers are very different if you can live on $40k or if you need $120k to fund your lifestyle.

And if you retire before 65, you must make some provision for covering health care insurance if that is not art of the retirement program.
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Old 05-31-2019, 01:08 AM
 
Location: Silicon Valley
99 posts, read 41,648 times
Reputation: 435
Forgive me for being slow, but why would anybody want to work an additional 5 years and not have that time accrued toward your pension? Unless you have some type of cap on the amount you can accrue. Some of the bargaining groups where I worked had a cap on the amount their pension checks would be, (say 90% of their final salary). In that case, once they hit the limit, they just retired since there was no additional benefit for them to continue. If that's your situation I get it.

Or is it just a matter of not wanting to pay the 11% into your pension? Our pension money was taken out pretax so I just considered it another form of savings.

Not trying to be contrary, I just don't understand.
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Old 05-31-2019, 12:26 PM
 
41 posts, read 29,555 times
Reputation: 64
Thanks everyone for the input. ComoAmero, I see that I did not make myself clear in my initial posts regarding the "deferred retirement option program" offered by my employer. To answer your question, if I were to work 5 more years and not enter the program, my monthly pension benefit would be higher because my compensation would be multiplied by, let's say, 30 years of service versus 25 years of service. However, the benefit of entering the program is that, while my additional years of service are not serving to directly increase my pension benefit, I am being paid not only my salary during each of the 5 years, but also being paid my monthly pension benefit (though that is not paid to me directly, but goes into an account that I would be able to access when I finally terminate employment). In my case, my initial monthly pension, if I were to retire this fall, would be approximately $9,000 per month (annual would be approximately 108,000). If I enter the program, that benefit would be paid into the account on my behalf each month for a maximum of 5 years and accrue a 6.5% per annum interest rate compounded monthly. In addition, each year the monthly benefit would be increased by a 3% COLA so that when I would finally terminate employment and stop receiving my salary, I would receive the benefit of a monthly pension that has been increased by the COLA adjustments each year. In addition, I would have access to the monies that accrued in the account, which would be roughly $500,000, without considering the interest accrued or the COLA., if I stayed employed for the whole 5 years (5 x 108,000). By entering the program, I am trading off additional years of credited service as a multiplier for my eventual monthly benefit in return for the monies accrued on my behalf in the account.

As an aside, this program is very popular where I work and is the type of program that gives rise to criticisms such as "double dipping" because, for the max of 5 years, the employee (though technically retired) continues to work at full salary while also accruing full pension benefits. Although the accrued pension benefits are taxable when you start drawing them, many retirees use this accumulated money for things such as buying a vacation home or RV or something like that.
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Old 05-31-2019, 12:35 PM
 
Location: Silicon Valley
99 posts, read 41,648 times
Reputation: 435
Ah, ok, got it. That's going to be a nice size savings account when you get there.
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Old 06-01-2019, 02:18 PM
 
Location: New Mexico
6,562 posts, read 3,659,218 times
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Quote:
Originally Posted by ComoAmero View Post
Ah, ok, got it. That's going to be a nice size savings account when you get there.
If you get there. The strength of the plan seems to be (I hope) that you can bail out and enjoy what you have.
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Old 06-01-2019, 03:13 PM
 
Location: OH>IL>CO>CT
5,231 posts, read 8,395,972 times
Reputation: 7185
Quote:
Originally Posted by dmenesq View Post

rjm1cc - I know that if a person receives social security prior to their FRA that they have to return a significant percentage of the SS if their earnings are higher than a specified amount. However, I thought that, once a person reaches FRA,that they are free to earn more money without having to return the SS. Am I wrong about that? If I am, then it would not pay to collect SS until I completely stopped working.
Re "working after FRA", you are correct. SSA will no longer offset benefit payments.

What rjm1cc is referring to is the taxability of SS benefits by the IRS, before or after FRA.

See https://www.calcxml.com/calculators/...taxed?skn=#top

This also becomes an issue with IRA RMDs boosting taxable income.
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