Feedback on current plans (pension plan, physically, emotionally, social security)

[dmenesq]

I am currently 63 years old and have worked for the same employer for more than 25 years. I am fortunate that, when I retire, I will get a generous pension based on years of service multiplied by a percentage and applied to our highest years of compensation. I will also be eligible for employer-paid health insurance as a retiree. My employer also offers a program by which I can choose to "retire" but continue working and receiving my same salary, without needing to contribute the 11% I currently contribute toward pension, and my pension payments will accrue for me in an account that I will not be able to access until I officially leave employment. My termination of employment would have to occur in not more than 5 years from the time I opt to enter the program. That is a pretty good deal, especially since the pension benefits would be increased annually by a COLA and the monies in the account would be accruing interest. Once I leave employment, I can choose to withdraw the funds or leave them in the account for a certain number of years (5 or 10, I don't recall). My pension benefits would then be paid to me monthly.

My current thought is that I would enter the program in a few months, when I am almost 64 and leave not later than 5 years later -- assuming health, etc. holds out. While mentally demanding, my job is not physically demanding and I enjoy my work. Unfortunately, due to family issues some of which are ongoing, I do not have much in the way of savings so my current thought is that I am hoping to be able to pay down some debt in these next few years and put away some savings -- aside from the pension benefits accruing in the account. I am also thinking that I would apply to start receiving social security at about 67 (just past my FRA) and then use those monthly payments to make some home improvements, and increase my savings so that by the time I officially leave employment my house would be paid off and updated. Does the idea of starting social security at approximately my FRA or a couple of months later make sense in that scenario? Would the benefits of receiving the social security be offset by the increased income taxes I would be paying? Does this sound like a viable plan or am I overlooking something? (I realize that I possibly should have entered the program a year or two ago, but I did not want to be required to terminate employment before I was emotionally ready to do so and that ship has sailed). I know the social security issue has been beaten to death, but I am not a numbers person and only recently fully grasped the amount of money that would accrue to me if I enter the program and stay for the entire 5 years, including the interest, so I am looking for feedback here. I know there are some very knowledgeable people in this forum. Thanks for any input.

[turkeydance]

are you married?

[johngolf]

The question should be when you die is there anyone you need to financially take care of?

[dmenesq]

Not married. One adult child who I would need to financially provide for at least to some extent and who would get house, life insurance,and all assets. One of my retirement benefits is an employer-paid life insurance policy in the amount of two times my final compensation. My pension includes a minimum guaranteed 10 years (including the max of 5 years in the program) so if I died before 10 years of retirement, my beneficiary would get any remaining years of pension up to the 10 years.
If I died after 10 years, beneficiary would get none of my pension benefits -- other than those that had accrued in the program account. I could choose to decrease my pension benefits in order to have adult child be a joint annuitant, but due to the age difference, my monthly benefit would be significantly decreased. Therefore, I think I am better off trying not to deplete the retirement account so that my beneficiary would receive the balance of those funds even if I lived more than 10 years post retirement (including the 5 years while still working).

[MI-Roger]

Those are VERY generous benefits! I recommend a Private sit-down with a Benefit Rep at work to verify everything is as you stated and believe.

Such as:
1) Life Insurance equal to twice your Salary while working is somewhat common. Having this same level of benefits after retirement is not.
2) Will opting for the "5-Year No Pension Deduction Plan" permanently freeze your pension account balance? Or will it continue to accrue interest?

Just be 100% certain what your benefits will be, and have it in writing! No "Do Overs" in retirement.

[rjm1cc]

Take SS as late as you can. It is a very good inflation adjusted annuity.
Remember you have to return about 50% of what you get in SS if you earn too much money. I think the repayment may start around 17 or 18,000.

[dmenesq]

These are all good points.

MI-Roger, the life insurance benefit is as I stated, even for retirees as long as they started work prior to a certain date (as I did). This benefit is not available to employees who started work here after a certain date. With respect to your second question, I do not understand what you are asking. The program that I described considers the employee to technically be "retired" even though they are still working. Therefore, the employee stops contributing to the pension plan and starts receiving pension benefits, but instead of getting them paid to the employee, the system holds them in an account for the benefit of the employee when they finally stop working (but the employee must terminate employment within 5 years). The pension benefit does not continue to increase in terms of years of service once the employee goes into the program because the employee is technically now "retired" so the benefit amount is set at that time based on the option the employee selected. In other words, the highest monthly payment would be for employees who choose to receive pension only for their lifetime, but the most common (for single employees) is the 10 year certain because they are guaranteed 10 years of pension benefits and if they die sooner than that, their beneficiary gets the balance of the 10 years. If they go into the deferred program that I described, the years they spend in the program are counted toward the 10 years of guaranteed pension. The pension payments get a 3% COLA each year on Oct. 1 and the accrued monies in the account earn 6.5% interest per annum compounded monthly. The downside is that the pension benefit is set at what it was when you go into the program (plus COLA and interest) so if you get any raises while you are working during the 5 years, those raises will not result in an increase in your pension benefit calculation and your additional years of service do not count toward a higher pension benefit though you continue to be paid your salary, including any raises, promotions, etc.

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.

[GeoffD]

The high points:
63
A pension with medical benefits and social security coming
No savings
Some debt. Amount unspecified
Own a house. Nothing about a mortgage. Not much about condition other than some home improvement is desired

There isn’t enough information to comment

What I care about is “I can spend $xx,xxx per year and not run out of money.” You then either adjust your lifestyle to live on that cash flow or you keep working.

[EllieKay56]

If you are FRA there is no cap on earnings while collecting social security.

[numsgal]

Do you know what your expenses really are? Do you track them? The income question can't be answered without knowing the outflow answer.