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We treat it like a deferred annuity, and don't consider any part of it in net worth. I like the previously mentioned easy math of 40K pension income = 1MM you don't need to save. Another way to look at it is that you can retire earlier with a higher than recommended withdrawal rate, knowing that you have a future income stream that will start in X years. So depending on your spending needs, you could really be saving for 10 years of retirement rather than 30. -
Same boat, but mine vests after 5 years and eligible for retirement at 59.5
It wil however keep us at our first job for 5 years, like it or not-even though our contributions are payable if we leave before then. We'd miss out on the 15.3% state match.Leave a comment:
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My spouse has a pension. It has kept us in the state of Missouri despite being miserable. Golden Handcuffs for sure. My private practice is also thriving so it's double golden handcuffs.
We are very heavily invested in stocks because of the pension... and because we're 39.
It's been interesting reading everyone's comments of how they're treating pensions.
Big 4-0 coming in 2018 for both of us. Been debating making portfolio a bit more conservative... but think we will remain mostly stocks since we've got more than 10 yrs until retirement and the pension.Leave a comment:
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That is a really nice pension-mid 100s at 62.Slav-- I know you are doing PP-do you ever toy with the idea of leaving the State job at doing PP full time?---you could probably get the salary and pension NOW(and then some) vs waiting for 62.
I also am at a place with the golden handcuffs--salary on the low side but pension nice and at 55--however to diversify I am at 0.5 , I did at one point think about going full time but then I would not have time for any 1099 income -or if I did it would feel like I am working too hard.
Diversifying jobs is nice for psychiatrists however we end up working more than we planned.Leave a comment:
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Someone asked what retirement system this is in reference to - I am in NY: http://www.osc.state.ny.us/retire/Leave a comment:
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We opted to avoid the pension and instead go with SS. We don't include SS in our asset or retirement estimates. I assume all pensions and SS will be gone at that time.
I agree w/ @Donnie that it should, but mentally I can get away with it for now, and having included in income won't change our plans now. Same thought for the $100 I keep in my passport. If I forget its there, it's a cool surprise later!Leave a comment:
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OP, you in the UC system? The $$ listed in UCRP is low I would never take the bulk payment; would either take he immediate annuity or deferred annuity to your chosen time. I unfortunately came in 2014 and don't get insurance benefits unless stay to ripe old age of 60 and then only 20% per year until 65 is fully paid. Should have bailed out of VA a year 8 months earlier---blah.
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They are definitely making things less attractive for new hires though... every few years they come up with a new Tier and it's getting worse and worse; but at least they are doing something to make sure they stay current with funding.Leave a comment:
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Golden handcuffs. That’s the double edged sword of doing that accounting.
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Very true. What really helps is that luckily (for now at least) the gig is attractive in other ways too and due to pretty good hours I am able to do a number of other self-employed things; diversification always helps, in employment as well. When and if the job becomes unpleasant I can always jump ship.Leave a comment:
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Golden handcuffs. That's the double edged sword of doing that accounting.Leave a comment:
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Thanks. That way of looking at it makes me feel motivated to stay.Leave a comment:
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I am approaching a ten year mark with my employer and will soon be “vested” in pension, which I will then be able to start collecting at age 62
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I think in your mental accounting each 40K of vested pension=1 million in nest egg. My brother who has an IBM pension thinks of it this way. It is especially useful if your job pay is lower than some peers who only have a nest egg. Agree with the above thought that with a good pension LTC insurance is not needed.
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So that sort of makes sense intuitively, but what do you guys think of the formula proposed in the article I included in the OP? With their formula, which I think is mathematically correct, it’s not 1 mil but really only 150k. Basically they are taking into account the fact that pension doesn’t start for X years from now, so you really need a much smaller number now to make it grow, and then you will have the pension for Y number of years till you die, then there is the inflation factor etc. If I had that 1 mil today, in 20 years when I would start collecting it would be MUCH more… you get the idea.
But really it’s tough to calculate all of this exactly. I think I will stay conservative and not include it in the net worth, but will just keep a column of projected cash flow at a certain age.
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Using a discounted rate makes sense, but I think its really the point that matters and in the end its unnecessarily complex and somewhat confuses the type of asset by trying to fit it in more of an equity framework, but its not an equity. I dont think it really needs to be discounted since you're not going to increase the assets value unless the payout changes. That is, its not as if you're going to erroneously compound that 1M value at a rate higher than your annual payout indexed to whatever withdrawal rate is.
So if your current is 40k/yr thats 1M, and if it grows to 100k/yr if you stay longer thats 2.5M, just as if it were growing anyway and is indeed much more, but its always tied to the payout rate, not some projected compounding. Discounting it just doesnt make as much sense if you can say leave today and take it, it doesnt need to 'grow'.Leave a comment:
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I am approaching a ten year mark with my employer and will soon be “vested” in pension, which I will then be able to start collecting at age 62
Click to expand…
I think in your mental accounting each 40K of vested pension=1 million in nest egg. My brother who has an IBM pension thinks of it this way. It is especially useful if your job pay is lower than some peers who only have a nest egg. Agree with the above thought that with a good pension LTC insurance is not needed.
Click to expand...
So that sort of makes sense intuitively, but what do you guys think of the formula proposed in the article I included in the OP? With their formula, which I think is mathematically correct, it's not 1 mil but really only 150k. Basically they are taking into account the fact that pension doesn't start for X years from now, so you really need a much smaller number now to make it grow, and then you will have the pension for Y number of years till you die, then there is the inflation factor etc. If I had that 1 mil today, in 20 years when I would start collecting it would be MUCH more... you get the idea.
But really it's tough to calculate all of this exactly. I think I will stay conservative and not include it in the net worth, but will just keep a column of projected cash flow at a certain age.Leave a comment:
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Only to the degree that liability has been accounted for correctly and vesting reached. If they use an inappropriately high discount rate (as many pensions do), or if you don't have a current claim on that money such that you can demand it today then I wouldn't include it.Leave a comment:
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It shows up as a liability on a company's balance sheet, so it should show up as an asset on yours.Leave a comment:
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