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Pension Decisions
Posted on 7/18/25 at 2:27 am
Posted on 7/18/25 at 2:27 am
Blessed to have a pension. Two big decisions on the horizon.
Plan is to use pension to cover essential expenses (home, utilities, food, clothing, health insurance, car).
Welcome your insights / experience on decisions below!
1. 100% vs 50% joint annuity survivorship for spouse:
Context: If I die 1st (likely), wife gets 100% or 50% for remainder of her life.
Cost: 100% costs $3600/yr (ie, annual pension haircut vs if choose 50%)
Looking at this like a term life insurance premium. If I die early in retirement, payoff is wife does not have to tap into retirement nest egg for add’l 50% of pension that, in worst case and I die very early, could cost retirement nest egg over $1,000,000 at her end of life, if she were to dig into it early.
If she dies before me or I die late in retirement years, like term life insurance, wrong decision (but better than alternative).
Decision: 100%.
2. Timing of pension - retiring at 55yo.
Taking pension immediately is 80% of pension at 60yo. However, my PV calc says taking at 4-5 years earlier, even at 80%, more than offsets taking at 60yo.
However, earlier pension cuts into RMD reduction strategy (pension takes some of lower tax table capacity) but stretches the reduction strategy years.
Decision: Take pension at 56yo
Plan is to use pension to cover essential expenses (home, utilities, food, clothing, health insurance, car).
Welcome your insights / experience on decisions below!
1. 100% vs 50% joint annuity survivorship for spouse:
Context: If I die 1st (likely), wife gets 100% or 50% for remainder of her life.
Cost: 100% costs $3600/yr (ie, annual pension haircut vs if choose 50%)
Looking at this like a term life insurance premium. If I die early in retirement, payoff is wife does not have to tap into retirement nest egg for add’l 50% of pension that, in worst case and I die very early, could cost retirement nest egg over $1,000,000 at her end of life, if she were to dig into it early.
If she dies before me or I die late in retirement years, like term life insurance, wrong decision (but better than alternative).
Decision: 100%.
2. Timing of pension - retiring at 55yo.
Taking pension immediately is 80% of pension at 60yo. However, my PV calc says taking at 4-5 years earlier, even at 80%, more than offsets taking at 60yo.
However, earlier pension cuts into RMD reduction strategy (pension takes some of lower tax table capacity) but stretches the reduction strategy years.
Decision: Take pension at 56yo
This post was edited on 7/18/25 at 2:39 am
9
Posted on 7/18/25 at 6:36 am to Artificial Ignorance
Post the actual numbers.
Posted on 7/18/25 at 9:35 am to slackster
Yep, would need to see numbers. I trust your present value calc but much more going on here than just the percentages.
Debt coverage side of things matters as well as SS integration into these calculations.Also depends on how much you want to pass on and to whom.
RMD issues could be mitigated by earlier distributions or annual conversions to Roth up to your targeted income tax bracket. 22% to 24% brackets don't offer to much optimization. Your target should be to limit distributions so you never have anything at the 32% bracket. If you are worried about the jump from 12% to 22% then that is tougher to solve for using early conversions or distributions, income range is just too narrow.
If your spouse works and when she retires will also have a big impact. Health insurance costs until your are medicare eligible are also a pretty hefty expense.
Debt coverage side of things matters as well as SS integration into these calculations.Also depends on how much you want to pass on and to whom.
RMD issues could be mitigated by earlier distributions or annual conversions to Roth up to your targeted income tax bracket. 22% to 24% brackets don't offer to much optimization. Your target should be to limit distributions so you never have anything at the 32% bracket. If you are worried about the jump from 12% to 22% then that is tougher to solve for using early conversions or distributions, income range is just too narrow.
If your spouse works and when she retires will also have a big impact. Health insurance costs until your are medicare eligible are also a pretty hefty expense.
Posted on 7/18/25 at 9:37 am to Artificial Ignorance
ChatGPT thoughts
quote:
1. 100% vs. 50% Joint Annuity Survivorship for Spouse
100% Option: Costs $3,600/year more but ensures your wife gets your full pension if you pass away first.
50% Option: Cheaper but your wife only gets half of your pension.
Decision: Choose the 100% option for better financial security for your wife if you pass away early, even though it costs more.
2. Timing of Pension - Retiring at 55 Years Old
Take Pension at 55: Get 80% of the full amount but start receiving it 5 years earlier.
Take Pension at 60: Get the full amount but start 5 years later.
Decision: Take the pension at 55 based on your calculations showing that receiving it earlier is more beneficial financially.
In summary:
100% Joint Annuity: More secure for your spouse.
Pension at 55: Financially better to start earlier despite the reduction.
Posted on 7/18/25 at 10:43 am to Artificial Ignorance
I worked with a guy who retired in 2003, and he opted for the cut so his wife would get more than 50% if he died first. turned out it was a good decision. he passed in 2005 from a massive heart attack. his spouse passed about 2-3 years ago. had he not taken the initial cut, shoe would have gotten 50% of his pension for around 17 years instead she got 80%
big difference for the spouse for 17 years.....
big difference for the spouse for 17 years.....
Posted on 7/18/25 at 10:45 am to Artificial Ignorance
This isn’t your personal retirement board dog
Posted on 7/18/25 at 10:50 am to Artificial Ignorance
3. Cash Balance Option - Take the cash and invest it.
Posted on 7/18/25 at 2:10 pm to Artificial Ignorance
Its $3600/ year from the time you start your pension? What are your plans? You are going to simply stop working? Your wife also?
Have you looked into a term life insurance plan? No idea what the costs would be, at 55-65 I know insurance wouldn't be cheap and that's essentially what the Pension plan is likely paying for also.
I'd be looking at going with 50% and some sort of term life plan for 15 years or so.
Also, if a pension is your only retirement plan I would be looking for some sort of income to supplement from 55-65. Even just a part time job at the hardware store or whatever. Doing nothing isn't good for you and it sounds like you could use a little extra cash anyway.
Have you looked into a term life insurance plan? No idea what the costs would be, at 55-65 I know insurance wouldn't be cheap and that's essentially what the Pension plan is likely paying for also.
I'd be looking at going with 50% and some sort of term life plan for 15 years or so.
Also, if a pension is your only retirement plan I would be looking for some sort of income to supplement from 55-65. Even just a part time job at the hardware store or whatever. Doing nothing isn't good for you and it sounds like you could use a little extra cash anyway.
Posted on 7/18/25 at 2:22 pm to Mingo Was His NameO
quote:
This isn’t your personal retirement board dog
Says the personal fitness board hall monitor.
TD ain’t my only source of deep retirement planning insights. But it is a good one. The end on dat.
Posted on 7/18/25 at 2:25 pm to RoyalWe
quote:
3. Cash Balance Option - Take the cash and invest it.
This is an option for 40% of pension (that is actually 2 different pensions).
Not gonna happen. Did IRR calc on it. Further, non negotiable decision to have combine pension as annuity for essential expenses.
Posted on 7/18/25 at 2:35 pm to baldona
quote:
Its $3600/ year from the time you start your pension? What are your plans? You are going to simply stop working? Your wife also?
Stop working is the plan. Restart whitewater rafting and hiking in mtns. Dancing more. Wife n I start new chapter of life stuff.
quote:
Have you looked into a term life insurance plan? No idea what the costs would be, at 55-65 I know insurance wouldn't be cheap and that's essentially what the Pension plan is likely paying for also.
As comparison, current pre-retirement term life insurance policy is $3,600, before the additional $3,600 haircut on 100 vs 50% pension choice.
Deferred accts, taxable accts, pension and SS more than cover retirement expenses in sustained abysmal market conditions. Should be ok with existing retirement sources in the worst case.
This post was edited on 7/19/25 at 2:23 am
Posted on 7/18/25 at 2:39 pm to Artificial Ignorance
quote:
Have you looked into a term life insurance plan? No idea what the costs would be, at 55-65 I know insurance wouldn't be cheap and that's essentially what the Pension plan is likely paying for also.
No, as will not need life insurance. Current pre-retirement term life insurance policy is $3,600, before the additional $3,600 haircut on 100 vs 50% pension choice.
You need to think about this statement again. That's the entire point of your OP.
My point is that you need to price a term policy, or maybe something other than a term policy. It may be cheaper (I honestly have no clue) or make more sense to go with the 50% option and then get a term life insurance policy in case you die that will cover the other 50%.
Again, you really need to be throwing real world numbers like originally asked to get even a ball pack assessment.
Posted on 7/18/25 at 2:42 pm to Artificial Ignorance
quote:
Stop working is the plan. Restart whitewater rafting and hiking in mtns. Dancing more. Wife n I start new chapter of life stuff.
That's great and I wish you the best. I'm just being honest though, most people find they have a lot more time on their hands. If you are working 40 hours a week now, moving to a part time job you fully enjoy or some sort of hobby job you can make money on to supplement you with an extra $10,000-20,000 a year can REALLY change your retirement.
If you are looking to retire at 55, you need to look into your healthcare options asap. As they will be very expensive most likely.
This post was edited on 7/18/25 at 2:43 pm
Posted on 7/18/25 at 2:42 pm to Artificial Ignorance
Search "pension maximization using life insurance".
It's either cheaper than your 100% option or it's not. But, either way, you're buying life insurance.
ETA: Take into account taxable nature of the survivor's benefit and the tax-free nature of the life insurance benefit.
It's either cheaper than your 100% option or it's not. But, either way, you're buying life insurance.
ETA: Take into account taxable nature of the survivor's benefit and the tax-free nature of the life insurance benefit.
This post was edited on 7/18/25 at 3:23 pm
Posted on 7/18/25 at 3:36 pm to baldona
quote:
If you are looking to retire at 55, you need to look into your healthcare options asap. As they will be very expensive most likely.
Thank you!
Supplement is not needed, although I appreciate your point. Will see if RtW in some capacity is a want at some point. The plan is no.
Healthcare cost is covered by company until I die, at the same cost as I am working now. Blessed. Once that bridge was crossed, this triggered ready to retire (financially) green light.
Thank you for things to consider. Helpful!
Posted on 7/18/25 at 5:15 pm to Artificial Ignorance
Looks like you made reasonable decisions.
Posted on 7/18/25 at 5:33 pm to Artificial Ignorance
I took my pension at 62 along with SS. Took the wife option which is a couple hundred a month less up front. If I go 1st she still gets I believe 85% of the amount we receive. But if she dies first then my pension goes back up to where it would have without the option.
She would also get my amount of SS which is greater than hers, but lose hers.
She would also get my amount of SS which is greater than hers, but lose hers.
Posted on 7/18/25 at 7:22 pm to Artificial Ignorance
quote:
This is an option for 40% of pension (that is actually 2 different pensions). Not gonna happen. Did IRR calc on it. Further, non negotiable decision to have combine pension as annuity for essential expenses.
It’s like you’re trolling the board. You want help but don’t post anything of actual substance.
Posted on 7/19/25 at 2:29 am to baldona
Thank you!
Brain misfired completely on term insurance specific purpose here.
Buying it one way or the other so will price it against the 100% vs 50%.
Appreciated.
Brain misfired completely on term insurance specific purpose here.
Buying it one way or the other so will price it against the 100% vs 50%.
Appreciated.
Posted on 7/19/25 at 7:54 am to Mingo Was His NameO
quote:Post less.
This isn’t your personal retirement board dog
OP: Take the haircut to guarantee your wife has the 100% and take the money as soon as you absolutely need to begin taking it, not want to start taking it.
Retirement before age 60 is the exception, good for those who can but your pension was not designed to encourage that, it penalizes you for doing so.
If you are forced to retire before 60, it’s nice to have even the diminished value of the pension there.
This post was edited on 7/19/25 at 8:00 am
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