How much is a pension worth compared to retirement savings.

[WorldWatcher]

 

[WorldWatcher]

 

[WorldWatcher]

 

[Harpy Eagle]

I think the other thing to consider is with a pension, it's the pension's money. With a 401k it's your money. Pension plans can fail, and while protected to a degree by the government, it's not 100% protection. for you to lose your 401k money while retired (assuming you have moved most of it to stable money market/bond type funds by this point) it would basically take a societal collapse for you to lose said money.

Since both our pensions will be from the US Fed Govt, it would basically take a societal collapse to lose them.

But you do make a very good point with private pensions. A friend of mine has worked for ATT for a very long time, and has a pension with them. He has been there long enough he still has the option of taking a lump sum which he plans to do.

 

[Harpy Eagle]

View attachment 979825

is there some point to these spreadsheets?

 

[WorldWatcher]

The the above is an RMD file I have for determining the rough (emphasis on "rough") outlook is for:

#1 Annual Expected Income from my 401K assuming a "let it ride" model where nothing is withdrawn except for Required Minimum Distributions (RMDs) starting at age 73.

#2 What is the impact on (a) Payments over time and (b) balance over time when taking only the minimum.

#3 Assumed rate of returns are 5%, 6%, and 7%. Which is why these numbers are "rough" because actual results depend on market returns for the principle.

WW

 

[WorldWatcher]

is there some point to these spreadsheets?

Ya, I was typing the point. You were pretty quick.



WW

 

[Harpy Eagle]

Ya, I was typing the point. You were pretty quick.



WW

Thanks! Those are pretty good.

Our 401ks/IRA are our biggest "unknown" as to how we will treat them in retirement. Based on projections for SS and pensions we should be able to live just fine without touching our investments. If that turns out to be the case we will use the funds for those out of the norm travel experiences that we are looking forward to in the first decade of our retirement. We plan to travel extensively the first 10 years while we are still young enough to truly enjoy it. After those 10 years, I will be 75, we will see how our health and wealth is doing.

 

[WorldWatcher]

The the above is an RMD file I have for determining the rough (emphasis on "rough") outlook is for:

#1 Annual Expected Income from my 401K assuming a "let it ride" model where nothing is withdrawn except for Required Minimum Distributions (RMDs) starting at age 73.

#2 What is the impact on (a) Payments over time and (b) balance over time when taking only the minimum.

#3 Assumed rate of returns are 5%, 6%, and 7%. Which is why these numbers are "rough" because actual results depend on market returns for the principle.

WW

What I find interesting is the difference between 5% and 7% rates of return.

At 5% "Ending Balance" continues to increase until age 79 because dividends/interest exceed the RMD. After that the Ending Balance begins decreasing. However because the RMD factor is decreasing the RMDs are increasing.

However if you look at 7%, RMD constantly increase to age until about age 96 and Ending Balance constantly increases to at 87 since return is greater than RMD.

WW

 

[WorldWatcher]

Thanks! Those are pretty good.

Our 401ks/IRA are our biggest "unknown" as to how we will treat them in retirement. Based on projections for SS and pensions we should be able to live just fine without touching our investments. If that turns out to be the case we will use the funds for those out of the norm travel experiences that we are looking forward to in the first decade of our retirement. We plan to travel extensively the first 10 years while we are still young enough to truly enjoy it. After those 10 years, I will be 75, we will see how our health and wealth is doing.

Here is the spreadsheet showing formulas.

Row one is the baseline starting row.

Row three is the first row of formulas and only need to be entered once. Then select and drag down to autofill the rest of the way. The "$" in column F lock the value to the "Return" value in cell I3.

Once setup you only need to plug in the beginning balance Cell G2 and the expected rate of return in Cell I3.

Cells are formatted as currency (no decimal) except for "Return" in column F formatted as a percentage.

WW


WW

 

[WorldWatcher]

Thanks! Those are pretty good.

Our 401ks/IRA are our biggest "unknown" as to how we will treat them in retirement. Based on projections for SS and pensions we should be able to live just fine without touching our investments. If that turns out to be the case we will use the funds for those out of the norm travel experiences that we are looking forward to in the first decade of our retirement. We plan to travel extensively the first 10 years while we are still young enough to truly enjoy it. After those 10 years, I will be 75, we will see how our health and wealth is doing.

Same here. I'm looking at exiting the work force next year while I'm 65. Was planning on working to full retirement age of 67. But projections are better than expected even with the early retirement "hit" and it's impact on total revenues. Retiring at 65 v. 67 (for both of us) will decrease income by 4%. But that has to be balanced against quality of life.

However I've been thinking:
(a) I'm just tired of the rat race even though I like the people I work with and the core functions of my job.
(b) Being young enough to actually enjoy retirement and do some travel. My wife and I were both WESTPAC sailors, so we'd like to do some extensive European travel.

We'll have 6 revenue streams in retirement and projections are that disposable income will actually increase when we stop working by a good bit. Mostly because:

• 13% Rule - We would no longer be paying Social Security, Medicare, and required employee contributions to our pension funds.
• 401K - We would stop max'ing out payments into the 401K meaning those expense move from "debits" to "disposable".

We've always lived below our means and saved for retirement. Now it looks like we will be fine financially without the 401K's. The 401K's then will be able to fund travel to the tune of a couple of major multi-week European trips and then small US based 2-3 day trips in the mean time.

As retiree's we're looking at major travel in the spring before the tourist season ramps and then again in the fall after the busiest times. And you can usually get much better deals cost wise outside of peak seaons.

Not bad for a retired Gunny (you) and a Chief (me).

WW

 

[Harpy Eagle]

Same here. I'm looking at exiting the work force next year while I'm 65. Was planning on working to full retirement age of 67. But projections are better than expected even with the early retirement "hit" and it's impact on total revenues. Retiring at 65 v. 67 (for both of us) will decrease income by 4%. But that has to be balanced against quality of life.

However I've been thinking:
(a) I'm just tired of the rat race even though I like the people I work with and the core functions of my job.
(b) Being young enough to actually enjoy retirement and do some travel. My wife and I were both WESTPAC sailors, so we'd like to do some extensive European travel.

We'll have 6 revenue streams in retirement and projections are that disposable income will actually increase when we stop working by a good bit. Mostly because:

• 13% Rule - We would no longer be paying Social Security, Medicare, and required employee contributions to our pension funds.
• 401K - We would stop max'ing out payments into the 401K meaning those expense move from "debits" to "disposable".

We've always lived below our means and saved for retirement. Now it looks like we will be fine financially without the 401K's. The 401K's then will be able to fund travel to the tune of a couple of major multi-week European trips and then small US based 2-3 day trips in the mean time.

As retiree's we're looking at major travel in the spring before the tourist season ramps and then again in the fall after the busiest times. And you can usually get much better deals cost wise outside of peak seaons.

Not bad for a retired Gunny (you) and a Chief (me).

WW

I will be 65 and my wife 62. I will wait till 67 to start taking SS and she will take it right away. That way if I pass before her she will have my full SS. We did not do the SBP as I have already been retired from the Marines for 13 years and assume I will be retired close to 40 years at least before I die, so it would have been a terrible waste of money.

We too plan to travel opposite the busy seasons for most places, not a fan of crowds.

 

[WorldWatcher]

I will be 65 and my wife 62. I will wait till 67 to start taking SS and she will take it right away. That way if I pass before her she will have my full SS. We did not do the SBP as I have already been retired from the Marines for 13 years and assume I will be retired close to 40 years at least before I die, so it would have been a terrible waste of money.

We too plan to travel opposite the busy seasons for most places, not a fan of crowds.

Sorry shipmate but I disagree. It's OK to disagree, just a different perspective.

People say that SBP is a waste of money, really it's not. You have to look at what it provides.

Some people say, "if you had taken the money and invested it over 30-40 years" you would have more money. Which is true.

The other side of that coin is I retired at 38 with a wife and two small children. The cost of guaranteeing 55% of my retirement is $155 per month. If I died in a car accident 2 months after retiring she would receive 55% of my retirement for the rest of her life to help care for herself and our two small children (kids are adults now, so just her). If I wasn't in the SBD they would have gotten nothing

Even today my contributions to SBP have totaled $46,500. If something happens to me she'll receive about $14,000 per year. So the payback is about 3.2 years to recover all costs and after about 6 years the SBP payments would exceed not only base principle but interest if it had been invested in fairly conservative vehicles.

So the peace of mind knowing that my wife and kids would have something regardless of what happens (happened) to me is priceless.

WW

 

[Harpy Eagle]

Sorry shipmate but I disagree. It's OK to disagree, just a different perspective.

People say that SBP is a waste of money, really it's not. You have to look at what it provides.

Some people say, "if you had taken the money and invested it over 30-40 years" you would have more money. Which is true.

The other side of that coin is I retired at 38 with a wife and two small children. The cost of guaranteeing 55% of my retirement is $155 per month. If I died in a car accident 2 months after retiring she would receive 55% of my retirement for the rest of her life to help care for herself and our two small children (kids are adults now, so just her). If I wasn't in the SBD they would have gotten nothing

Even today my contributions to SBP have totaled $46,500. If something happens to me she'll receive about $14,000 per year. So the payback is about 3.2 years to recover all costs and after about 6 years the SBP payments would exceed not only base principle but interest if it had been invested in fairly conservative vehicles.

So the peace of mind knowing that my wife and kids would have something regardless of what happens (happened) to me is priceless.

WW

I get what you are saying and you are not wrong. As you said there are more than one way to look at it.

I am telling myself the longer I live the better choice it was!