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Retirement & Pension: A Guide to Planning with Guaranteed Income
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- čas přidán 6. 08. 2024
- How A Pension Shapes Your Retirement Plan:
00:00 Pensions & Retirement Planning
01:01 Guaranteed Income Stream
02:05 Reduced Savings & Greater Flexibility
03:49 Protections
05:19 Longevity Risk Mitigation
05:49 Calculating A Pensions Value
07:06 Incorporating Pension Into Net Worth
07:34 Employer Stability
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Disclaimer: Please note that this video is made for entertainment purposes only and not to be taken as financial advice. Always make sure to do your own research.
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Thanks for watching, I appreciate you!
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I retired 3 yrs ago at 58 with a $2500 month pension.
Started collecting $16k per year survivor social security at 60.
I will collect my SS at 70, est $3k per month.
Modest 401k, house is paid for cars are paid for.
The key to a successful retirement?
Be debt free.
Thanks for the video!! My wife and I worked very hard for many years (military, GS, and teacher) and will have 3 pensions and 100% VA disability. With my social security at 62 we will earn between 13-14K per month. My wife will wait to 67 to draw her SS and we will not touch our 401k and TSP until we hit the age requirement. Government service doesn’t pay great in the early years, but makes for a great retirement.
@@ScottUnderwood-q7q I have the same strategy.. don’t touch the 401k until forced by RMDs. Meanwhile, while it lasts, I’m holding off on paying off the mortgage, as I get more gain by keeping $ in high interest savings. Once RMDs kick in, that is when I go into high gear paying down the mortgage.
Your hard work and strategic planning have certainly paid off! It's impressive how you’ve set up a solid financial foundation for retirement. How are you planning to manage and optimize these multiple income streams to ensure long-term financial stability?
@@Erginartesia But aren’t you going to pay a huge amount of tax on those RMDs?
Some pension plans, like mine, offer the option to take a lump sum. I opted to take the lump sum, rolled over into an IRA, which I invested in S&P 500 and high dividend stock ETFs. This has worked out well for me when applying a 4% rule.
Taking a lump sum and investing it wisely can be a strong strategy! It sounds like you’ve found a good balance with the S&P 500 and dividend ETFs. How do you plan to adjust your strategy as you approach retirement, and are there other investment considerations you're exploring?
I am 70, retired after 30 years at a major automotive company. I then worked at a small marketing agency where they offered a buyout. My home is paid off as well as my used car. No credit card debit! I can live comfortably with my pension and social security benefits. I feel very blessed to be able to pay for any repairs on my home. Having an IRA gives additional peace of mind.
Thank you for making this video! Exceptionally well done and informative.
Your financial situation sounds truly impressive-being debt-free and having a solid retirement plan is a great place to be! How do you plan to manage and utilize your IRA going forward, and are there any additional goals you’re focusing on in retirement?
I’m approaching this pension subject with a lot of apprehension. I’ve earned a defined pension but haven’t started it yet. .. trying to get as much knowledge as I can. Thank you for this video. You have made it a little clearer for me.
We retired 12/31/22 with a state pension. With no debt, we have a stress free retirement. It is a blessing that we do not take for granted.
You're are right on about the benefit of a pension! So much of the retirement advice on withdrawals and well balanced porfolio's really doesn't apply when you have a pension.
Planned my working career around the anticipation of a pension from the Federal government and saved both in TSP and IRA's to the fullest during my working years. Have a solid net worth which I continue to add to almost monthly! (have to live a little 😁) When I am asked my advice for successful retirement, my #1 response is DEBT FREE & Dave Ramsey methodology!
I have a federal pension with survivor benefit at 50% at 71k, no debt, wife also has a smaller fed pension plus both have SS, not touching tsp/ ira other then Roth conversions…40 years as a fed + military
I love brains and beauty.
Yes .. retired with government pension. It is working just like the “3 legged stool” system, as it was intended to do. I absolutely agree that it reduces stress. I use the 401k fund for non-regular expenses, and to fund my own long-term care.
I STRONGLY recommend that having a pension, you should still put 10% to 15% into your 401k. Having that funds bucket is equally as important to having confidence in retirement.
these are some great points, I’m still about 10 years away from early retirement but I have a solid 401k and will be getting about $105k per year from a defined pension plan. It’s definitely been super helpful to have both and not as much pressure to save. Planning to move somewhere with lower cost of living and live a good life.
Having a solid 401k and a defined pension plan is a great combination for your future! Moving to a lower cost of living area can be a smart move. What are some of the key factors you're considering in choosing your new location, and how are you preparing for this transition?
@@StressLessFinancial I'm looking at finding a maintenance free property and downsize, something with amenities like a pool or hot tub. I plan to travel in retirement and I don't want to maintain anything or worry about cleaning a larger home. I'm also looking at states that don't tax pensions.
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Awesome content Erin!
Thanks so much!
Great Video on pensions, Thank you..
Thanks you watching
Great video, I've been waiting for one that calculates the value of a pension. I'm so fortunate to have a job that provides one and by the time I'm ready to retire my annual payout is expected to be around 44% of average of my 3 highest pay years.
Great explanation of pensions and retirement planning, Erin! Understanding the difference between defined benefit and defined contribution plans is so important for financial security in retirement. The insights on how pensions can ease financial pressures and offer peace of mind are incredibly valuable. Thanks for breaking it down so clearly!
Absolutely, grasping the difference between defined benefit and defined contribution plans is crucial for a secure retirement. I’m glad the explanation was helpful! What strategies are you considering to maximize the benefits of your retirement plans and ensure long-term financial stability?
Very informative video. For me, I retired from the military back in 2001 and then started working for the county government which will be my 2nd pension when I plan to retire from it next year. Those plus SSI and other investments and I should be good. Not married and no debt except for my home. I'm thankful.
this video didn't really apply to me but it's so good I'm subscribing.
Thanks for subbing! Welcome to the channel 😊
A couple things to consider about pensions. Like you to be at that job at least 5 years to get vested, or you get nothing. You have to stay at the same company or union for a very long time (without going into management) to get the larger amounts, or starting pay outs earlier.
Hi Erin great post. I'm served 26 years in the military and draw a pension for the remainder of my life. All my pensions combined with social security when I reach 62 will cover all my expenses. I invest heavily though like I will receive nothing so I definitely have to take a look at this.
Impressive video Erin! I don't think many working people understand the guaranteed income/peace of mind relationship. I'm amazed it isn't mentioned more often in the "when to take Social Security" videos. I'm a big advocate of delaying Social Security, if you can afford to and have longevity in your genes. I had a pension but took the lump sum because I retired early and needed more up front than the pension paid. After all debt was paid off, I need much less and am delaying Social Security for that peace of mind factor.
My jobs have both DB and DC plans🎉
Thanks for the great information. I am fortunate enough to have a great pension from a municipal career when I retire. But I also started an IRA years ago along with contributing 10% to my deferred compensation plan at work.
And she will receive 50% of my pension should I pass first.
I had my wife start an IRA years ago as well and she adds to a 403b with 4% matching contribution by her employer.
Hopefully my wife and I will be sitting pretty when we retire and can share with our kids and grandkids.
Always force yourself to save extra for retirement …because you never know.
Thanks again 😊
Great video Erin. Can you make a follow up on how you plan to budget/invest (or how one should do it) like with you & your husband since he’s military/government?
Excellent video! The way that I incorporate the value of our pensions right now is to just include the lump sum value, i.e., how much we would get if we pulled our money out of the system. It's the most conservative way to do it. I'm not sure if all pension systems have this, though.
Thank you SO much for this video. As a math nerd who took graduate level accounting, so many financial people mis-speak about valuing pensions. They just say "derp, a 30k pension is like having 750k nest egg at 4% SWR!" Which is wildly inaccurate. The value of your pension does not know or care what your SWR is. I keep track of NPV of my wife's teacher retirement pension and my own S.S., since both are earned. I have to further discount them due to payments not starting until the future. But my wife's pension is the largest asset we have - it just surpassed our home equity last month, and our home is almost paid off. I use actuarial tables to know how many expected payments I will have. There're really no more accurate data to use.
@@robloxvids2233 i don’t get it .. what’s a SWR and how do you assess your pension’s value? Are you saying each $10k of pension is worth $250k in 401k? Maybe Erin can explain this on another video.
Erin, I retired in 2013 early at 55 with a traditional, non-adjusting pension. Full retirement was at age 60, so I took about a 40% cut in monthly benefit, but that early retirement date allowed us to return home while our parents were still alive. Early in our careers my wife and I decided that we were going to assume pensions weren't going to be around, nor social security (this is in the early 80s, so that mind set is nothing new). Investing in our company's 401k over 30 years, plus pension and SS, we're in good shape.
Well I am fortunate. I retired from the military after 24 years, getting VA disability, and working for the DoD to close out another pension and that will will be small but useful. I have been maxing my contributions to my TSP and plan on retiring using the MRA +10. Will pull SS at 62 and enjoy the rest of my life with my wife. My father passed at 61 after serving in the military for 33 years, not going to happen to me. The only guarantees in life are death and taxes. Great content and I look forward to your next video.
I’m 60 on a State pension retired for 2 years. It pays over 65% of pre-retirement income and has 3% compounding COLA. I selected a 75% survivor benefit for my wife. I’ll receive a small pension from another company at 65 and plan to start taking Social Security around that time. All of that together will be more than I was making when working. Taxable Brokerage account will be used to supplement income for needs, fun, travel etc and plan on leaving Roth IRA to wife and adult children.
I once saw pensions referred to as the BONDS in considerations about the investing breakdown/diversification in retirement and that was a good way for me to look at mine.
Great video, thanks as usual. Glad to see the first batch of comments warn that even if you have a pension, there's no guarantee it will pay off fully, or even at all. Plus further warnings that present health is no guarantee you'll live as short or long a life as you'd expect. Best plan is to save more, longer, for the worst case scenario, imo. Just look at the last four years. We've gone from low interest rates to high, plus an inflation scare, all due to a global pandemic and Ukraine war, and experts believe we'll have more pandemics, all while BRICS threatens the global economic superiority of the West, and futurists worry about AI run amok. Your future is a LOT more unpredictable than you think. Save up, and don't make your home the majority of your nest egg.
Thank you for making this video, Erin. This directly affects me since I’ll have both a Pension and a 401k when I retire.
You’re welcome, thank you for watching!
So working for the Commonwealth of Ma, I have contributed to my pension at a rate of 8% for 38 years. I will likely max out my benefits which feels good, and in part, is exactly why I worked for the government. I never got rich, but I had benefits. Now the decision is whether or not to provide for wife who is a few years younger then me. That formula for calculating the dollar value of the pension was interesting. The thing I worry about though is the effects of inflation on my pension and frankly, the ability to still live and have fun. You need to have discretionary cash for that and my pension is good, we have significant savings but the closer I get, the more I want to keep working and keep saving. The other thing I would be interested in, and this is just in order to minimize taxes is what you think of buying a long term municipal bond. I am considering putting aside a million dollars into a MA municipal bond to avoid both state and federal taxes. I am looking for something paying between 4 and 6 percent if I can find it. That should generate sufficient income to live off of, and would be tax free. Any thoughts or downsides you can think of?
@@wmb9419 remember that the municipal tax free bond will still be included as income for Medicare B.
I’m a 28 year UAW worker with a pension. I also take advantage of the 401K with other investments as well. I’ve been patiently waiting for this video. Thank you, Great job.
Thanks for watching 😊
Hopefully, my pension +457b + roth Ira will be enough because I started late in my career. I'm also trying to pay off my mortgage before retirement.
You and me both brother. I am fast tracking my mortgage to get it gone. After that, everything else gets easier (I hope).
I have retired once as a LEO. I will retire again in 4.5 years at age 63 not LEO this time.. I currently draw on a Pension and Drop account. My pay was not stellar but retirement is where all my hard work and bad things I dealt with as a street cop pay off... Between 2 pensions and 2 DROP accounts and modest 457, my retirement will be over 100K a year.. I am blessed. Some credit card debt but nothing horrible, I am currently saving to have it paid off in 4 years..
I am so glad that my employer switched from a defined benefit plan to a money purchase plan funded by the employer and managed by the employee!
I have a pension, but I believe it is an atypical type. The company contributes a % of my income to it each yr. The sum of the account is mine. When I retire, I can take it as a lump sum or if I want payments, they annuitize it. There is no set dollar amount of income, it's based on how much you have accrued in the account. I had always thought I would take the lump sum because surely I can do better w/ the $ than they can....until I started looking at the math. If I take the payments, it would provide me w/ nearly 100% of the bare minimum amount I need to live, with just 10% of my entire portfolio. So, while I still believe I COULD do better w/ the lump sum, the income security that would be provided by the annuity, I believe, are worth it.
Now, what happens if my employer (or the insurance company administering the annuity) go bankrupt? I'm not sure, but there are certainly risks w/ either decision.
You have to consider taxes too. If you take a lump sum retirement, that's all taxed in the year you take it probably pushing you into the highest tax bracket where Uncle Sam will take a huge bite out of your potential payment.
@@garym81 I believe, though I am not certain, that I could roll that lump sum into an IRA.
Calculate the lump sum value over the next ?? Years. Decide how important it is to you to have a legacy in your portfolio… and then calculate how much of the lump sum you will need to pull out over the next ?? Years. When you are all done with that, think about how much you enjoy always worrying about and being your own financial advisor .. if you hate that, then you will want to add !% per year to your annual budget to pay a CFP to do it for you.
Finally, decide how likely it is for your employer to still have a pension fund in ?? Years.
It all sounds like just more stress. Which stress can you withstand more?
I'll have a small pension from working for 20 years at my old part time job. I would still be there, but I had my son and now I need to be home to watch him. Although it's nice to have that pension in the future. I'm more aggressive with my 401k and Roth IRA since those will be my main source of income when I do retire.
Thanks for addressing how a pension fits in with how we (folks with pensions) now save/plan for retirement. And yes, I'm one in the minority now with a pension as my primary source of retirement income. Although I know what my state defined benefit pension will provide me once I retire, It's been difficult figuring out how much my pension is "worth" and how to use this in such calculations such as my net worth. Another valuable equation to use to figure out what a pension is worth is described in a 2018 paper by Blanchett and Finke - your pension viewers should find this helpful too.
My wife has a pension from her hospital employment... it's awesome. Some of her retiree friends receive near ~3k in SS and ~4k in pension... and set for money pretty much. Hope it becomes same for her
That's wonderful!
My wife and I are both military retirees, each with over 20 years active duty. We also were lucky enough to use the GI Bill to obtain college degrees that are in high demand. In our area, the federal government is the employer who pays both pays the highest wages and has the most call for our skills, my wife has a BS in Social Psychology with a MA in Security Management, I have a BS in Computer Information Systems with a MS in Information Management/Information Technology. My wife retired early from her GS position, 16 years of service at 58 years old. I am about to retire with 20 years GS at 62 years old. That gives us four pensions, 2 military, 2 GS. Our total annual pension income will be ~$100k before taxes and deductions. Using the IRS's calculator, we should earn about another $60k (combined) at 67 years. Yes, we would earn more at 70, but we will see how our health holds up at that time.
Adding to all of that, we have about $600k in TSP. Our situation had a lot to do with economic conditions when we were young, luck in being able to stay in the service when it was undergoing drastic cuts, and planning on choosing education that was in demand.
Unfortunately I was unable to retire with a pension, but I did purchase an immediate annuity which gives me more monthly guaranteed income like a pension would.
The annuity does not include a COLA, but along with Social Security it does give me more of a piece of mind having additional guaranteed lifetime income.
i have a pension at my work. There's no COLA. I also am considering I may NOT end up staying at that my whole life! So, its interesting to try to consider how it'd work for me if I left and took it water (less contirbution years), or just cash out... its definitely a little more unusual of a factor for FI people. I do use it as part of my strategy because indeed its income I wont need to investments to cover ! I look at it as kind of a bond value.
Federal employee. I will have my full pension at age 57 and TSP (doing max match, of course!). I get to retire early and double dip! 🤑
Love your videos.
I love that you have a double pension, that's great! Thanks so much for watching! 😊
Hi Erin, I appreciate the straightforward information but wish you’d share some commentary on how the shift from defined benefits to defined contribution plans has left the average employee in a lurch for retirement planning. Anyone with a pension should feel blessed, and it’s a shame that tax policy to DC plans benefited corporations at the expense of employees.
I have Military retirement/disability, and currently work for a county that I put 7% into my pension. It is matched at 210% after vested time of 8 years. I also put in 8% to a 457(b). Between those 3 accounts, I feel comfortable at 35 years old in my future. My spouse also has her accounts. I have many generations of family that worked for government, state and city entities that received pensions. They have all lived comfortable retirements with the ability to vacation and help others in need.
Great video, but I have one thing that I disagree with and that's Incorporating your pension into your net worth. While you can calculate a long term number you can't predict life expectancy. That being said the pension payment is, as incurred, so if you live a month they pay a month, most pensions die with the owners at death.
I'm 62, modest Pension of $1842 p mo, they froze it 15 yr ago. Will delay SS and am considering an Annuity to build stable "income floor" and has 403b IRA Not Rich but shud be OK? I have been there since 1986! 38 Years!
I also have a frozen pension. Unfortunate, since I have 31 years of service.
Traditional military "retirement" is really a pension and there's a lack of understanding how that folds into financial planning because there aren't many under-50 year olds in the civilian world that are already collecting a monthly pension. This helps. Thanks!
...but military pensions are paid out monthly like an annuity (no "lump sum" option) and indexed to a government approved cost of living allowance amount annually.
Absolutely agree that most financial planners’ models and tools do not proper account for the change in risk posture if you have a military pension. (I specifically left USAA because they SHOULD have been pros at that, but just bought an off-the-shelf tool from some other brokerage.) For most models, About all you can do is just increase your risk tolerance number a bit higher than you otherwise would be comfortable with.
@@lonnieevans4127 True, but military members can also contribute to the TSP to build a tax-deferred nest egg.
Way back in 1981, with three active duty years under my belt, I made the decision to stay 20 years to retire at half-pay. Well, that turned into retiring as a full colonel with my pension based on 34 years of service. (85% of base pay). After subtracting $720 for the survivor benefit, the gross amount is currently $11,200 monthly. I went on to a lucrative 10-year second career, but the pension is the cornerstone of my financial security.
I’m in the sergeant’s major academy now and this was supposed to be a one enlistment to “see how it goes” 😆. Funny how things work out. I started saving late but I’m planning on shoveling as much into retirement when I start a civilian career after military retirement. I’m currently maxing Roth IRAs for my wife and I in addition to a bit in traditional TSP.
Can you do a video on retirement pensions for Federal employees and those in the Military?
As well as state and local government employees. That would be interesting.
@@karlheck4121 Just out of curiosity, how would they be any different?
@@cablebandit I work for local/regional government and they don't participate in Social Security like Federal Employees.
i retired from the feds after 40 years, it pretty easy to figure out, anyone hired after 1983 is on FERS, the calculation is..years of service x either 1.1% ( if one is 62 and has at least 20 years of service) or the rest at 1.0% x high 3 year salary...
example high 3 year salary 100K x 30 years of service x 1.0% ( under age 62)
0r high 3 year salary 100K x 30 years of service x 1.1% ( age 62 or older)
Great video. My one complaint is you talk only about the gross payment…no mention of the effect of taxes to get to the net amount. I know rates are different by state, but some mention of their impact on the pension amount would be good
Do you have a video that explains how to consider military retirement and VA disability as retirement income?
I am 58 with 37 years worked in local government. I have a significant 457b account and my wife and I are both social security eligible. My pension offers a full monthly payment option without any death beneficiary payout that is about $1,327 per month more than an option with 70% beneficiary payout upon my death or $1,076 more monthly with 50% beneficiary payout option. My insurance agent wants me to consider taking the full pay out option and purchasing a life insurance policy that would payout an amount that would provide plenty of income for my wife upon my death. My health is just okay and men in my family typically live to 76 years age. My wife is in excellent health. This seems a bit risky but still tempting. I have expensive hobbies and could use the extra income in retirement which is about 1 year away. Erin, would you consider doing a video on the life insurance vs pension beneficiary payout option discussing the pros and cons?
I’m retiring next year at age 59 with two pensions worth a combined $8K a month. $1000 is a private company and the rest is from a government job. The larger one has 1/2 COLA for the first $30K. I also managed to save $530K in a 403b which has a 7% fixed Option for life and $200K in a standard 401K. Owe $60K on my $300K Condo and my medical is being picked up by the government with my cost being $1500 a year including meds. The pension(which I paid 3% salary into for my first my first 10 years) is one of the greatest retirement plans one could have. My smaller pension cost me a total of $3600 over 10 years to buy into. It’s sad that so few jobs offer pensions anymore. It really allows people to retire with dignity.
Most pensions are not indexed to inflation or COLAs. Ours sure isn’t. After buyouts the company froze the pension. Now I look at it as Sequence of returns risk reduction because the primary value is during the first ten years before inflation eats it by 50%. My primary concern is the company rolling it over to an insurance company to get it off of their books. This is an increasingly common scenario. In doing so, it is no longer protected by the PBGC, and ‘in theory’ the insurance is protected by state insurance board. However, those backstops are limited toa fraction of the pension value (for example 250k max), plus the state may simply renege on paying.
I know this can be a personal decision, but would be curious if there are any guidelines of taking the lump sum versus monthly payments, if offered. Lump sum seems to take the guess work out of survivor benefits, and should allow more flexibility to modify income year to year if needed.
I receive a small pension from a company I used to work for. I was eligible to start collecting after age 50. I only get $97/month. This $ gets automatically invested monthly into an M1 broker account. I will also have a pension as a US government employee and a defined contribution plan (Thrift Savings Plan). I will be eligible to keep medical in retirement and will rely on that pension to cover medical. I will rely on my TSP, taxable brokerage accounts and IRA's to cover living expenses in retirement.
Your analysis and presentation just keeps getting better, Erin. The point about calculating the PV of your pension as part of net worth was revealing, just as that formula was a little scary to those, like myself, who are not that gifted with numbers!
Having a defined benefit pension as I do, being an educator, has certain benefits outside of being able to rely on a 50k p/a pension (net 3000 monthly) at age 65. It also gives me more room in my own portfolio to be risk-tolerant. I treat the pension as the fixed income portion of my portfolio, and for that reason -- and I know this is not for everyone -- I can then be 100% equity in my ETF and stock portfolio. In that portfolio, especially in the individual stocks I hold, I tend toward blue-chip dividend payers, regarding those dividends as another form of fixed income.
This makes more sense with DIY self-directed investors like myself. But as a matter of strategy, the pension is greatly freeing, and allows me to be more aggressive, and hence earn a greater return long term, as I've that pension as a hedge against the volatility I take on with that portfolio profile.
I work in a regional government agency and they have a pension that is managed by the state where I contribute 8% of my salary. They don't participate in Social Security. I'm maxing out my ROTH IRA each year through Fidelity since my agency's 401k doesn't offer a match. If my work opts out of Social Security, will this significantly impact my ability to plan for retirement?
I’m 34 with a company with a pension; I’m about to hit my 11th year and vested at the 5th year. My salary has grown over the 11 years and rockin over $100k+. I’m still maxing my 401k with match. 🤙🏻
@@Bartonhockey08 congrats on hitting $100k! I think that is an even bigger milestone than the $1million milestone (well .. maybe just as big lol)
As we discussed in our video together, I am a retired Marine and current federal employee so I am looking at two pensions by the time I retire at 55 (currently 44). Plus I have VA disability and Social Security (hopefully). I still cant help but try and max out my TSP (401Kish) each year and add more to a taxable brokerage account. My goal is to have enough invested on my own to live a comfortable life in retirements without needing the pensions and other incomes. So far I think I am on track. With no kids, a wife who is 10 years younger than me and working, I have no need to build up generational wealth. I need to start living more in the now. My future is solid.
I would go for 100% Roth TSP if I were you.
Holy guacamole. Military pension, VA disability, Federal employee pension, and social security? Then 401k-ish on top? I'm doing something wrong with my life lol
Actually I've already done the prep to change to a union company next year so I'll have a pension even though my IRA, 401K, brokerage, and Wife's ABLE account will more than support us on their own during retirement. The pension is just sprinklers and a cherry on top
@@youarehere1251 I am 100% C for now.
@@youarehere1251 when in the Marine Corps there was not a Roth option in TSP so all that money was Traditional. When I joined Federal I opened a Roth IRA and was contributing to both the Roth IRA and Traditional TSP. Now I am over the income limit to contribute to Roth IRA, so I now contribute all to Roth TSP, 100% C fund.
@@rayzerot sounds to me like you will be just fine. Sometimes I forget about the pensions and do my retirement planning solely based on how much I expect to have invested.
My wife has a pension. We are both in our early 40’s with about $350 in 401k. Currently putting about 25% into our 401k, also have 529’s and about $6k a year into other investments.
Was thinking about taking a little off the gas peddle to spend more on vacations and other stuff. But also scared to at the same time. We bought our house for $160k 12 years ago, and our mortgage payment is only $1100. My wife has received some aggressive pay increases the last 3 years and we now make about $180k.
Should we take the foot off the gas and just put it on cruise control?
2 years left before I retire with state pension somewhere between 80-90k a year. I’m currently 50 y.o. My wife and I both have Roth IRA open with approximately 400k combined and I a 457 with 220k. My question is about the roths. I’m heavy in stocks but don’t like the volatility in the market. Any suggestions on specific investments to setup on autopilot and not worry about it constantly??
I opted out of my pension. I was offered a 5% 401k match and a pension or a 10% 401k match with no pension. I would rather have an additional 5% match that I own and control than count on my pension.
Great video. i've been watching your channel for awhile. i never thought of including my state pension in my net worth. keep 'em coming.
Another thing to consider is the emergency fund amount calculation. You definitely need one for emergencies like auto/appliance death, etc... But a lot of the calculations say you need to be able to cover up to 2 years (or more) of your expenses in the event of a market downturn.
But if some/most/all of your expenses will be covered by a pension (and possible social security), then you'd only need to have enough to cover the amount you would need to pull out of your retirement, which could be much less...
That comes in handy when working out how much you pay into your emergency fund compared to how much you pay to invest.
It goes back to your "you might be able to be more aggressive" concept. Not just more choosing a more aggressive investment plan, but also how much you choose to invest...
Again, not saying you don't need any emergency fund, you do. Just that it might not need to be quite as large as some will suggest.
As someone who has a defined benefit pension (but just barely; people who were hired just a few months after me got the "new" plan, which is not a defined benefit pension), it's something I'm interested in. Thanx for the vid...
Excellent video. I fully retired at 55 with a 2K monthly pension & wife's SS at 63. No debt but using my dividends to supplement my retirement. I have another year before I apply for my max SS at 70. Thank you for the informative video and congratulations on your upcoming 70k. You've come a long way.
Sounds like you're in an excellent financial position in your retirement. I recently retired at 56 with a $4,500 monthly pension and a healthy traditional ira a third of which I'll slowly convert to a roth ira by 63. Be well and enjoy your retirement.
@@30-Year_Accountant thank you. Take care of your health as well
@@30-Year_AccountantOne thing I underestimated was how much the traditional IRA recovered in a year, after converting!
Hi Erin,
My wife and I are both civilian federal government employees. We are contributing TSP in max and we also have Roth IRA accounts separately outside of TSP (Fidelity) and we max out them as well. If we divide our contributions in TSP with traditional and Roth options within TSP, do we go over the max limit of $8K on Roth (over 50 yrs of age) each and will be penalized by additional 6% tax?
Great work on your videos!
The Roth IRA limits and the TSP limits are entirely separate - and you can max both out without one affecting the other. The traditional and Roth TSP have one shared limit for the calendar year. Hope that helps 😊
Thanks so much for watching!
Erin’s answer is 100% correct.
But PLEASE only do Roth TSP and Roth IRA. You’ll be grateful later.
Would Social Security be considered a pension in retirement?
I retired from the service in 1998 but didn't receive a retirement check until my 60th birthday. I was in both the Army and the Army National .Guard
I'm so glad I stayed in the Guard because now my Medicare supplement is TriCare for Life. Then in 2013, I retired from a telecommunications cooperative with just over 31 years. I had a defined benefit and defined contribution plans. Then last year I retired from our local City government job as part of the city services section of the small town where I reside. There I spent nearly 6 years but long enough for a small defined benefit plan. I'm nearly 66 but haven't started SS yet. I'm still working but doing what I love to do as a handyman.
Great video content. It gives people a lot of thought as to what needs to be done for a comfortable retirement. Thank you Erin.
I retired from my last employer when they decided to "freeze" their pension plan. I feared the company would monetize it as a previous employer had in the late 80s. And true to form, they gave out a "lump sum" that was deposited into 401k accounts. And then they came after retirees that had a pension - they wanted to likewise give us a "lump sum" that was considerably smaller than what it would cost to replace it on my own. The pension, itself isn't very much - but I pay about 50% to tax withholding thereby eliminating the need to worry about calculating estimated tax payments.
Excellent video! I am retired and I currently have two defined benefit pension plans. I’ve always wondered how to figure the net present value of those income streams, and now you’ve given me a good formula. I’m not sure I’m going to include that into my net worth statement though. To me, Network is liquid. But thank you for the formula. It’s good to know.
Retired after 35 years state service with a little more than $5500 a month. Spouse retired 10 years ago and gets a little more than $4k. His SS is around $2300 and we get pummeled in taxes with no write offs. We havent paid a dime for health coverage in over a decade and pension pays Part B. I'm not yet 62 but can get $2200 when I turn 62 but might wait simply because we'll end up paying 22% tax on it. Plus RMD also increases our income. I think I'll wait for a few years to collect.
I have a fixed pension of $1,384 that I started collecting in 2013. My wife chose 50% survivor rate, so not much. My SS and pension combined is about $48k. My wife will start SS in two years at about $45k. Add in dividends and interest and we’ll be fine. Dividend increases should provide a cost of living increase each year.
I plan to retire at 62 in another country outside the US that is free, safe and very cheap with a high quality of life. I could fully just rely on only my SS if I wanted to when that times arrives but I'll also have at least one pension, a 403 (b) and a very prolific lnvestment account with my Abby Joseph Cohen my FA. Retiring comfortably in the US these days is almost impossible.
Erin, can you do a video about the Rule of 55 for early withdrawal of 401K?
Congratulations on 70 k subscribers 😊
Unfortunately no pension for me. I took the next best option and bought an income annuity that will pay me $24k annually. This along with SS will leave me about $1k left over each month after expenses. I also have other investments and an emergency fund that I most likely will not need to touch and just let grow.
You didn't mention that some pension plans offer a lump sum payment option and how to decide whether to take monthly payments or lump sum
My pension offers the same thing. I think I’m going with the monthly pension as opposed to a lump sum. I already have a “lump sum” in my 401k invested in the market. Having another source of income and not worry about the market will be nice. How about you?
@@dantheman6607I took the lump sum. I invested it in the market. Using the 4% rule, I come out ahead. And hopefully will have a nice nest egg to leave to my kids.
I am over 63 years old and looking to retire August 1st after 45years my company has a modest pension that they look at every year in our wage package some years it goes up some years it doesn't it's been consistent and solid and I'm glad it's there for me thank you for your overview on pensions it was an excellent video thanks Erin
Congrats on your upcoming retirement! 😊
I'll be getting a pension when I'm out at the end of 2025 and it's inflation protected with an annual COLA. I was told to either divide the annual amount by 0.04 or multiply by 25 to get an approximate cash value. That helps when trying to determine where you stand with your total retirement assets.
25x is definitely a good starting point for your calculations. But I’d highly recommend sitting down with a financial planner BEFORE YOU GET OUT to do a financial health checkup and plan your way ahead. If you only convert that pension amount to a cash value estimate and use online tools, you’re ignoring the possibility that you could die early and your spouse would have 55% of that.
(Im still a big believer in paying for the survivor benefit, though many professionals will try to sell you an insurance product instead.)
@@shawnbrennan7526 My wife's accounts are with Fidelity and we meet with him once a year. We're debt-free and she'll be getting a pension and SS too. We decided that we're each taking the maximum pension (single life) since we both have solid nest eggs. On my interactive planner, I have my age projected out to 100 with retirement savings, pension, and SS. If my savings last to 100, they'll also last to 90 or 95. We don't have kids and that's the main reason we are able to be debt-free and save well.
I have a 457b and a pension. Currently watching. I’m doing 16% into 457b and pension is automatically taken 10% out. Than I’m doing a Roth IRA this year
Erin will you help me retire?
I'm 6.5 years away from a union pension of 6200.00 a month. I will be 58.5 years old. If I stay until I'm 64 it goes up to 8200. Currently saving 30% into retirement. Debt free except 215k on a house worth 750k on a 15 year mortgage @2.5%. With 9 years left. We are putting over 800.00 a week into the 401k's which have about 450k in them. I also did just receive an inheritance of about 130k. But we were already edm's at that point. My friends say I save way to much. But I'd rather have too much than not enough.
Thanks for sharing this...another great video! My wife and I both have pensions. Be both chose government jobs because of the pensions. Our combined annual income will be around 98,000 when we retire. We look at our Roth IRA's, 403 (b) and 457 (b) as security and fun money.
Thank you for this video! I maxed out my 401k every year and have seen great success in the 401k performance.
With the exception of Social Security, most SPIA annuities bought through a dealer are not inflation protected. The best you can do (if you are able to) is take your monthly payments and roll them into a higher paying yield (and , more importantly ,make sure to live a long time😅). I wish you would address the SPIA market someday. Thanks.
@Erin.talk.money.123 Your digits ? What do you mean ?
Thank you for doing this video. I’m so tired of Finance experts making light of just how a pension takes pressure off saving for retirement. Appreciate you reminding us that if you have one, you can be less aggressive in saving.
Glad it was helpful!
Great video
Very nice video I have a Pension from a job. I retired from when I was younger and working on a second pension from a second job. That formula does help me calculate.thank you
My company is doing a real pension, which is highly unusual. Unfortunately it's invested incredibly conservatively, so it's only going to be 1% above the 30 year treasury rate. It will probably be worth 2-3 years of my salary after 20 years of working, but maybe I'll be surprised. After 9 years, it's not quite half my salary.
👍🏾 I appreciate the retirement bench mark examples… very useful.
I didn't fully appreciate my pensions until I started receiving this year. Military reserve pension plus tricare has huge value, and the pension from a government job, I have more assets than I need need, so I am figuring out how to take fancy vacations, do estate planning , and help others.
I will have a pension from local government as well as social security. I still max out my Roth IRA and my 457b. A lot of my colleagues do not invest in any other retirement plans because they think the pension will cover everything. Unwise decision in my opinion.
Unwise perhaps? It can depend how many kids are being raised. Those little Budget Busters have a way of spoiling the best laid plans. Lol
Great info. My wife and I are still working but my company is contributing to my pension and I also have matching 401(k), old IRA from previous company and HSA. With both my wife and I also having SS, and her TSP and IRA we will have pretty good diversification when we finally retire. I like the idea of not having everything in one basket and with pension + SS we will meet our minimum income requirements so can weather a downturn in the stock market.
Why don't we consider what we pay into social security and pensions as retirement savings given how big a part of most people's retirement income they represent?
Pension is a huge +. I retired from the Army in 2010 at 37. I have $36k/yr from that retirement. We paid off our mortgage and have no debt. I've been working for Fed since and will retire at 62 with TSP, FERS pension, a Roth IRA, and some investments. When combined with my wife's 401K and SS for both of us, we expect a total of approx $92-95k per year in retirement. Pensions make a huge difference.
First, thank YOU for your service.
Great job on building your foundation
Trying to guess who is going to live longer is not easy. My father had heart disease with four bypasses, a plastic heart valve, eight stents and a pacemaker. My mother was the picture of health, so when my mother retired from the government, she only left my father a small percentage of her retirement. And of course she passed away at 86 and my father lived another five years and passed away at 91. Current health doesn't predict life span.
So true - it's a complete unknown. We had a similar situation in my family - my grandfather was the picture of health, very active and ended up passing away first. My grandma had many health issues - diabetes, heart surgeries, etc. and she outlived him. You just never know. I hope you have a wonderful weekend David!
So true. I retired early 8 years ago because of severe illnesses, recovered from all. Fortunately, I was financially prepared.