Value of annuity question

[bigdaddybus]

I run several scenarios in Flexible Retirement Planner:

1. Base only (No pension, no SS) - make sure I have enough saved for a base amount that is reasonable. Not poor, not rich, just right (for me, that's $76k / year expenses)

2. Base + pension - here comes the nicer vacations and higher spending (add $45k / year spending). This is a military pension, so I don't think it is at high risk of going away.

3. Base + pension + SS @ 70 - This is great for my heirs. SS + Pension covers all my expenses including plenty of leisure money, so anything left when I start SS @ 70 will likely go to them.

You should run similar scenarios to see what each looks like.

Tom

That's a good approach, and I ran something similar last night.
1. base retirement savings (401K, Roths, savings) $56K yr at 62 (based on 4% withdrawal rate)
2. base + trust = $96K at 62 (based on 4% withdrawal rate)
3. base+trust+pension= 221K per year at 62
4. base+trust+pension+SS = 288.5K per year at 67

so right now if I change nothing We will conservatively make somewhere between 56K-288.5K per year in retirement. Its hard for me to imagine what my retirement spending will need to be as right now we have 4 kids that suck a lot of money out of the budget.

[corn18]

That's a good approach, and I ran something similar last night.
1. base retirement savings (401K, Roths, savings) $56K yr at 62 (based on 4% withdrawal rate)
2. base + trust = $96K at 62 (based on 4% withdrawal rate)
3. base+trust+pension= 221K per year at 62
4. base+trust+pension+SS = 288.5K per year at 67

so right now if I change nothing We will conservatively make somewhere between 56K-288.5K per year in retirement. Its hard for me to imagine what my retirement spending will need to be as right now we have 4 kids that suck a lot of money out of the budget.

What is the trust?

Predicting expenses in retirement is not a science. I took a wag and it looks like I was close enough. I also did some sensitivity analysis in that I had a frugal, most likely and living high on the hog set of values that I used when I first started. That ranged from $40k to $150k / year. I aimed for the middle bit at $75k and now that the kids are gone, that seems to be about right.

[bigdaddybus]

What is the trust?

Predicting expenses in retirement is not a science. I took a wag and it looks like I was close enough. I also did some sensitivity analysis in that I had a frugal, most likely and living high on the hog set of values that I used when I first started. That ranged from $40k to $150k / year. I aimed for the middle bit at $75k and now that the kids are gone, that seems to be about right.

My parents have all their assets in a living trust. 80% goes to my sibling and I. They have reviewed their wishes with us, and though I told them to "Live it Up!!!" Currently the trust is outgrowing their spending.

[corn18]

My parents have all their assets in a living trust. 80% goes to my sibling and I. They have reviewed their wishes with us, and though I told them to "Live it Up!!!" Currently the trust is outgrowing their spending.

I would remove that from your planning, unless you will get that before they pass. I have a large inheritance coming but I hope I never get it and don't put it in any calculations. If you do this, your spend plan is reduced by $96k.

[~bs]

To be honest, thats the combined value of my spouses pension and mine. Basically we get 50% of our highest 5 yr average salary +bonuses if we stay enough years.

I was just looking to find out a value for the pensions, to add to our roth and 401K numbers to get a total idea of how we are doing.

I appriciate all the responses, as I was expencting to hear the typical. "You cant count on a pension" just like all the social security doomsday posters out there. Thankfully the pension is heald by an employee association spereate from the company and 100% funded, so I have quite a bit of faith in it being around.

It is a legitimate concern though, especially if the pension is underfunded.

I am contributing to a pension that will pay ~ 65% of my final salary with 1.5% COLA. The pension is underfunded. Because of this, I don't really "count" the pension in regards to my saving rate and retirement outlook.

[bigdaddybus]

It is a legitimate concern though, especially if the pension is underfunded.

I am contributing to a pension that will pay ~ 65% of my final salary with 1.5% COLA. The pension is underfunded. Because of this, I don't really "count" the pension in regards to my saving rate and retirement outlook.

I agree. My bro in law is a firefighter with a generous pension. Unfortunately its only 34% funded as of the last annual report I saw for the city he works for.

[Nutria]

I agree. My bro in law is a firefighter with a generous pension. Unfortunately its only 34% funded as of the last annual report I saw for the city he works for.

This is why -- unless we start "terminating" people at age 75, or if their medical conditions get too expensive -- Defined Contribution is the way of the future: too few workers supporting too many retirees.

[~bs]

This is why -- unless we start "terminating" people at age 75, or if their medical conditions get too expensive -- Defined Contribution is the way of the future: too few workers supporting too many retirees.

I actually think there is nothing wrong with the defined benefit concept, it's just that the way that many of these are set up and run by the people in charge is bad.

From the get-go, companies/govt should be required to fund 100% at a minimum, if the market has a great year, and you go above 100% funding, that's fine, and actually preferred as a safety cushion, and will offset bad years with market losses. And with the market returning 8-10% a year along with pensioner and pensionee yearly contributions, there should be no issue with building a surplus.

Actuarial estimates factor into the collection amount before and after retirement, so if youre collecting $1000/month, and they estimate people are living longer, then your benefit adjusts downwards to compensate. People still working estimated benefit would adjust downwards as well.

If you both mandate fully funded plans initially and allow the benefit to pensionees to flex due to average lifespan considerations, there shouldn't be problems with unfunded liability. But it's too late for that.

I agree. My bro in law is a firefighter with a generous pension. Unfortunately its only 34% funded as of the last annual report I saw for the city he works for.

34% is insane... my pension is bad with 55-60% funding. At 34%, there is no hope of recovery to 100%, even over the next 20-30 years unless they tax the hell out of people.