To those with a pension...

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Admiral
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To those with a pension...

Post by Admiral » Mon Jan 09, 2017 8:11 pm

Did you (if retired) or do you (if still working) either:

A) reduce your retirement contributions by some percent or dollar amount based on the fact that you will have a guaranteed stream of income in addition to social security; or

B) reduce your bond allocation and increase your stock allocation?

We will have a pension at age 60 (municipal, so unlikely to go bust) that will account for about 30-40% of our projected pre-tax retirement expenses (current dollars). Social security will pay the rest, but we plan to retire in our late 50s, so we'll have to bridge for a while from investments.

Just wondering if we are saving too much. We're at about 20% of our gross income right now, all retirement space fully funded, plus matching, about $47,000 per year.

Our AA is 70/30, ages 45 and 47.

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sergeant
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Re: To those with a pension...

Post by sergeant » Mon Jan 09, 2017 8:19 pm

A. No. We maxed IRA's and 457b accounts every year and put the rest in taxable. We saved about 30% of our pretax income every year.
B. No. I was usually at 60/40 and slowly moved to about 50/50.

There isn't enough information provided to determine if you're saving "too much."
Lincoln 3 EOW! AA 40/60.

cherijoh
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Re: To those with a pension...

Post by cherijoh » Mon Jan 09, 2017 8:36 pm

Admiral wrote:Did you (if retired) or do you (if still working) either:

A) reduce your retirement contributions by some percent or dollar amount based on the fact that you will have a guaranteed stream of income in addition to social security; or

B) reduce your bond allocation and increase your stock allocation?

We will have a pension at age 60 (municipal, so unlikely to go bust) that will account for about 30-40% of our projected pre-tax retirement expenses (current dollars). Social security will pay the rest, but we plan to retire in our late 50s, so we'll have to bridge for a while from investments.

Just wondering if we are saving too much. We're at about 20% of our gross income right now, all retirement space fully funded, plus matching, about $47,000 per year.

Our AA is 70/30, ages 45 and 47.
I'm not sure how you decided you pension was unlikely to go bust - hopefully not just based on the pension being "municipal". Some of the municipal pensions are in horrible shape (i.e., severely underfunded) and some cities are declaring bankruptcy in part to get out from under their pension obligations. My private pension is guaranteed by the PBGC - municipal pensions are not. Here is an old article talking about Detroit's pension cuts.

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Re: To those with a pension...

Post by sschullo » Mon Jan 09, 2017 8:36 pm

A. No. when I was working, I could not afford to max out my 403(b). What decided was what I needed to live, and not that I had a pension.

B. No. I had a 30/70 stock bond split for over a decade as a response to my portfolio tech bubble disaster. The 30/70 allocation worked fine during the 2008 disaster, while achieving from 2-10% returns since 2009. I am 69 and need some of my investments to supplement my pension. The pension covers only 49% of my teacher's salary.
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DA200
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Re: To those with a pension...

Post by DA200 » Mon Jan 09, 2017 8:39 pm

Still working at age 50. DW is 49.
I will have a pension of $50K/yr if I work to 55 which increases to $100K/yr if I work to 60. We plan to both retire when I turn 55 (if I can get over leaving significant pension on the table).
We both max all retirement accounts: $24K to 403b, $24K to 457b, 18K+15K profit sharing to 401k, and $6.5K to backdoor Roth IRA (wife has SEP IRA so can't do backdoor Roth). We still have enough income to have several fun experiences/trips with family and friends each year, but have held off on major kitchen and basement remodels. I don't think you can ever save too much, unless you are missing out on life experiences (which don't have to cost that much).
We have followed your choice "B" - our portfolio is 80/20 right now due to the fairly secure state pension I expect to receive. With no pension, I think we would be at 65/35 right now.
Last edited by DA200 on Mon Jan 09, 2017 8:44 pm, edited 2 times in total.

Topic Author
Admiral
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Re: To those with a pension...

Post by Admiral » Mon Jan 09, 2017 8:40 pm

cherijoh wrote:
I'm not sure how you decided you pension was unlikely to go bust - hopefully not just based on the pension being "municipal". Some of the municipal pensions are in horrible shape (i.e., severely underfunded) and some cities are declaring bankruptcy in part to get out from under their pension obligations. My private pension is guaranteed by the PBGC - municipal pensions are not. Here is an old article talking about Detroit's pension cuts.
I said "unlikely" not impossible. I don't want to get into a side discussion on the funding model of the pension plan but it's relatively secure, or can/will be made so with some inevitable changes.

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CyclingDuo
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Re: To those with a pension...

Post by CyclingDuo » Mon Jan 09, 2017 8:53 pm

DA200 wrote:Still working at age 50. DW is 49.
I will have a pension of $50K/yr if I work to 55 which increases to $100K/yr if I work to 60. We plan to both retire when I turn 55 (if I can get over leaving significant pension on the table).
:shock: Work the extra 5 years (speaking to you as a 55 year old) and run, don't walk, to the extra $50K per year. :moneybag :moneybag
"Everywhere is within walking distance if you have the time." ~ Steven Wright

Cruise
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Re: To those with a pension...

Post by Cruise » Mon Jan 09, 2017 8:56 pm

Admiral wrote:Did you (if retired) or do you (if still working) either:

A) reduce your retirement contributions by some percent or dollar amount based on the fact that you will have a guaranteed stream of income in addition to social security; or

B) reduce your bond allocation and increase your stock allocation?
A: No. We save as much as we can.

B: My wife had the opportunity to increase her pension by buying into the system. She added about $300K and will increase her retirement income stream about 40%. In our analysis of our options, we considered this to be our bond portfolio, and are now in 90% equities and 10% in "waiting for the market to significantly drop so we can buy cheaply."

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scubadiver
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Re: To those with a pension...

Post by scubadiver » Mon Jan 09, 2017 9:29 pm

No to both.

I'm a federal employee who will likely not stick around till full retirement age. Saving as much as I can while the money is good.

The modest pension that I will have buys down risk, but I maintain my asset allocation as if the pension did not exist.

Scubadiver

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Peter Foley
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Re: To those with a pension...

Post by Peter Foley » Mon Jan 09, 2017 9:34 pm

We are both retired. I have a pension and my wife does not.

My answer to both is no.

I did have a very aggressive AA but having a pension was only one factor for doing so. I think I overestimated my risk tolerance. When done in the abstract it is one thing, when you go through a deep recession and don't sleep well at night it is another.

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Re: To those with a pension...

Post by sport » Mon Jan 09, 2017 9:34 pm

No to both.

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Re: To those with a pension...

Post by nodenuff2 » Mon Jan 09, 2017 9:45 pm

No saved like I didn't have a pension Was at a high stock allocation until about 5 years from retiring moved to 50/40/10 stock bond cash since retiring 3 years ago.
2014 No. 42 2015 No.342 2016 No. 6 2017 238 2018 no. 175 2019 no. 144 6 year average 157.83. Proves I am just an average investor.What do I know? "Good bless America land that I love..."

DA200
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Re: To those with a pension...

Post by DA200 » Mon Jan 09, 2017 9:47 pm

CyclingDuo wrote: :shock: Work the extra 5 years (speaking to you as a 55 year old) and run, don't walk, to the extra $50K per year. :moneybag :moneybag
Due to maxing our retirement accounts for the past 20+ years our portfolio has grown to $3.1M. When I asked questions in a thread I started on the topic of "Earlier retirement with lower pension", viewtopic.php?t=197688 many respondents thought that retiring earlier was reasonable and asked "How much money do you really need?"
Last edited by DA200 on Mon Jan 09, 2017 9:49 pm, edited 1 time in total.

spencer99
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Re: To those with a pension...

Post by spencer99 » Mon Jan 09, 2017 9:48 pm

Admiral wrote:
A) reduce your retirement contributions by some percent or dollar amount based on the fact that you will have a guaranteed stream of income in addition to social security; or

No. I contributed as much as I was able. Two reasons:

1) I got focused and began retirement contributions late and had some ground to make up.

2) I am not getting into politics but mine is a government pension and there are ideological winds blowing in my state that are intent, if permitted, to gut the (fully funded) public pension under the guise of conversion to a 401(k) type program. BTW, this is not a effort limited to my state. My 403(b) / 457 savings are insurance against that possibility.

My point here is that over the term in which one earns a pension lots of things can change, impacting the viability of a pension. It's worth giving some thought to other than the best-case scenario.


B) reduce your bond allocation and increase your stock allocation?

No. If all goes as reasonably expected my pension and SS (@ 70) are equivalent to a liability matching portfolio - meeting all my needs. They're income, not part of my retirement savings. My AA is in the (hopefully) goldilocks territory of 60:40 and will stay that way through retirement.

Good luck with your planning

S

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Re: To those with a pension...

Post by tigermilk » Mon Jan 09, 2017 9:57 pm

Still working, and my position is comparable to yours in terms of pension income stream and amount being put away each year.

A) Not reducing my contributions - taking advantage of my TSP, HSA, Roths, and extra in taxable

B) Yes. Was 100/0 up until last month and am now around 5% bond. It's a very gentle glide path to around 15-20% by the time I retire (no earlier than 10 years from now). Between the pension and what I have now, basics are covered, so I don't mind being more aggressive.

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EngCapt1
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Re: To those with a pension...

Post by EngCapt1 » Mon Jan 09, 2017 10:00 pm

Wife and I both will receive pensions that will cover our ordinary expenses when we retire in about 11 years.

A. We don't reduce anything, still continue to max my traditional 457(b) and HSA, her Roth TSP and both of our Roth IRAs at VG every year.

B. We currently have an overall AA of 67/33. We do the "Age -10" instead of "Age in Bonds" since we have the pensions.
Admiral wrote:
Just wondering if we are saving too much.


My wife says we still don't save enough :oops:

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Watty
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Re: To those with a pension...

Post by Watty » Mon Jan 09, 2017 10:07 pm

Admiral wrote:B) reduce your bond allocation and increase your stock allocation?

We will have a pension at age 60 (municipal, so unlikely to go bust) that will account for about 30-40% of our projected pre-tax retirement expenses (current dollars). Social security will pay the rest, but we plan to retire in our late 50s, so we'll have to bridge for a while from investments.
The money that will be the "bridge" might all be spent between the ages of 58 and 68(or whatever). One of you is 47 so would be about an 11 to 21 year timeframe from now. That is a lot shorter window than typical retirement money which might not all be spent until you are in your 90s. For that time frame you would want a more conservative asset allocation, not a more aggressive one.

delamer
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Re: To those with a pension...

Post by delamer » Mon Jan 09, 2017 10:25 pm

Aside from the bridge from your retirement to Social Security claiming, you also need to consider whether your pension is inflation adjusted. If it is not, then a portion of your nest egg will go toward maintaining the same buying power as your pension as it becomes worth less in real terms.

In our case, about 70% of our pension income is inflation adjusted (including Social Security) so part of our savings will go toward keeping the purchasing power of the remaining 30%.

With me already retired and my husband closing in, you could argue objectively that we oversaved. But with the vagaries of the stock/bond market, high marginal tax rates while working, the possibility of needing extended long-care, and philosophically wanting to not have to worry about money in retirement, I am not sure I would have done anything differently. When I see friends struggling to afford retirement, I'd certainly rather be in our shoes.

There are two perspectives on investment allocation when pensions plus SS cover your retirement expenses. One is that you've won the game, why take any unnecessary risks with your savings? The other is that because you've won the game, you can afford to take a larger risk so why not try to maximize your assets for your heirs or charity (or to buy the winter condo in Florida)? We are in the second group -- 70/30 -- but I understand why people might go with the first option.

heyyou
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Re: To those with a pension...

Post by heyyou » Mon Jan 09, 2017 10:39 pm

Assume that anyone serious about wanting to retire early is maxing all tax sheltered retirement savings accounts, so my remarks are about taxable savings.

A. No, I just kept saving pay raises. In retirement, I'm delaying SS until age 70, using the no-COLA pension income.

B. During my working years, I used the pension credits as most of the bond allocation, but not since retirement. Note that the optimal portfolio has near 10% in bonds for rebalancing into more equity shares during equity crashes. My current bond allocation would allow for ten years of withdrawals from bonds, before having to sell any equities at depressed prices.

Now, after 12 years of variable withdrawals, the portfolio is still worth about its real (inflation adjusted), retirement day amount. So far, so good.

Ron Ronnerson
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Re: To those with a pension...

Post by Ron Ronnerson » Mon Jan 09, 2017 11:09 pm

A) No, we save as much as we can outside the pension. That's roughly 25% of our gross income. I'm 42 and so is my wife. I'm a public school teacher and think there is a chance my pension may not pay out as expected so I try to keep that in mind.

B) Yes. We're roughly 80/20 stocks to bonds. I think I'd hold maybe 10% more bonds at my age if I wasn't expecting a pension.

If pension does pay out as expected, it would cover almost all our retirement expenses. It should be roughly 85k in 2017 dollars at age 61 and continue to pay my wife at 100% if I pre-decease her.
Last edited by Ron Ronnerson on Tue Jan 10, 2017 12:07 am, edited 1 time in total.

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Re: To those with a pension...

Post by victorb » Mon Jan 09, 2017 11:46 pm

We purposely decided not to include the pension and Social Security. It was a way of being more conservative and we also didn't know what was going to happen to Social Security. The pension amount was in the $1000-$1100 range, so not a major part of yearly budget anyway. We saved and invested well and that puts us in a position to delay taking Social Security until age 70.
My wife and I are now both retired and tremendously enjoy not being in the stressful work environment.

Vic

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CyclingDuo
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Re: To those with a pension...

Post by CyclingDuo » Tue Jan 10, 2017 12:24 am

DA200 wrote:
CyclingDuo wrote: :shock: Work the extra 5 years (speaking to you as a 55 year old) and run, don't walk, to the extra $50K per year. :moneybag :moneybag
Due to maxing our retirement accounts for the past 20+ years our portfolio has grown to $3.1M. When I asked questions in a thread I started on the topic of "Earlier retirement with lower pension", viewtopic.php?t=197688 many respondents thought that retiring earlier was reasonable and asked "How much money do you really need?"
Ah! Well done with the accumulation phase to say the least.

No desire to stick it out for the extra years to use the extra $50K - and how it would impact the rest of your portfolio - for any philanthropic endeavors?
"Everywhere is within walking distance if you have the time." ~ Steven Wright

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Sandi_k
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Re: To those with a pension...

Post by Sandi_k » Tue Jan 10, 2017 1:21 am

Admiral wrote:Did you (if retired) or do you (if still working) either:

A) reduce your retirement contributions by some percent or dollar amount based on the fact that you will have a guaranteed stream of income in addition to social security;
Nope - currently saving 18% of gross income, and increase by 1% per year (raises have been -8% to +2.5% since 2010)
Admiral wrote:or

B) reduce your bond allocation and increase your stock allocation?
Yes, we've chosen to to this. We're 10 years away from my retirement, and currently 80/20. I plan to move to 70/30 by the time I retire. Depending on sequence of return issues, we'll see what we and up with - but I'm hoping to delay SS until age 70, by which time we'll be at 50/50.

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catdude
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Re: To those with a pension...

Post by catdude » Tue Jan 10, 2017 3:06 am

(A) No. I just saved as much as I could -- about 30 - 35% of my gross income.

(B) No. I haven't changed my asset allocation due to having a pension. It's 50/50 stocks/bonds. I figure that with a pension that covers almost all of my monthly expenses, I have a negligible need to take on risk.
catdude | | "As much as cats fight, there always seems to be plenty of kittens." (Abraham Lincoln)

Church Lady
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Re: To those with a pension...

Post by Church Lady » Tue Jan 10, 2017 3:26 am

I will receive a modest, non COLA pension.

a) No, I just saved what I could. My pension was frozen years ago, so I'm glad I did not count on it. It will help me bridge to Social Security, but over time it will lose value to inflation.

b) You're overthinking. If you need (for example) 40,000 a year and your pension is 20,000 a year, simply allocate for an income of 40,000 - 20,000 = 20,000, and add that to your pension.
He that loveth silver shall not be satisfied with silver; nor he that loveth abundance with increase: this is also vanity.

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JoMoney
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Re: To those with a pension...

Post by JoMoney » Tue Jan 10, 2017 3:52 am

(B) - I'm more comfortable having a large stock allocation knowing I have the 'fixed income' the pension (albeit small) will provide.
"To achieve satisfactory investment results is easier than most people realize; to achieve superior results is harder than it looks." - Benjamin Graham

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Admiral
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Re: To those with a pension...

Post by Admiral » Tue Jan 10, 2017 7:44 am

Thanks all for responses, very helpful.

Based on my projections using Flexible Retirement Planner, at current and expected future savings rates and projected return rates (insert caveat here), during our bridge years the most we would need to withdraw from our portfolio would be about 2.1% per year. (And this is not including any inheritances, which we expect but don't count on.) Once SS kicks in, it would be under 1%. At at full retirement age (70 for me) projected value of portfolio is over 4m.

Thus, my question. I didn't really expect a Bh to save less based on an expected pension, but I figured I would ask. The higher stock:bond AA seemed more of a possibility.

Dandy
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Re: To those with a pension...

Post by Dandy » Tue Jan 10, 2017 8:12 am

I did not change my approach because I was going to get a pension. It allowed me to take more risk but I did not want to and it turned out I did not need to.

Lost my job at age 52 after almost 30 years of service so that made what would have been a wonderful pension turn into a nice pension. Lucky go another job quickly but needed to have 5 years of service to vest in a small pension. So, not the best turn of events to amp up my equity investments just as I am approaching retirement. Lost the second job due to the 2008-09 crisis but vested in a small pension from that company. Delayed taking both pensions until they reach their maximum payout.

The moral to my story is just because you think you have a pension and a secure job doesn't mean you will. A frugal saving late Boglehead devotee I ended up with a nice nest egg and 2 pensions that provide a decent income floor.

Now at almost 69 I am looking forward to collect SS at age 70. That should increase my income floor to where I will need to withdraw little from my nest egg. I still don't anticipate increasing my equity allocation by much - since I don't have the need to take on more risk. I'm from the "if you have won the game..." school.

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Re: To those with a pension...

Post by carolinaman » Tue Jan 10, 2017 8:30 am

I too have a local govt pension. I did not always max out my 401k allocation although I always did at least enough for the match. I had a couple of major expenses that I needed to pay off about 10 years from retirement: I bought back time in the pension system (5 years cost $63k) and purchased a building lot for our home. Both of these proved beneficial to my overall finances though and my overall savings was probably in excess of the allowed 401k max even though it was not all in the 401k.

My AA during work ranged from 70/30 to 45/55 (just before retirement). My pension and our SS more than cover our living expenses, but even so, I have a 40/60 AA because that is what I am comfortable with. I could invest more aggressively but prefer not to. I had the capacity to take more risk but not the willingness. It sounds like you are in a similar position and it is really your call as to what an appropriate AA should be.

I have studied the local government pension risk and believe this risk is often overblown by the press. It is true that some jurisdictions are in financial distress and their pensioners are at risk for a reduced payout. However, most jurisdictions are healthy enough to where their pensioners will likely get all or most of their promised payout. I suggest you do some research to determine the financial condition of your pension system. I would not put all of my eggs in the pension basket even if it appears healthy. I recommend saving in whatever investment vehicles you have: 403b, 457, 401k, IRA, etc. This added savings will provide greater assurance of a comfortable retirement.

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Re: To those with a pension...

Post by JW-Retired » Tue Jan 10, 2017 8:37 am

DA200 wrote:Still working at age 50. DW is 49.
I will have a pension of $50K/yr if I work to 55 which increases to $100K/yr if I work to 60. We plan to both retire when I turn 55 (if I can get over leaving significant pension on the table).
What??? You won't work 5 years for an extra million bucks? :oops: ..... i.e., An age 60 J&S immediate annuity paying that extra $50k/year would cost you right around $1,000,000.
https://www.immediateannuities.com/a/an ... -1nem.html
JW
Retired at Last

Bogel0048
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Re: To those with a pension...

Post by Bogel0048 » Tue Jan 10, 2017 8:53 am

No to both.

I'm retired and my wife is still working. I have a pension that covers about half of our annual living expenses. Neither of us will take SS until 70. Since my wife is still working we have not had to draw anything from our savings during the semi-bridge period while I have been retired.

I view my pension and our SS as "other available income" within my overall assessment of our retirement savings needs. Based on this perspective, I assess our savings and AA separately and I consider our savings AA "on its own bottom". We are currently 75% equity and 25% bonds. I expect we will stay at this AA indefinitely.

I never considered backing off on our tax advantaged savings opportunities in view of my prospective pension. This was primarily because we are economically-driven and we recognize that "more is better". Deferring taxes on savings for thirty years or more is a slam dunk if you don't need the income for current living expenses, whether you need the extra savings for retirement or just want to let it grow in a tax-deferred account so you will have more to spend, give to your children, or give to charity when you are older.

Also, of course, there is always the risk you might move away from your pension, to a different employer, or that your employer could reduce or end your pension. When I was in my mid-forties my employer sent out a notice they were changing the pension formula for all employees under age 50, with the result that a future 25 year employee would end up with 36% of high five income rather than about 50%. That cut my pension by 28%. Then when I was about 58 my employer ended the pension altogether for all new employees and changed over to a defined contribution plan. My pension was not affected at that time, but it could have been.

weedf16
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Re: To those with a pension...

Post by weedf16 » Tue Jan 10, 2017 9:25 am

A) No, we live well below our means and save as much as we can every month into retirement savings. Most months that is 30% of gross income.

B) Yes, I feel comfortable accepting more risk due to a guaranteed pension (22 years active duty military and counting). Current AA is 75/25.

The biggest benefit this pension affords me is the ability to retire earlier due to the substantial COLA adjusted income stream. My current plan is to retire for good at 55, DW is six years younger than me so she will work for 5-ish years after I retire.

That is the plan, but as we say in the military "no plan ever survives first contact with the enemy"! Thus my answer to A).

Cheers :sharebeer

SQRT
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Re: To those with a pension...

Post by SQRT » Tue Jan 10, 2017 10:51 am

66 years old , retired for 10 years.
No for A as I didn't really focus that much on the pension aspect of my savings towards retirement.
Yes for B. In fact my portfolio is 100% equities. If I notionally capitalize my pension value it would represent about 40% of the combined portfolio plus pension total. I have a high tolerance for risk and my pension covers most of our fixed expenses so this seems like a reasonable approach.

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Re: To those with a pension...

Post by surfstar » Tue Jan 10, 2017 11:16 am

JW-Retired wrote:
DA200 wrote:Still working at age 50. DW is 49.
I will have a pension of $50K/yr if I work to 55 which increases to $100K/yr if I work to 60. We plan to both retire when I turn 55 (if I can get over leaving significant pension on the table).
What??? You won't work 5 years for an extra million bucks? :oops: ..... i.e., An age 60 J&S immediate annuity paying that extra $50k/year would cost you right around $1,000,000.
https://www.immediateannuities.com/a/an ... -1nem.html
JW
I would wonder how many 65, 70, etc, year olds would pay $1mm to have the years from 55-60 back, though?
At some point, money < time.


We should both have government pensions (local & fed) in time. We'd also like to bail out at 55/57 and leave a lot of pension accumulation on the table in order to enjoy our non-working lives as soon as possible. In our mid 30s now, we hate the thought of getting trapped in "one more year" mode when we near the end, but we shall see how things look then and adjust as wanted/needed.

We are currently 80/20 AA and haven't really used the pensions as a reason to tilt one way or the other.

jimishooch
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Re: To those with a pension...

Post by jimishooch » Tue Jan 10, 2017 11:22 am

A) no
B) no
50/50 investable asset allocation after income (pension and/or SS).

saving 40% of take home beyond 401k and rIRAs, 64/55 YOA.

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Admiral
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Re: To those with a pension...

Post by Admiral » Tue Jan 10, 2017 11:26 am

surfstar wrote:
JW-Retired wrote:
DA200 wrote:Still working at age 50. DW is 49.
I will have a pension of $50K/yr if I work to 55 which increases to $100K/yr if I work to 60. We plan to both retire when I turn 55 (if I can get over leaving significant pension on the table).
What??? You won't work 5 years for an extra million bucks? :oops: ..... i.e., An age 60 J&S immediate annuity paying that extra $50k/year would cost you right around $1,000,000.
https://www.immediateannuities.com/a/an ... -1nem.html
JW
I would wonder how many 65, 70, etc, year olds would pay $1mm to have the years from 55-60 back, though?
At some point, money < time.


We should both have government pensions (local & fed) in time. We'd also like to bail out at 55/57 and leave a lot of pension accumulation on the table in order to enjoy our non-working lives as soon as possible. In our mid 30s now, we hate the thought of getting trapped in "one more year" mode when we near the end, but we shall see how things look then and adjust as wanted/needed.

We are currently 80/20 AA and haven't really used the pensions as a reason to tilt one way or the other.
At some point, the equation simply becomes: How much is enough? How much more do I need? If you've been a diligent saver you're unlikely to spend like a drunken sailor when you retire. You might travel more, etc., but at least for me--now appx 12 years from early retirement, if all goes well--I have my number and when I hit it, I will either work less or not at all. I love my job but my time is not my own.

Anyway my DW says she will keep working to support my pricey skiing habit :wink:

travellight
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Re: To those with a pension...

Post by travellight » Tue Jan 10, 2017 12:07 pm

^I would work the extra 4 years for the extra million bucks; unless your job is unbearable and bad for your health. But then, I do get 10 weeks vacation a year and like my job.

To answer the OP:

a) No, I was able to max out retirement space so I did every year.

b) Yes. I was 100% stocks for 2 decades because I was "young". Then, I went 80/20. Then just about 2 years ago, I thought about the pension and realized I didn't need that safety precaution. My pension covers 2X my expenses. I am again 100% stocks in new allocation. I did not sell my bond holdings and by dilution with time, it is down to about 12%.

Another consideration is that I may take SS at the earliest possible date rather than wait till age 70. My reasoning is that I am in the highest tax bracket and I think SS may diminish for us and I don't need the SS money so getting an earlier start makes sense to me.
364

btenny
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Re: To those with a pension...

Post by btenny » Tue Jan 10, 2017 1:04 pm

No to both questions. I maxed out 401K like account at my work every year. In the early years my company matched my investment. They also gave me a small pension. My wife maxed out her pensions. We also saved outside taxable money and invested in real estate and some stocks. This allowed us to retire early. Retiring early reduced our pensions. We did not track our asset allocation back then (in the 401K or our taxable account) nor keep much cash/bonds beyond our emergency money.

Now we are about age + 10% in stocks. We plan to stay at 40/60 from now on.

Good Luck.

SurferLife
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Re: To those with a pension...

Post by SurferLife » Tue Jan 10, 2017 2:47 pm

Admiral wrote: A) reduce your retirement contributions by some percent or dollar amount based on the fact that you will have a guaranteed stream of income in addition to social security; or

B) reduce your bond allocation and increase your stock allocation?
A) We have stopped our retirement contributions and we are age 45/38 with about 650k, though we still max our Roth IRAs since we can pull out those contributions. I have a federal pension that will provide around 80k/yr and I believe it was Bogle that said to count pensions as a bond holding. I could be wrong on that, and I'm sure people here will let me know if I am. :happy One reason I stopped contributions to my TSP is because we are retiring early and need more money in taxable for a house purchase to get us through to age 59 1/2. It's REALLY HARD to stop contributing to retirement accounts and I question that decision weekly if not daily, but I'm pretty sure we are doing the right thing. I want to avoid doing a 72T or other complicated plan to get at that money early. The TSP, though it's great for the G fund in retirement, is not great when it comes to withdrawal options.

B) We are currently at 80/20 in our retirement accounts and I don't know yet what we will do as we get closer to age 59 1/2. I assume we will get more conservative, perhaps a 50/50 asset allocation, though we will have to see where we are at come that time. I believe that if we've "won the game", we will stop playing.

grettman
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Re: To those with a pension...

Post by grettman » Tue Jan 10, 2017 2:51 pm

SurferLife wrote:
Admiral wrote: A) reduce your retirement contributions by some percent or dollar amount based on the fact that you will have a guaranteed stream of income in addition to social security; or

B) reduce your bond allocation and increase your stock allocation?
A) We have stopped our retirement contributions and we are age 45/38 with about 650k, though we still max our Roth IRAs since we can pull out those contributions. I have a federal pension that will provide around 80k/yr and I believe it was Bogle that said to count pensions as a bond holding. I could be wrong on that, and I'm sure people here will let me know if I am. :happy One reason I stopped contributions to my TSP is because we are retiring early and need more money in taxable for a house purchase to get us through to age 59 1/2. It's REALLY HARD to stop contributing to retirement accounts and I question that decision weekly if not daily, but I'm pretty sure we are doing the right thing. I want to avoid doing a 72T or other complicated plan to get at that money early. The TSP, though it's great for the G fund in retirement, is not great when it comes to withdrawal options.

B) We are currently at 80/20 in our retirement accounts and I don't know yet what we will do as we get closer to age 59 1/2. I assume we will get more conservative, perhaps a 50/50 asset allocation, though we will have to see where we are at come that time. I believe that if we've "won the game", we will stop playing.
Are you sure you don't mean "we have a federal pension that will provide around 80k/yr"? I don't know how 80K is possible given that FERS employees only get between 1% and 1.1% per year in federal service.

SurferLife
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Re: To those with a pension...

Post by SurferLife » Tue Jan 10, 2017 2:56 pm

grettman wrote:Are you sure you don't mean "we have a federal pension that will provide around 80k/yr"? I don't know how 80K is possible given that FERS employees only get between 1% and 1.1% per year in federal service.
Yes. I have a military retirement and will have a high disability rating, thus the 80k/yr. DW is currently a SAHM, though she is also an attorney. She may go back to work when I retire and become a SAHD, but right now we are not planning on that possible income stream.

DA200
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Re: To those with a pension...

Post by DA200 » Tue Jan 10, 2017 6:31 pm

JW-Retired wrote:
DA200 wrote:Still working at age 50. DW is 49.
I will have a pension of $50K/yr if I work to 55 which increases to $100K/yr if I work to 60. We plan to both retire when I turn 55 (if I can get over leaving significant pension on the table).
What??? You won't work 5 years for an extra million bucks? :oops: ..... i.e., An age 60 J&S immediate annuity paying that extra $50k/year would cost you right around $1,000,000.
https://www.immediateannuities.com/a/an ... -1nem.html
JW
No doubt that the possibility of leaving so much pension on the table has made me do LOTS of thinking. I'm sure the picture will become clearer as I get closer to 55. My father and stepmom retired early at the ages of 56 / 48 with pensions that are EACH currently around $75K/yr. They could have saved much more and had larger pensions if they would have worked into their 60s. My dad who is now in his early 80s constantly preaches to me that early retirement was the best thing he ever did and that these have been the best years of his life. I hear that is true for many retirees, but it is hard to know for sure until you try it yourself.
My dad and his wife can't spend all of their pension and continue to save nearly $100k per year. They do drive me a bit crazy with their approach to investing 90% CDs / 10% stock. They are running out of local banks to buy CDs from ($500K per bank invested at 1%) x 4 banks. Their mindset is we "won the game". If my wife and I had those large pensions which cover three times expenses we would be 100% stocks...

federal dinosaur
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Re: To those with a pension...

Post by federal dinosaur » Tue Jan 10, 2017 6:52 pm

A. No
B. Yes

Federal employee here & still working. I am in FERS. I plan on working until 62, then move on. I like my job and I have been truly blessed to be able to work on a pretty complex system that many people use frequently (aviation related). There is much frustration though about the slow pace of innovation & technological improvements in gov't work!

flyingbison
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Re: To those with a pension...

Post by flyingbison » Tue Jan 10, 2017 8:59 pm

Admiral wrote:Did you (if retired) or do you (if still working) either:

A) reduce your retirement contributions by some percent or dollar amount based on the fact that you will have a guaranteed stream of income in addition to social security; or

B) reduce your bond allocation and increase your stock allocation?
A) Not for that reason, but my (other) retirement contributions are reduced by the amount that I have to pay for my pension and because my salary is lower.

B) No, I keep the AA of my other retirement accounts at the ratio I am comfortable with.

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Steelersfan
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Re: To those with a pension...

Post by Steelersfan » Tue Jan 10, 2017 9:14 pm

A. No
B. Yes

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ClevrChico
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Re: To those with a pension...

Post by ClevrChico » Tue Jan 10, 2017 10:47 pm

I'm still working, and will have participated in a pension from ages 24 - 43. I count it as $0 because:

- Company contributions are stopping.

- No COLA adjustment.

- Will only amount to $1k/month at age 60 something. It will probably cover utility bills and part of grocery, but I'm not counting on it.

rgs92
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Re: To those with a pension...

Post by rgs92 » Wed Jan 11, 2017 12:47 am

I worked for a major telecom company and at age 43 (with 23 years on the job) I was on track to get a $48,000/yr pension at age 50.
An email showed up and said they froze it and my pension at 50 would be just $20,000 instead. (No inflation adjustments in these pensions.)
Easy come, easy go. So don't count your pension chickens too soon (unless you have a federal or other reliable gov't job).

ND Fan 1
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Re: To those with a pension...

Post by ND Fan 1 » Wed Jan 11, 2017 8:05 am

This is a good question and I struggle with this as well. I'm projecting a COLA"d $70K pension starting at age 60 (combined military and fed). If you take away our house payments our annual expenses are $30K with 3 young kids. This will increase, but I can't imagine our expenses being that much higher in retirement. once the kiddos are all gone Plus at 67 will start SS. I'm 31 and max out my TSP and 2 Roth IRAs. There are times I would rather enjoy life a little more now and not be so crazy about saving. Take the kids on nice vacations, buy a house in the country, things like that. And if my retirement contributions take a hit a few years, so be it. We live very simply so I don't see lifestyle creep an issue

Luckily we built a decent nest egg early on our lives, so if our contributions decrease a bit, we still have close to 30-40 years of compound returns.

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midareff
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Re: To those with a pension...

Post by midareff » Wed Jan 11, 2017 8:20 am

Admiral wrote:Did you (if retired) or do you (if still working) either:

A) reduce your retirement contributions by some percent or dollar amount based on the fact that you will have a guaranteed stream of income in addition to social security; or
I didn't... I used an excel sheet with year by year goals for savings and such and some years saved as much as 30% of income between deferred compensation (457) and Roth and taxable investments. Age 69, soon to start year six of retirement and my pension + SS pays all the bills. Portfolio pays for nicer international travel, cruises, frills and toys. Glad I did what I did, but on the other hand.... if I had not retired into a strong bull market things might be different. 42/54/4 equities/bonds/bank cash.


B) reduce your bond allocation and increase your stock allocation?

No, I didn't ... as I approached retirement time and with the aid of the bull I reduced equities. Story lines such as risking the money you need for a certain lifestyle in the hope of making money you don't need? and.... If you have won the game stop playing.

We will have a pension at age 60 (municipal, so unlikely to go bust) that will account for about 30-40% of our projected pre-tax retirement expenses (current dollars). Social security will pay the rest, but we plan to retire in our late 50s, so we'll have to bridge for a while from investments.

Just wondering if we are saving too much. We're at about 20% of our gross income right now, all retirement space fully funded, plus matching, about $47,000 per year.

I don't think there is any such thing as "too much" when it comes to savings unless you are really crimping you lifestyle now. Anyone can always drive a nicer car, live in a bigger home and so forth. I felt that once I reached that years savings goal I was free to indulge with the rest and was able to vacation travel internationally twice a year and still have toys with a high savings rate. Being efficient with money is an art.

Our AA is 70/30, ages 45 and 47.

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Nords
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Re: To those with a pension...

Post by Nords » Sat Jan 14, 2017 4:16 pm

Admiral wrote:Did you (if retired) or do you (if still working) either:

A) reduce your retirement contributions by some percent or dollar amount based on the fact that you will have a guaranteed stream of income in addition to social security; or

B) reduce your bond allocation and increase your stock allocation?

We will have a pension at age 60 (municipal, so unlikely to go bust) that will account for about 30-40% of our projected pre-tax retirement expenses (current dollars). Social security will pay the rest, but we plan to retire in our late 50s, so we'll have to bridge for a while from investments.

Just wondering if we are saving too much. We're at about 20% of our gross income right now, all retirement space fully funded, plus matching, about $47,000 per year.

Our AA is 70/30, ages 45 and 47.
I earned an active-duty military pension in 2002 at age 41, and six years later my spouse earned her Reserve pension (which starts in 2022).

We chose your option (B). When I retired (and her status was still uncertain) we knew that my pension would cover our very basic living expenses. Since it's a federally-guaranteed inflation-fighting income stream (sort of like a portfolio of I bonds), we ramped up our asset allocation in our investment accounts to >90% equities. We kept the rest in cash to cover two years of living expenses in a bear market. No bonds.

During the first few years of my retirement, we waited out the last of the Y2K tech recession and then watched our net worth grow again through the same asset allocation. We kept a pretty tight hand on the purse strings. When my spouse earned her Reserve pension, we loosened up with some home improvement projects. We also watched breathtaking volatility in our portfolio during the Great Recession, but we got through it with the same asset allocation.

Today we're living off my pension and our dividend/interest income and spending 2%-3% of our investments, but we're clearly not spending it fast enough. In general, after 15 years of retirement, our daily routine expenses have dropped. We occasionally splurge on more home improvement, and I experiment with angel investing. We gift some of our assets to our daughter and her spouse.

Your asset allocation seems fine. In your situation, I'd forecast your retirement expenses and then start running some of the calculators from the Bogleheads Wiki. If you keep coming up with success rates like 95%-100% then you're probably saving too much. (Your municipal pension will cover you with annuity income to get through the sequence-of-returns risk.) If your success rates are 80%-95% then you're probably saving enough, but you might want to build a little excess into your retirement-expense projection.
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