Taking pension early
Taking pension early
I hope someone can help me understand the pros and cons of taking a noCOLA pension early.
I can get pensions from TWO former companies I worked for as follows:
PENSION COMPANY ONE:
At age 65: $3,816/ per month ($45,792/ per year)
At age 62 (my current age): $3,694/ per month ($44,328/ per year)
Difference taking it early: $1,464/ per year (a 3.2% reduction)
PENSION COMPANY TWO:
At age 65: $1,812/ per month ($21,744/ per year)
At age 62 (my current age): $1,575/ per month ($18,900/ per year)
Difference taking it early: $2,844/ per year (a 13.1% reduction)
Thus, if I took BOTH pensions at 62 (now), I would get $4,308/ LESS per year than if I were to wait until 65. I know that I am locking myself into a permanent reduction of $4,308/ per year for every year that I live but I need the money now rather than later. I have a cash flow problem now until the age of 66. After that I should be fine. Taking these now, would help reduce my taking money to meet these cash flow needs from my TD accounts.
1) Is there a way to show what the pros and cons are of waiting until 65 versus taking it now?
2) Of these two pensions, it seems that the first one has the least reduction  3.2%  between the two dates. Is this the one to take early?
Thanks for any help thinking this through.
I can get pensions from TWO former companies I worked for as follows:
PENSION COMPANY ONE:
At age 65: $3,816/ per month ($45,792/ per year)
At age 62 (my current age): $3,694/ per month ($44,328/ per year)
Difference taking it early: $1,464/ per year (a 3.2% reduction)
PENSION COMPANY TWO:
At age 65: $1,812/ per month ($21,744/ per year)
At age 62 (my current age): $1,575/ per month ($18,900/ per year)
Difference taking it early: $2,844/ per year (a 13.1% reduction)
Thus, if I took BOTH pensions at 62 (now), I would get $4,308/ LESS per year than if I were to wait until 65. I know that I am locking myself into a permanent reduction of $4,308/ per year for every year that I live but I need the money now rather than later. I have a cash flow problem now until the age of 66. After that I should be fine. Taking these now, would help reduce my taking money to meet these cash flow needs from my TD accounts.
1) Is there a way to show what the pros and cons are of waiting until 65 versus taking it now?
2) Of these two pensions, it seems that the first one has the least reduction  3.2%  between the two dates. Is this the one to take early?
Thanks for any help thinking this through.
Re: Taking pension early
Based on your numbers Company One is definately the one to take at age 62. With only a 3.2% reduction for 36 payments it would seem that anyone would be better off taking it at 62 than 65. If someone invested the payments between 62 and 65 it would seem that there's a strong possibility that they could generate a higher monthly income between the ongoing reduced pension and income from investments than if they waited for Company One pension at age 65.
Often there are health insurance benefits in connection with pension eligibility so that could be a consideration depending on what these pension plans offer and your personal situation.
Do either of these plans offer a lumpsum alternative? (Most nongovernment based plans do.) Lumpsums (which can usually be rolledover into an IRA) can be attractive depending on your financial situation. Often the lumpsums are equivalent to around 11  12 years worth of payments. Sometimes people opt for the lump sum depending on their own medical situation. If a lumpsum alternative is calculated based on IRS provided interest rates (many are) lump sum could be greater at age 62 than at 65 (assuming that interest rates rise during that period). Interest rates can impact the amount of the lumpsum alternative but may not impact the projected monthly payment amounts.
Often there are health insurance benefits in connection with pension eligibility so that could be a consideration depending on what these pension plans offer and your personal situation.
Do either of these plans offer a lumpsum alternative? (Most nongovernment based plans do.) Lumpsums (which can usually be rolledover into an IRA) can be attractive depending on your financial situation. Often the lumpsums are equivalent to around 11  12 years worth of payments. Sometimes people opt for the lump sum depending on their own medical situation. If a lumpsum alternative is calculated based on IRS provided interest rates (many are) lump sum could be greater at age 62 than at 65 (assuming that interest rates rise during that period). Interest rates can impact the amount of the lumpsum alternative but may not impact the projected monthly payment amounts.
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 Posts: 330
 Joined: Mon Apr 24, 2017 11:16 am
Re: Taking pension early
Take Company 1 at 62. There are probably more sophisticated ways to look at this, but by age 65 you will have pocketed $123,000 in pension payments. At a difference of $1,464 per year starting at age 65, it would take about 84 years for the age65 start to make up that difference. (The absence of a COLA makes for easy math)Dyons wrote: ↑Tue Sep 11, 2018 3:05 pmI hope someone can help me understand the pros and cons of taking a noCOLA pension early.
I can get pensions from TWO former companies I worked for as follows:
PENSION COMPANY ONE:
At age 65: $3,816/ per month ($45,792/ per year)
At age 62 (my current age): $3,694/ per month ($44,328/ per year)
Difference taking it early: $1,464/ per year (a 3.2% reduction)
PENSION COMPANY TWO:
At age 65: $1,812/ per month ($21,744/ per year)
At age 62 (my current age): $1,575/ per month ($18,900/ per year)
Difference taking it early: $2,844/ per year (a 13.1% reduction)
Thus, if I took BOTH pensions at 62 (now), I would get $4,308/ LESS per year than if I were to wait until 65. I know that I am locking myself into a permanent reduction of $4,308/ per year for every year that I live but I need the money now rather than later. I have a cash flow problem now until the age of 66. After that I should be fine. Taking these now, would help reduce my taking money to meet these cash flow needs from my TD accounts.
1) Is there a way to show what the pros and cons are of waiting until 65 versus taking it now?
2) Of these two pensions, it seems that the first one has the least reduction  3.2%  between the two dates. Is this the one to take early?
Thanks for any help thinking this through.
The second one takes roughly 20 years. Closer call. Any survivor benefit considerations at play?
Re: Taking pension early
I’d set up a spreadsheet showing your various options for each year — expenses minus one pension (or the other) or minus both pensions or minus no pensions — from now through RMDs, at least.
Then you’ll be clear on how much you’ll need to take out of investments, and can make a better decision.
Off the cuff, though, I agree with FoolMeOnce.
Then you’ll be clear on how much you’ll need to take out of investments, and can make a better decision.
Off the cuff, though, I agree with FoolMeOnce.

 Posts: 338
 Joined: Sun Apr 08, 2018 1:09 pm
Re: Taking pension early
Dyons wrote: ↑Tue Sep 11, 2018 3:05 pmI hope someone can help me understand the pros and cons of taking a noCOLA pension early.
I can get pensions from TWO former companies I worked for as follows:
PENSION COMPANY ONE:
At age 65: $3,816/ per month ($45,792/ per year)
At age 62 (my current age): $3,694/ per month ($44,328/ per year)
Difference taking it early: $1,464/ per year (a 3.2% reduction)
PENSION COMPANY TWO:
At age 65: $1,812/ per month ($21,744/ per year)
At age 62 (my current age): $1,575/ per month ($18,900/ per year)
Difference taking it early: $2,844/ per year (a 13.1% reduction)
Thus, if I took BOTH pensions at 62 (now), I would get $4,308/ LESS per year than if I were to wait until 65. I know that I am locking myself into a permanent reduction of $4,308/ per year for every year that I live but I need the money now rather than later. I have a cash flow problem now until the age of 66. After that I should be fine. Taking these now, would help reduce my taking money to meet these cash flow needs from my TD accounts.
1) Is there a way to show what the pros and cons are of waiting until 65 versus taking it now?
2) Of these two pensions, it seems that the first one has the least reduction  3.2%  between the two dates. Is this the one to take early?
Thanks for any help thinking this through.
It might be easier to think of in terms of increase for delaying rather than reduction
The break even point (in years) is roughly 100/yearly increase (as others have noted)
I’m Thinking your percents are change for 3 years not for each year
Have you checked other starting ages? One of mine has little increase from 62 to 65 but then takes bigger jumps after 65
Taking both now does put less strain now on your TD account now
But taking more later also put less strain on your TD account later
It also means more of your income is NOT subject to market return risk
Re: Taking pension early
Thanks, everyone, for all your thoughtful responses.
@123
Company 2 does offer a partial lump sum and the rest as an annuity. Specifically, it is $92850/ as lump sum plus residual annuity as follows:
At 62, $978/ per MONTH (for 100% joint and survivor with popup)
At 65, $1291/ per MONTH (ditto)
Company 1 does not offer a lump sum option.
@FoolMeOnce
The figures I quoted were for 100% joint and survivor with popup.
I'll brood over what everyone has said, and come back with a few more questions, if I may. THANKS VERY MUCH, AGAIN, for all your advice and help!
@123
Company 2 does offer a partial lump sum and the rest as an annuity. Specifically, it is $92850/ as lump sum plus residual annuity as follows:
At 62, $978/ per MONTH (for 100% joint and survivor with popup)
At 65, $1291/ per MONTH (ditto)
Company 1 does not offer a lump sum option.
@FoolMeOnce
The figures I quoted were for 100% joint and survivor with popup.
I'll brood over what everyone has said, and come back with a few more questions, if I may. THANKS VERY MUCH, AGAIN, for all your advice and help!

 Posts: 36360
 Joined: Fri May 11, 2007 11:07 am
Re: Taking pension early
Since you have cash flow problems, you should certainly take pension One.Dyons wrote: ↑Tue Sep 11, 2018 3:05 pmI hope someone can help me understand the pros and cons of taking a noCOLA pension early.
I can get pensions from TWO former companies I worked for as follows:
PENSION COMPANY ONE:
At age 65: $3,816/ per month ($45,792/ per year)
At age 62 (my current age): $3,694/ per month ($44,328/ per year)
Difference taking it early: $1,464/ per year (a 3.2% reduction)
PENSION COMPANY TWO:
At age 65: $1,812/ per month ($21,744/ per year)
At age 62 (my current age): $1,575/ per month ($18,900/ per year)
Difference taking it early: $2,844/ per year (a 13.1% reduction)
Thus, if I took BOTH pensions at 62 (now), I would get $4,308/ LESS per year than if I were to wait until 65. I know that I am locking myself into a permanent reduction of $4,308/ per year for every year that I live but I need the money now rather than later. I have a cash flow problem now until the age of 66. After that I should be fine. Taking these now, would help reduce my taking money to meet these cash flow needs from my TD accounts.
1) Is there a way to show what the pros and cons are of waiting until 65 versus taking it now?
2) Of these two pensions, it seems that the first one has the least reduction  3.2%  between the two dates. Is this the one to take early?
Thanks for any help thinking this through.
If you need further cash flow, then you could take Pension Two as well.
The advantage of deferring Social Security for as long as possible is that it is inflation indexed and will thus protect you in the very long run of retirement.