draw my pension early, no-brainer?

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Topic Author
Fired2020
Posts: 57
Joined: Sat Jan 23, 2021 3:12 pm

draw my pension early, no-brainer?

Post by Fired2020 »

I'm a few months from age 61 now, I retired @ 56.5 years-old (not what I wanted...but my position was eliminated & I was financially able). I'm fortunate to have small pensions coming from my last two employers, neither of which have cost-of-living adjustments. They will simply be fixed annuities.

Am I nuts not to take this pension before waiting to age 65?

age monthly
4/1/2025 61 $ 907.08
4/1/2026 62 $ 950.28
4/1/2027 63 $ 993.47
4/1/2028 64 $1,036.67
4/1/2029 65 $1,079.86

I ask because the reduction factor for taking it early seems small. By comparison the second pension, which is a little smaller. penalizes me much more for taking payments sooner.

I've never taken either pension, I'll wait on Social Security to maximize the benefit & always kind of planned to do the same as far as pensions. I also wanted to minimize income so as to maybe qualify for a health care subsidy, but that will never happen (too much coming each year in the form of interest & dividends, and required RMD's from a couple of inherited IRA's). I'm single, so there's nothing to consider here as far as survivors benefits to a spouse.

I in no way need the monthly check but am feeling foolish for not taking the $. Any perspectives would be appreciated.
rkhusky
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Joined: Thu Aug 18, 2011 8:09 pm

Re: draw my pension early, no-brainer?

Post by rkhusky »

It looks like the benefit for delaying is about 4.5% per year. In comparison, the SS penalty for taking early is about 6%/yr and the bonus for delaying past FRA is about 8%/yr. Since SS is supposed to be actuarially neutral for a single person, your pension looks like a good bet.
Last edited by rkhusky on Mon Feb 03, 2025 7:20 am, edited 1 time in total.
Topic Author
Fired2020
Posts: 57
Joined: Sat Jan 23, 2021 3:12 pm

Re: draw my pension early, no-brainer?

Post by Fired2020 »

rkhusky wrote: Mon Feb 03, 2025 7:15 am It looks like the benefit for delaying is somewhat under 5% per year. In comparison, SS penalty for taking early is about 6%/yr and the bonus for delaying past FRA is about 8%/yr.
Thanks, SS is also increased periodically for inflation which my pension is not. This leaves me to feel like the 5% "increase" for delaying payments is only compensating me for inflation & not truly giving me an increase over time.
bonesly
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Location: WA

Re: draw my pension early, no-brainer?

Post by bonesly »

Fired2020 wrote: Mon Feb 03, 2025 7:19 am This leaves me to feel like the 4.5% "increase" for delaying payments is only compensating me for inflation & not truly giving me an increase over time.
This seems like a reasonable assessment, so there's only a small benefit in terms of an increase over inflation-adjusted value in today's purchasing power for drawing now or waiting until 65 (unlike there would be for SocSec as @rkhusky pointed out).

The BLS Dec 2024 Notice shows the CPI for the 12 months ending in Dec was 2.9% (all items) or 3.2% (all items less food & energy), which is below 4.5% so you're getting something, just not as much as delaying SocSec.
Don't do what Bogleheads tell you. Listen to what we say, consider other sources, and make your own decisions, since you have to live with the risks & rewards (not us or anyone else).
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Stinky
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Location: Sweet Home Alabama

Re: draw my pension early, no-brainer?

Post by Stinky »

I think the proper way to look at this is to see what your pension options are “worth”, using single premium annuity rates as a guideline.

Per immediateannuities.com, it would cost about $152k to purchase an immediate annuity that would pay you $907 per month for the rest of your life.

And it would cost about $145k to purchase an annuity that would start payments of $1079 per month in four years, and continue for the rest of your life.

$152k is more than $145k. So I’d start payments now.

And if you don’t need the cash, invest per your asset allocation.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
Topic Author
Fired2020
Posts: 57
Joined: Sat Jan 23, 2021 3:12 pm

Re: draw my pension early, no-brainer?

Post by Fired2020 »

Thanks for the responses, I went ahead & completed the request to begin payments 5/1. They're to mail me paperwork within 14 days for me to sign.

It will feel to get "paid" again after almost five years of not working, lol.
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Stinky
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Location: Sweet Home Alabama

Re: draw my pension early, no-brainer?

Post by Stinky »

Fired2020 wrote: Tue Feb 04, 2025 7:05 am Thanks for the responses, I went ahead & completed the request to begin payments 5/1. They're to mail me paperwork within 14 days for me to sign.

It will feel to get "paid" again after almost five years of not working, lol.
I think that’s an excellent decision on your part.

Best to you.
Retired life insurance company financial executive who sincerely believes that ”It’s a GREAT day to be alive!”
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