I’m on our retirement board. Our plan is currently over 100% funded. Apparently, this is pretty rare. Our board meets 4x year where our financial guy goes over everything and we make adjustments as recommended or we see fit. Since we are over 100% we aren’t very risky with our investments. We have about 5 employees (we are local government) and maybe 3-5 citizens who have financial background that are voting members. And then a few others come (HR, finance) but don’t vote. But anyone is welcome to attend and all the info is available for employees to review.
Dividends have two rates - qualified are att 20% but irrelevant in a tax deferred account. Again my example was stocks. Yours is a stock fund and yea they give off gains and dividends.
The other reality is that individuals are typically not policing this do a quarterly dividend hitting their bank allows them to plan as opposed to having to go and make a transaction.
I see your point and I’ll disagree for a retiree but again all are entitled to their opinion.
The military pension can be quite significant, particularly when retiring as a colonel. It still does surprise me that someone wouldn’t have started saving for retirement until their fifties when they have had a substantial salary, pension or not. Likely the reason he has a million dollars in retirement funds would be because he either invested very aggressively or has an assumed or inherited IRA from his spouse or someone else. You can’t plan on starting to save for your retirement in your fifties, that you’ll end up with a million bucks. I was startled when I read a story about the Speaker of the House, who had worked as a lawyer, having very little assets and less than 2K in his bank account, with lower net worth than my children had from working jobs as teenagers. I’m always curious as to what others stories are. There is often more than meets the eye with tragedy, medical expenses, overspending, lack of planning, and just plain misfortune.
That’s fortunate that you are able to access a pension that adjusts for inflation. It may end up being substantially more than you planned for, if inflation keeps on going up.
I’m a local government employee for a huge county (Los Angeles). I also am operating under the assumption that the retirement fund will stay solvent. I hope we are both right!!
That’s exactly what we’re doing, because of having the (hopeful) security of the pension. Instead of having the recommended ratio of stock/bond mix for our elderly age (62) with an expected return of 3-5%, we’re going 90% equities/10% high interest money market. Since we aren’t forced to withdraw from 401Ks unless we want to, we can invest like we’re in our twenties and if the market crashes, oh well, just let it ride. Don’t know if that’s a smart strategy or not, but that’s what we’re doing.
I would take a lump sum, too. I worked for what used to be an exceptional employer, a company I was proud to work for, and people bent over backwards to do their jobs. This company was at the top of the heap in their industry, but times changed. Now all that matters is making money for the investor. Customer service and employee loyalty is down the toilet. Instead of taking profits and investing in the customer and shoring up pension plans, stock buybacks are king. This is a dying company, and the only reason I’m not completely fearful for my pension is because pension rules have changed so much, it’s difficult to raid the pension funds.
We treat income from our rental properties this way, as a bond proxy. Better inflation protection than bonds as rents have gone up faster than inflation. The income can be slightly variable depending on how vacancies and expenses go, but it’s not hugely variable.
The rest is more like 60/40 with equities and money market funds, rather than 90%, but I’m happy with it.
Our annuities pretty much retain their value - so at the end of the period of the annuity, we have the principal returned.
There are a broad range of annuities. A pension is a form of a ‘life’ annuity - and some take a smaller amount so the spouse can have surviving benefits.
DH’s parents had modest incomes - and with his mom’s teacher’s retirement and both of their social security amounts, they had more money coming in without the expenses of four sons. They both lived to 92.
Absolutely understand what you are purchasing, and take time to digest it – multiple meetings if needed.
Sometimes a piece of tax advice and strategy can save someone quite a bit of money.
And absolutely retirement has a lot of different strategies. Key is not running out of funds.
I am surprised about the mention of food costs with specific weekly/monthly amount by the one couple in the retirement article. A gal that is quite a good cook who moved from a smaller town in WI to CO stated how much groceries are in CO.
I have noticed grocery increases, but not significant enough for concern to us. But it is a sign of inflation and the significance of the time value of money.
What type of annuity if you don’t mind me asking because an annuity has fees so in theory if you are assured principle retention, it should have less income.
I only pay attention to relative comparisons on this kind of analysis, not actual dollar values.
And… as always, there can be huge variation by community within the same state. For folks scoping out another location, the Nerd Wallet COL (cost of living) comparison calculator is handy. It includes details for food etc, but generally the cost of housing is the major factor.
I am very concerned about that. Right now I think the pension is reasonably funded, but I am most certain the company is looking for every possible way to fund it less.
Our FA has been really quite expert in seeing what annuity gives the most bang for the buck. The insurance companies utilize this tool to have funds available to them. I would have to see what annuities we have (we are out of state right now) - but we got different ones at different times. Sometimes we had to wait until it was a ‘good time’ to purchase. Also each insurance company probably offers different things at different times. One time, FA said “someone surely made a mistake offering this particular annuity - as it was so favorable to the purchaser”.
When I get home I can tell you more details on our annuities and purchase years.
I wonder about this sometimes as I drive through the neighborhood and see these very young homeowners in very expensive houses with 2 new cars in the driveway and a stay at home parent. I don’t know if the salaries have just gone crazy and everybody is making a fortune today or people are not putting money in the bank for retirement and are living on everything they make. Maybe they all had parents who could gift them money. My husband keeps reminding me it is none of our business but it’s hard not to think it will hit everyone in the end if a large population/generation needs more help during retirement years.
Pensions have government oversight and regulations. Also with 401k, cannot invest more than 25% into the company stock - many years ago, companies were limited to allowing this because of companies going belly up and people’s retirement gone as well.
I would look into federal and state regulation on pensions to see what the requirements are to relieve yourself of this concern.
There are people with new cars that maybe are extending themselves a bit - but maybe one is a company leased car. Some in expensive houses might have had help with a down payment. Some people do make crazy high incomes and don’t have student loans - one of my friend’s SIL fit this category and his wife stays home with 3 children.
Note that retirement article by Wall Street J where the granddad was going to have inheritance go to the grandkids.
We note that many young people are use to having a fairly high standard of living - the upscaling of dorms and college apartments, first apartments that have monthly leases as high as an owned condo or small home. They want a house that is not a ‘first house’.
I wonder if the dairy items are a bit less costly with the big WI dairy state. Maybe more staples with less convenience food purchases as there are a lot of rural or low density areas with major city of Milwaukee. I know Milwaukee was lower for wedding costs than Chicago. Outside of Milwaukee, not too many concentrated city areas - Madison WI as the state capitol and large flagship U is not unusually ‘big city’.
DD seemed to think San Antonio TX had higher groceries than Birmingham AL, but I think it is because they moved July 2023 and groceries started climbing after that.
We have found the annuity doesn’t lose much value, if any. The percentage return typically has matched what our withdrawals have been - so annuity doesn’t go down much in value.
One has to remember that the insurance company is taking advantage of the time value of money – so $100K at the start and $100K at the end is ‘not the same value’. However to me the security of the value there is worthwhile, as bonds can lose value and IMHO do not gain the returns we do with our annuities.