Retiring before you have a full work pension

[Anonymous]

What's a pension?

from someone who was never promised a pension but was given a 401k instead

[Anonymous]

I would like to put some hard numbers on this because some people seem confused.

Let's look at FERS federal pension as an example. Let's say person A retires at 62 with 20 years of service and their salary at retirement (and high-3) is $100k. Their pension benefit (deferred until 62) will be $22k per year.

Person B works another 10 years, retiring at 72 with 30 years of service. Meanwhile, cost of living adjustments have brought their salary up to, say $110k. Their pension benefit will be $36k per year. So the difference will be about $14k per year for working those last 10 years.

That may or may not be "worth it" to someone, depending on their other financial resources, budget, and the value they place on their time. If you also have a 401k, and take social security, the pension at 62/20 years might be "enough" and they can enjoy their 60s in "early" retirement.

There is no one right answer of course. It depends on the individual circumstances.

And of course, other pension systems work differently, further confirming the notion that there is no one "right" answer to when to take your pension.

[Anonymous]

Anonymous wrote:I would like to put some hard numbers on this because some people seem confused.

Let's look at FERS federal pension as an example. Let's say person A retires at 62 with 20 years of service and their salary at retirement (and high-3) is $100k. Their pension benefit (deferred until 62) will be $22k per year.

Person B works another 10 years, retiring at 72 with 30 years of service. Meanwhile, cost of living adjustments have brought their salary up to, say $110k. Their pension benefit will be $36k per year. So the difference will be about $14k per year for working those last 10 years.

That may or may not be "worth it" to someone, depending on their other financial resources, budget, and the value they place on their time. If you also have a 401k, and take social security, the pension at 62/20 years might be "enough" and they can enjoy their 60s in "early" retirement.

There is no one right answer of course. It depends on the individual circumstances.

And of course, other pension systems work differently, further confirming the notion that there is no one "right" answer to when to take your pension.

But person B didn't collect the pension for ten years while person A did. Not worth it.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:My sister cannot fathom that someone who has a work pension would retire before they get the full amount.
She doesn't get it at all.
For example, most pensionshere in Canada require 30 years before you get the max amount. She cannot get that someone may retire after 20 or 25 years in the plan.
I have a work pension and work part time, I will probably only have 15 years in the pensio and I don't care.
What gives?

What gives OP? You don't want to work until you can get full pension?

Heck no. I have always worked part time. I'm not going to work FT just for a pension.

Most ppl don't have the luxury of having another breadwinner so they can work part-time. Obviously "you" are not the typical pensioner.

Why do you assume I make less than someone who works FT. I make more than my sister who works FT and I am PT.

[Anonymous]

I think the sister must be extremely frugal and cannot fathom leaving money on the table.

[Anonymous]

Anonymous wrote:

Anonymous wrote:I would like to put some hard numbers on this because some people seem confused.

Let's look at FERS federal pension as an example. Let's say person A retires at 62 with 20 years of service and their salary at retirement (and high-3) is $100k. Their pension benefit (deferred until 62) will be $22k per year.

Person B works another 10 years, retiring at 72 with 30 years of service. Meanwhile, cost of living adjustments have brought their salary up to, say $110k. Their pension benefit will be $36k per year. So the difference will be about $14k per year for working those last 10 years.

That may or may not be "worth it" to someone, depending on their other financial resources, budget, and the value they place on their time. If you also have a 401k, and take social security, the pension at 62/20 years might be "enough" and they can enjoy their 60s in "early" retirement.

There is no one right answer of course. It depends on the individual circumstances.

And of course, other pension systems work differently, further confirming the notion that there is no one "right" answer to when to take your pension.

But person B didn't collect the pension for ten years while person A did. Not worth it.

Right, I should have added, it also depends on how long you think you're going to live. And this was only one example, and the ages and incomes obviously could be changed. The point was only that there is no one-size-fits-all answer. Heuristics like "you should never retire before full pension" are overly simplistic.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would like to put some hard numbers on this because some people seem confused.

Let's look at FERS federal pension as an example. Let's say person A retires at 62 with 20 years of service and their salary at retirement (and high-3) is $100k. Their pension benefit (deferred until 62) will be $22k per year.

Person B works another 10 years, retiring at 72 with 30 years of service. Meanwhile, cost of living adjustments have brought their salary up to, say $110k. Their pension benefit will be $36k per year. So the difference will be about $14k per year for working those last 10 years.

That may or may not be "worth it" to someone, depending on their other financial resources, budget, and the value they place on their time. If you also have a 401k, and take social security, the pension at 62/20 years might be "enough" and they can enjoy their 60s in "early" retirement.

There is no one right answer of course. It depends on the individual circumstances.

And of course, other pension systems work differently, further confirming the notion that there is no one "right" answer to when to take your pension.

But person B didn't collect the pension for ten years while person A did. Not worth it.

Right, I should have added, it also depends on how long you think you're going to live. And this was only one example, and the ages and incomes obviously could be changed. The point was only that there is no one-size-fits-all answer. Heuristics like "you should never retire before full pension" are overly simplistic.

Just thinking of working until I'm 72 gives me depression.
No way.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would like to put some hard numbers on this because some people seem confused.

Let's look at FERS federal pension as an example. Let's say person A retires at 62 with 20 years of service and their salary at retirement (and high-3) is $100k. Their pension benefit (deferred until 62) will be $22k per year.

Person B works another 10 years, retiring at 72 with 30 years of service. Meanwhile, cost of living adjustments have brought their salary up to, say $110k. Their pension benefit will be $36k per year. So the difference will be about $14k per year for working those last 10 years.

That may or may not be "worth it" to someone, depending on their other financial resources, budget, and the value they place on their time. If you also have a 401k, and take social security, the pension at 62/20 years might be "enough" and they can enjoy their 60s in "early" retirement.

There is no one right answer of course. It depends on the individual circumstances.

And of course, other pension systems work differently, further confirming the notion that there is no one "right" answer to when to take your pension.

But person B didn't collect the pension for ten years while person A did. Not worth it.

Right, I should have added, it also depends on how long you think you're going to live. And this was only one example, and the ages and incomes obviously could be changed. The point was only that there is no one-size-fits-all answer. Heuristics like "you should never retire before full pension" are overly simplistic.

I would be surprised if anyone would your scenario of working until 72.

[Anonymous]

*would do

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:I would like to put some hard numbers on this because some people seem confused.

Let's look at FERS federal pension as an example. Let's say person A retires at 62 with 20 years of service and their salary at retirement (and high-3) is $100k. Their pension benefit (deferred until 62) will be $22k per year.

Person B works another 10 years, retiring at 72 with 30 years of service. Meanwhile, cost of living adjustments have brought their salary up to, say $110k. Their pension benefit will be $36k per year. So the difference will be about $14k per year for working those last 10 years.

That may or may not be "worth it" to someone, depending on their other financial resources, budget, and the value they place on their time. If you also have a 401k, and take social security, the pension at 62/20 years might be "enough" and they can enjoy their 60s in "early" retirement.

There is no one right answer of course. It depends on the individual circumstances.

And of course, other pension systems work differently, further confirming the notion that there is no one "right" answer to when to take your pension.

But person B didn't collect the pension for ten years while person A did. Not worth it.

Right, I should have added, it also depends on how long you think you're going to live. And this was only one example, and the ages and incomes obviously could be changed. The point was only that there is no one-size-fits-all answer. Heuristics like "you should never retire before full pension" are overly simplistic.

I would be surprised if anyone would your scenario of working until 72.

Fine, perhaps I didn't put enough thought into the hypothetical parameters in order to make it a balanced hypo. I really just came up with the numbers off the top of my head. Let's adjust the numbers a bit then.

Change it to: person A retires at 55 with 20 years of service and their salary at retirement (and high-3) is $100k. Their pension benefit (deferred until 62) will be $20k per year.

Person B works another 7 years, retiring at 62 with 27 years of service. Cost of living adjustments have brought their salary up to $110k. Their pension benefit will be $33k per year. So the difference will be about $13k per year for working those last 10 years.

Depending on your 401k balance, your budget, and your priorities, you may prefer to be person A or person B.

But, the point isn't really in the specific numbers. It's that there is no single one right answer that works in every situation.

[Anonymous]

I have a pension where the difference between 25 and 30 years is huge. If I retire at 25 I get 2K per month. If I leave at 30 I get almost 4K per month. Since this is for the rest of my life the difference is huge. The pension is structured to reward long term employees.

[Anonymous]

Anonymous wrote:I have a pension where the difference between 25 and 30 years is huge. If I retire at 25 I get 2K per month. If I leave at 30 I get almost 4K per month. Since this is for the rest of my life the difference is huge. The pension is structured to reward long term employees.

Wow what a terribly stupid system. Wherever you are (private company or public institution) I can't imagine who thought it would be a good idea to have a big bump at some arbitrary point like "30 years". Actually, I assume it's public, because any private company would be looking to find whatever cause necessary to fire people with 25+ years of service.

[Anonymous]

My dad took his pension early. Good thing he did as he only lived 10 more years.

[Anonymous]

I guess you'll find out when you retire... I personally want as much money as I can get when I am no longer working.

[Anonymous]

Anonymous wrote:I have a pension where the difference between 25 and 30 years is huge. If I retire at 25 I get 2K per month. If I leave at 30 I get almost 4K per month. Since this is for the rest of my life the difference is huge. The pension is structured to reward long term employees.

Yes. You need to think of what income you'll need at 85-90 when you cannot work. Not what feels right at 62.