Reply to Retiring before you have a full work pension

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[quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=Anonymous][quote=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, ...
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.[/quote]

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

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.[/quote]
I would be surprised if anyone would your scenario of working until 72.[/quote]

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.
[/quote]

Someone else already mentioned, but the difference is not $13K per year due to the opportunity cost of not getting money for 7 years. 7 years x 20K=140K, so breakeven is 10 3/4 years-almost 73. Also, pensions get COLAs plus you could plan to invest part of that pension income and get a return. That said, I would not plan to retire if you're a healthy 55 year old.[/quote]

Sure, there is the opportunity cost of not getting your pension.  But, you are getting paid your full salary while working.  So financially, you are much better off working and delaying your pension.  That doesn't necessarily mean you should continuing working because, as others have said, every has different preferences, life expectancies, and other resources.[/quote]

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