Reply to After how much money did you think you "have money"?

Forum Index » Money and Finances

Reply to "After how much money did you think you "have money"?"

Subject:

Emoticons





More smilies

Text Color: Font: Close Marks

[quote=Anonymous][quote=Anonymous][quote=Anonymous]Are you including retirement funds in net worth?[/quote]

Yes for 401k/TSP but pension is a bit tricky - no easy way to calculate $ value of pension. I think some people do and some don't include in NW estimate. [/quote]

Calculating fed pension value isn't that hard.  Below is taken from another site:

This is how I calculated it. I think the term is present value of future benefits. Feedback is welcome.

The gov basically wants you to take your pension starting at age 62. Let’s say you’re a fed for 20 years by the time you hit 62 (either immediate or deferred retirement).

And let’s assume your high 3 average is $200k (this is obviously for high GS/SL/SES).

That’ll give you about $44k/year in pension income, more or less.

Now, let’s assume you live another 25 years after that. Your question is basically “How much money would you need to give you $44k/year for 25 years?” In other words, what kind of investment do you need to have at retirement in order to match what the pension will give you?

Using a retirement calculator (google “how long will my retirement fund last”), you’d need about $950k.

So now you calculate what you need to save monthly for the next 20 years in order to accumulate $950k. At a 5% rate of return, I need to save $2300/month (after tax).

Now, if you’re a recent hire, you are contributing 4.4% of your pre-tax salary to the pension – about $7k/year (again, assuming DC-local GS-15), or probably something like $4k after taxes you’ll be missing.

So the delta in after-tax savings between pension and non-pension is about $23,600. And $23,600 after taxes equals probably about $35,000 in salary per year in today’s dollars.

So, a lot of variables you’ll need to fill out for yourself. At what age will be begin to draw a pension, how many years of service will you have, what will be your high 3, and what’s your pension contribution rate? Let alone rate of return and how long you’ll live after you retire. And this doesn’t factor for surviving spouse.

But if you follow this logic, you should be able to get a rough estimate on how much salary you’d need to make up for the value of a pension.[/quote]

Options

	Disable HTML in this message
	Disable BB Code in this message
	Disable smilies in this message

Review message

Search Recent Topics Hottest Topics