Saving when you have a pension already

[nidena]

Every retirement article out there (that I've come across) assumes that you no longer receive an income when you stop working so I'm finding it difficult to determine just how much I actually need to save to offset what my military pension and disability won't cover when I do actually retire.

FWIW, my last post specifically about my situation was in April 2020 and had to do with debt payoff in conjunction with the sale of the DE house.  There were some great nuggets in there that I have implemented to a degree--thank you to Tiny for the "set it and forget" savings suggestions--so I'm back to ask for Insights 2.0 on that topic.

I'm mid-40s.
Military pension $1817/mo (assume 2% COL increase annually)
Disability $1791/mo (assume same COL increase)
Regular job $824 every two weeks

Trad IRA $15802
Roth $3875 
Annuity $5451 (can't surrender until March 2023)

Mortgage 2.75%  $109,342 (30 years Apr 2021) payment is $625/mo
HRV  4.34%  $18,660 (70 months Nov 2018) payment is $409/mo
Rain gutters 0% $5919 (18 months Feb 2021) payment $600/mo to payoff by Aug 2022


$500/mo to max out the Roth for 2021
$74/mo to car insurance
$50/mo to Indy Power (it's the only bill I can't pay w/my CC)
$1500-$2000/mo to my CC to pay for my month's expenditures (groceries, medical copays, cat stuff, personal care, gifts, etc)

In 10 months I won't have the rain gutter expense.
In 34 months I won't have the HRV expense.
I put anywhere from $200-$700/mo in my gathers .01% interest savings account to pay for various home improvement expenses and then pull it out to pay for them.
I will likely continue at the "regular job" until the car is paid off and then reassess the need and whether I love it or not.

SocSec is estimated at $1800/mo come age 70 but that's still 20+ years away.

My only hard-and-set savings are the IRAs.

[giramomma]

It looks like your expenses are what, 3K a month, excluding the gutters and HRV?

You'll be on tri-care for life, right?

With tricare, and your situation, honestly, I don't know how much I would be saving for retirement. It would depend on what tri-care provides for things like in home nursing, different facility options, etc.

We're saving 15% on top of pensions.

But, I am intending to carry my work's health insurance as a retiree. I can convert unused sick leave to pay for premiums. Once I burn through that, health insurance will run us 2K a month before we get on medicare and 1100 after we get on medicare.

Carrying my work insurance as a retiree is a non-negotiable.

And we also have 300K earmarked for those nice facilities that you start in independent living and wrap your way around until you hit hospice or memory care. It's expensive, about 8K a month for a two bedroom apartment, plus you need to pay in a certain amount to save your spot when something actually opens up. I'm guessing we'll need to move out of our current home somewhere between 76 and 80, and it's very possible that one of us could live to see 85 (or even live longer).

Depending on how things look in a year or so, we may want to salt more money away. More money means I can retire earlier than 60, and/or maybe we can get a second home in a small town about 3 hours from us. (I'd like to pay cash if we get a second home.)

[nidena]

I have Tricare Prime.  It runs me $302/yr.

I may look into LTC ins in the next few years.  Luckily, I can pick the brains of many folx whom I work with. 

I may just need to look at targeted savings rather than retirement savings i.e. bedroom to bathroom/closet reno.

If, for some reason, I take SocSec at 62, it'll be just over $1000/mo but I'm hoping to hold out as long as possible.

[nidena]

Looks like my military incomes will increase 5.9% come 2022.  www.military.com/benefits/military-pay/allowances/cola-for-retired-pay.html

Can't complain about that.

[Deleted]

I’m interested in this thread and I hope more people chime in. I don’t have any advice, I’m trying to figure some things out myself.

It is really helpful to me when people post actual numbers, thank you nidena for doing so. Numbers help me compare that person’s situation to mine. Even though your numbers are very different from mine, I’m still interested in whatever advice and opinions you get.

[minnesotapaintlady]

Firecalc lets you input pensions.

firecalc.com/

It's not the most intuitive calculator, but it's very versatile once you figure it out. For starters, make sure the years you enter in the first tab equal from now until you expect you'll die. I always just do 100-current age.

[buystoys]

I'm also a fan of FIRECalc.  It allows you to run a lot of different scenarios to come up with a plan that fits you.  I also like i-Orp.com. 

[minnesotapaintlady]

I mean, the math is pretty simple you just need to figure out what you want for total monthly income in retirement, subtract the two pensions, then figure out what savings you need to provide the additional income. If it's $1000/month and you're going on the 4% draw then you'd need 300,000 in savings.

Personally, it seems you could be fine on just on the pension and disability. As a side note, I didn't know you could draw disability if you were working.

[Deleted]

Oct 16, 2021 18:16:13 GMT -5 minnesotapaintlady said:

I mean, the math is pretty simple you just need to figure out what you want for total monthly income in retirement, subtract the two pensions, then figure out what savings you need to provide the additional income. If it's $1000/month and you're going on the 4% draw then you'd need 300,000 in savings.

Personally, it seems you could be fine on just on the pension and disability. As a side note, I didn't know you could draw disability if you were working.

I work with a lot of veterans. It is my understanding that veterans can get disability payments for injuries that happened during or were caused by their years of service, even if the injuries don’t prevent them from working a job.

As far as I understand, that is separate from any other income, and they don’t have to pay taxes on it. But I could be wrong, because I’m not a veteran and I have no firsthand experience with it.

[nidena]

Yes, my disability is non-taxable and is provided by the VA.  It's a rating based on special Veterans Affairs math.  lol.  These are the things we can/do submit claims for: www.benefits.va.gov/WARMS/bookc.asp#e

It's different from Soc Sec Disability.

[nidena]

Oct 16, 2021 17:38:26 GMT -5 minnesotapaintlady said:

Firecalc lets you input pensions.

firecalc.com/

It's not the most intuitive calculator, but it's very versatile once you figure it out. For starters, make sure the years you enter in the first tab equal from now until you expect you'll die. I always just do 100-current age.

That is definitely along the lines of what I was looking for.  Once I entered my info, the 100+ scenarios never went below 0 so that's good.

[CCL]

Does your mortgage include taxes and insurance?

Hubby retired early with a pension. I guess I went about it backwards. Once I knew how much the pension would be I cut our expenses to fit. I had already been saving some in the 401k and IRAs, but didn't have any particular # in mind.

We don't use the retirement accounts to pay expenses. I did set up a monthly withdrawal, so we can use it for extras. Pretty much only fun stuff: vacations, eating out with the kids, shopping sprees, etc.

We haven't needed to touch the IRAs, so right now I'm converting them to Roths.

So far, so good.

[Rukh O'Rorke]

it would so wonderful to be able to make ends meet on pension/ss so you know you are safe forever!

I'll never have that luxury, so saving like crazy.

[tallguy]

Oct 16, 2021 22:44:40 GMT -5 Rukh O'Rorke said:

it would so wonderful to be able to make ends meet on pension/ss so you know you are safe forever!

I'll never have that luxury, so saving like crazy.

Trust me, it is!  

I had saved quite a bit already, since I didn't know how things would turn out.  Nice not to really need much of it though.  It will pay for a lot of extras, and leave quite a bit at the end too.  Can't complain about that. 

[CCL]

Oct 16, 2021 22:44:40 GMT -5 Rukh O'Rorke said:

it would so wonderful to be able to make ends meet on pension/ss so you know you are safe forever!

I'll never have that luxury, so saving like crazy.

As far as fixed expenses, I do keep them low. I'm kinda cheap lol. We don't spend a lot day-to-day. We usually only eat out a couple times a month, for example. I think that sort of spending adds up quickly.

[susana1954]

I save approximately the same amount that I did before retiring (20%) since my income from SS/pension is approximately the same.  I know that is not a luxury that everyone has, but I don't anticipate that always being the case with me, either.  Inflation will erode my pension since there is no COLA attached.  

Meanwhile, I still need stuff like a new(er) car and maintenance on the house.  Now it goes into savings, though, not retirement accounts.

[Deleted]

Oct 16, 2021 18:16:13 GMT -5 minnesotapaintlady said:

I mean, the math is pretty simple you just need to figure out what you want for total monthly income in retirement, subtract the two pensions, then figure out what savings you need to provide the additional income. If it's $1000/month and you're going on the 4% draw then you'd need 300,000 in savings.

Personally, it seems you could be fine on just on the pension and disability. As a side note, I didn't know you could draw disability if you were working.

I did something similar starting when I was about 50.  Took my current balances, made estimates of what I'd save in future years, put in some assumptions about average investment return (6%) and looked at the projected amount at age 65.  I then used a 3% rate of inflation to get it in current dollars.  I compared 4% of that (assuming 4% annual withdrawal), plus projected SS, to what DH and I were spending.  A little primitive but it was a good indication, and it motivated me to save as much as possible (while still enjoying life).

My numbers are bigger than yours but I have only $1800/month in non-COLA pensions (plus Survivor SS, filing in my own record next year) and have Medicare (ACA with no subsidies in the 4 years before I hit 65- painful).  In retrospect I over-saved and I'm happy with that,

[nidena]

Oct 16, 2021 21:13:38 GMT -5 CCL said:

Does your mortgage include taxes and insurance?

Hubby retired early with a pension. I guess I went about it backwards. Once I knew how much the pension would be I cut our expenses to fit. I had already been saving some in the 401k and IRAs, but didn't have any particular # in mind.

We don't use the retirement accounts to pay expenses. I did set up a monthly withdrawal, so we can use it for extras. Pretty much only fun stuff: vacations, eating out with the kids, shopping sprees, etc.

We haven't needed to touch the IRAs, so right now I'm converting them to Roths.

So far, so good.

It does.  I also get a reduction on property taxes as a veteran.

[seriousthistime]

I believe with Tricare you have to take Medicare Part B.  If that is true, be sure to budget for that cost when you turn 65. 

[nidena]

Oct 17, 2021 9:18:33 GMT -5 seriousthistime said:

I believe with Tricare you have to take Medicare Part B.  If that is true, be sure to budget for that cost when you turn 65. 

Well that will certainly offset the low cost of Tricare.  I'll pay in two months what I pay all year for Tricare.  

[Knee Deep in Water Chloe]

Oct 16, 2021 18:16:13 GMT -5 minnesotapaintlady said:

I mean, the math is pretty simple you just need to figure out what you want for total monthly income in retirement, subtract the two pensions, then figure out what savings you need to provide the additional income. If it's $1000/month and you're going on the 4% draw then you'd need 300,000 in savings.

Personally, it seems you could be fine on just on the pension and disability. As a side note, I didn't know you could draw disability if you were working.

Military service retirement is different from military service disability both of which are different from SSDI. 

[Knee Deep in Water Chloe]

Oct 16, 2021 18:38:25 GMT -5 nidena said:

Yes, my disability is non-taxable and is provided by the VA.  It's a rating based on special Veterans Affairs math.  lol.  These are the things we can/do submit claims for: www.benefits.va.gov/WARMS/bookc.asp#e

It's different from Soc Sec Disability.

Special VA math 
is for sure! 

[Knee Deep in Water Chloe]

Oct 16, 2021 18:28:21 GMT -5 @pinkcshmere said:

Oct 16, 2021 18:16:13 GMT -5 minnesotapaintlady said:

I mean, the math is pretty simple you just need to figure out what you want for total monthly income in retirement, subtract the two pensions, then figure out what savings you need to provide the additional income. If it's $1000/month and you're going on the 4% draw then you'd need 300,000 in savings.

Personally, it seems you could be fine on just on the pension and disability. As a side note, I didn't know you could draw disability if you were working.

I work with a lot of veterans. It is my understanding that veterans can get disability payments for injuries that happened during or were caused by their years of service, even if the injuries don’t prevent them from working a job.

As far as I understand, that is separate from any other income, and they don’t have to pay taxes on it. But I could be wrong, because I’m not a veteran and I have no firsthand experience with it.

I don't recall the part about the taxes, but it seems like somewhere deep in the caverns of my brain, Army disability wasn't taxable. But, yes it's for specific issues caused during service by the service. It's not easy to qualify for it actually. And many veterans still work even though they get a disability check. Most recently, I work with a teacher who can only walk with the use of crutches due to a bomb while he was serving in Afghanistan. He got his teaching degree after that with the GI Bill. So, he gets the Army disability check, but not a retirement check because he only served five years, plus he teaches full time now. 

[Knee Deep in Water Chloe]

Regarding the original question, both DH and I are public educators. 
There are four types of public employee pensions in our state. They are based on the employee's hire date. He is what's referred to as Tier 1, while I'm in Tier 3. The last ten years or so, the new hires are not even called Tier 4. They're called "welp, we get almost nothing" or something equivalent. 
So, DH, upon retirement, will get a taxable pension check that is about 2/3 of his current paycheck. When I retire, I'll get a taxable pension check that is (hopefully) at least 1/3 but may be up to 1/2 of my then paycheck. New hires are told to not to expect more than 20% of their last year's paychecks. 

[CCL]

Oct 17, 2021 8:35:21 GMT -5 @athena53 said:

Oct 16, 2021 18:16:13 GMT -5 minnesotapaintlady said:

I mean, the math is pretty simple you just need to figure out what you want for total monthly income in retirement, subtract the two pensions, then figure out what savings you need to provide the additional income. If it's $1000/month and you're going on the 4% draw then you'd need 300,000 in savings.

Personally, it seems you could be fine on just on the pension and disability. As a side note, I didn't know you could draw disability if you were working.

I did something similar starting when I was about 50.  Took my current balances, made estimates of what I'd save in future years, put in some assumptions about average investment return (6%) and looked at the projected amount at age 65.  I then used a 3% rate of inflation to get it in current dollars.  I compared 4% of that (assuming 4% annual withdrawal), plus projected SS, to what DH and I were spending.  A little primitive but it was a good indication, and it motivated me to save as much as possible (while still enjoying life).

My numbers are bigger than yours but I have only $1800/month in non-COLA pensions (plus Survivor SS, filing in my own record next year) and have Medicare (ACA with no subsidies in the 4 years before I hit 65- painful).  In retrospect I over-saved and I'm happy with that,

I think $1800 per month is a pretty good pension. I'm thinking you previously said that is for 10 yrs at 2 different employers. I don't know of any company that offers a pension for 10 years of service. That's about what people I know get for 30 yrs of service.

[Deleted]

Oct 17, 2021 17:56:35 GMT -5 CCL said:

]I think $1800 per month is a pretty good pension. I'm thinking you previously said that is for 10 yrs at 2 different employers. I don't know of any company that offers a pension for 10 years of service. That's about what people I know get for 30 yrs of service.

Ten years at one employer and less than 5 at the second. I get about $900 from each. From ERISA rules:

In a defined benefit plan, an employer can require that employees have 5 years of service in order to
become 100 percent vested in the employer funded benefits (called cliff vesting). Employers also can
choose a graduated vesting schedule, which requires an employee to work 7 years in order to be 100
percent vested, but provides at least 20 percent vesting after 3 years, 40 percent after 4 years, 60 percent
after 5 years, and 80 percent after 6 years of service.

In both places I worked, the pension as a % of your salary increased every year you were there. At the GE sub my pension ended up at only about 8% of my salary. At the Prudential sub it was about 12%. The real rewards came with staying for a company for 30 years when you'd get a much higher % of your salary in pension but I was downsized from one job and my other employer was bought out so we all had our benefits frozen at where they were as of the acquisition date. It's one sort of plausible reason 401Ks) are better because they're portable, but I think the real reason most went to 401(k)s and other defined contribution plans was to get the investment and longevity risks off the books of the employer and it on the employees.

[susana1954]

@athena53, Alabama's teachers retirement system uses 10 years for its cliff vesting.  I don't know if they are grandfathered in, or if ERISA has no jurisdiction over states.  Before 10 years, you simply get your contribution returned with interest and a contribution (small) from the state for each year.  Getting vested is almost as big a deal as getting tenured among teachers.

I wish I knew more about other public pensions because people rant and rave about how they are bankrupting places like Illinois, for example.  I have always felt like it was unfair to say something like that about us since 7.5% is not a small amount of money to teachers.  We pay Social Security as well.  The problem is that the state doesn't want to contribute their share.  That's when the COLA increases went away.  The pension director finally got through to them that if they give increases, they have to fund them and not just for a single year but for many years.  The lack of COL increases isn't something teachers "like," but it is actuarily sounder and preserves our original pensions better.

An interesting footnote is that if you are convicted of certain crimes in Alabama, they can take your pension away.  But they have to refund the contribution with interest and the state's portion.  The legislature didn't like that part, but it really isn't the state's money.  The legislature just likes to think it is all from their generosity.  

[Deleted]

Oct 17, 2021 18:55:54 GMT -5 susana1954 said:

@athena53 , Alabama's teachers retirement system uses 10 years for its cliff vesting.  I don't know if they are grandfathered in, or if ERISA has no jurisdiction over states.  Before 10 years, you simply get your contribution returned with interest and a contribution (small) from the state for each year.  Getting vested is almost as big a deal as getting tenured among teachers.

I wish I knew more about other public pensions because people rant and rave about how they are bankrupting places like Illinois, for example. 

I'm not sure why ERISA doesn't apply to teachers' pensions.

Most of the severe problems with public pensions arise from "spiking", when your pension is a % of your final salary, or maybe the final two years, and then the last year or two you load up on overtime, work on holidays and get double time, etc. It's more common among police and firefighters, where pay is high to begin with (yes, for good reason, I know- I wouldn't want to do those jobs). Those promises became more and more difficult to fund, especially as interest rates declined (less anticipated investment income means you have to put more cash into the plan to keep it adequately funded).

Back when there was an actuarial discussion board (it's since been taken down), the pension actuaries were a very unhappy bunch- always being pressured to use wildly optimistic interest rate assumptions (there are ERISA regs that limit them somewhat) and a decreasing pool of clients.  Some employers joined "multi-employer welfare associations" where they pooled their pension funds.  YRC, a trucking firm near me, is in one and many of the other trucking firms in the association have gone bankrupt, meaning that YRC ad the others that are still viable are left with the responsibility to fund shortfalls, including for the shares of the defunct employers.

One of my neighbors was collecting a railroad pension and it was decreased twice- I think he ended up with about half what had been promised.

[stillmovingforward]

I had a couple of friends who worked for PanAm (airline from back in the day). When they went bankrupt, their pension went from amazing (around $3,000 per month) down to $200 per month. One ended up selling his very nice house and having to rent a room from another neighbor. The other was fortunate enough that his wife had a nice pension and they had a bit of family money tucked away.

[TheOtherMe]

I don't know if this is still true but my mom worked for the state of Iowa for 5 years to become vested.  She only worked for the state for 5 years.  She had always been a waitress and her legs would no longer let her work as a waitress.

She was able to get on with the state and her pension from there was almost as much as her SS on her own wages.  For only working for 5 years, she drew on that for 28 years.  It didn't get a COLA, but they did get a bonus every year.  I was quite surprised when the last check arrived along with a letter of how much she had paid in and how much she had received in monthly payments.