I have a pension - how do I plan to that

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Hey all,

I’m 43 years old and a retired military officer. My pension from the government is approx $8,000 / month. I also work full time for a tech company.

My wife and I combine to make $330k (including my pension).

I don’t know what my target should be for when I can hang it up for good. We haven’t made this level of salary for very long, but will until we decide to retire. We have almost 250k in different 401Ks.

We have a mortgage of around 4K/month.

I just don’t hear the fool talk about pensions that much and how to include them in the future plans.

We currently put about 8500/month into our retirement savings. We have no debt.

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I just don’t hear the fool talk about pensions that much and how to include them in the future plans.

Actually I think pensions are talked about often but maybe not by that term. They are future income and can be used for expenses, or savings, or investments.

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First, thank you for your service to our country.

I cannot tell you how much money is enough on which to retire. But in terms of how I would use one if I had one (I don’t) is, if you have a monthly or annual budget for your retirement needs, you add up your fixed income (pension, social security) and if it exceeds your expenses, then you can rest easy. If you come up short, you’ll need to supplement your retirement income with retirement savings - IRA, 401k, retail investments. The standard rule is that you should strive to limit your draw against your retirement savings to 4% of the total value.

I don’t know if these articles are on point or are more general but hopefully you’ll find them useful:

What is a pension? Simple question and a slightly more complex answer than you may think. When most people think about pensions, they imagine someone who spent 30 years working at the factory, then getting a gold watch and a monthly check when he or she retires. And while that may be true for some people (except for the gold watch nowadays), pension benefits are a little more than that.

As a matter of fact, plenty of people who receive pensions will only get a small benefit and it may come from a company the worker left years and years ago. Let’s take a closer look at pensions, what they are, and how the benefits work.

https://www.fool.com/investing/general/2015/09/03/what-is-a-…

If even thinking about retirement planning makes you nervous or puts you to sleep, you are not alone. What does retirement planning even mean?

Retirement planning is a broad term that refers to learning about and choosing financial strategies that will enable you to be comfortable and secure in your retirement years. A good retirement plan, executed smartly, can provide you with enough money to cover all of your later-year living expenses.

https://www.fool.com/retirement/

For general retirement edification, here’s a larger list of Fool articles:

https://www.fool.com/articles/retirement/

While there is no specific discussion board for pensions, the general Retirement discussion board covers all bases:

https://discussion.fool.com/retirement-113551.aspx

Lastly, TMF has a dedicated premium service called Rule Your Retirement, led by the legendary Robert Brokamp, which offers financial advice for planning for and living in retirement.

Fuskie
Who thinks with your current income and your current saving rate, coupled with your relative youth, puts you in a strong position to be able to retire on your terms down the road…

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The usual procedure is to go through your records to see what your income is now and where your money goes.

Then make adjustments for how things will change in retirement. Some expenses will decrease such as the cost of going to work. But you will have more time for leisure activities like golf or travel, etc. and might want to budget for that. If you have children will they be on their own by retirement? Wedding or education expenses to fund. Mortgage paid off? Car payments? Etc etc

Don’t forget to adjust for savings no longer needed to fund retirement. Don’t forget RMDs on IRAs and 401ks. Income taxes. Property taxes. Etc.

Then figure what your income sources will be. Far before retirement the numbers have to be approximate. Pension, social security, any other sources. And how will they change over time. Inflation adjusted pension is a plus. But inflation makes it hard to estimate. Health insurance can be a new expense. Are you covered? What will cost be in retirement?

When you put all your numbers together does your income cover expected expenses. If yes, you are home free. If no, you can estimate how much income must come from investments and use the 4% rule to estimate how much savings you need invested to cover your needs. And then how much you must save or what rate of investment return is needed to get there by your planned retirement date.

If you are short, you can always make adjustments. Work part time for a while after retirement. Downsize. Move to a small house or a lower cost region. Etc etc.

Remember, its only a plan. You fine tune it as you go along. And one day you will have enough to retire and decide to take the plunge.

Good luck with your planning.

Not sure about now, but TMF’s Rule Your Retirement premium service used to have a worksheet to help you work through this. Financial planners are the experts. Many will run the numbers for you but often they want to sell annuities or other costly programs. If you use a pro, look for a fee for service planner rather than one who gets commissions for what he sells.