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year is determined by the plan.

Her problem may be with the SS tie in if she is eligible for a SS benefit.

Thanks for all the posts, you gave me things to think about. As far as the
pension survivorship goes, my wife will continue to get the pension without
the 3% increase when I die and will last until she dies.


"Dave Dodson" <dave_and_darla[at]Juno.com> wrote in message
news:80526350.0406280509.769d7b1c[at]posting.google.com...
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Cost of living increases in your pension plan are not quaranteed to be giving
each your nor is the amount of the increase when it is granted guaranteed.

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The spousal benefit is the default option. Both husband and wife must sign the
waiver to eliminate the option from the pension.

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depends solely on two factors, your income needs and your risk tolerance.

First and foremost, you insure that your income needs aremet. If you could do
that with 100% invested in stocksand you can stand the risk, fine.
Otherwise, your stock investment percentage should be adjusted to whatever
level allows you to sleep.

All the other rules are merely guidelines that may or may not mean anything to
you.

To use an extreme example. Bill Gate's pension plan from Microsoft will never
be enough to supprt his life style at its present level. Would anyone think he
was being less than intelligent if he invested 100% of his other wealth (even
after all that he and his wife are giving away to charity) in stocks?

On the otrher extreme, I had a widow for a client who determined she needed an
income of only $16,000 per year adjusted for inflation to continue with her
preretirement lifestyle, including travel and education assitance to
grandchildren if her help was needed.

Her total savings amounted to about $250,000, plus a house she intended to live
in as long as she was able and was fully paid for worth about another $225,000.

Her only income, other than her savings, would be from Social Security which,
at the time she retired, would be a little more than $12,000/year, with cost of
living protection built in by law.

As for her estate, her additude was, if there is anything left, the kids, all
grown and doing well, could have it.

We sounded her out as to her risk tolerance and devised a plan for her based on
her needs, both those she had considered and the one she had not (the cost of
nursing home care) and her resources.

So we recommended she buy a good Long Term care policy, and invest her savings
in a total of three or four equity mutual funds, all leaning towards the
conservative side, that would throw off the additional $4,000 income (adjusted
overtime to inflation) that she required.

My rule of thumb for investing in equities is you should put
everything in equities as long as 1) you understand and are
comfortable with the risk and 2) you don't need the money for five
years. (Item 2 implies the need for a 3 to 6 month emergency fund.)

So I agree with the 90% allocation for now. As retirement age
approaches, money should be moved into other-than-equities. For a
portfolio withdrawal rate of 5% of the total, then the five year rule
would have about 25% of the portfolio in other-than-equities

Frank


pmb[at]his.com (Paul Michael Brown) wrote in message news:<pmb-2706042242250001[at]max1ka-28.his.com> ...
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"Rich R" <richr[at]dls.net> wrote in message news:<7uedndcnNeR9vULd4p2dnA[at]dls.net> ...
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Sounds good to me if your pension starts when you retire. If you have
to wait to age 60 or something, then you might want to balance your
personal investments better until such time as the pension kicks in.

Dave

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In an era where defined benefit plans are almost as rare as short guys in
the NBA this is a *very* nice situation to be in.

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That's one way to do the accounting when figuring asset allocation.
Suppose this guy's pension will be worth $50K per year to him when he
retires in 10 years. Suppose further that in 10 years the interest rate on
10-year Treasuries will be six percent. So to replace his $50K pension
with risk-free interest income, he'd need to have $833K invested in
something guaranteed to pay at least six percent per year. Actually, he'd
really need more than $833K because his pension will increase by three
percent per year. That's doesn't sound like much. But remember this guy's
going to retire at age 51 or so. If his health is good he might collect
that pension for 30 years.

Of course, my math fails to take into account that the pension stops when
he dies. (Unless he chooses a survivor option, but we don't know that.) He
might get hit by a bus at age 52. If he had the $833K he could live off
the interest and his heirs would inherit the principal upon his death.
So if he's going to use this method of accounting, I recommend discounting
the $833K that he "credits" to fixed income to take into account that the
pension payments will last only as long as he lives. How much of a
discount? I have no earthly idea.

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Here's a contrarian look at it. If this guy is guaranteed a hefty pension
that starts at age 51 and goes up by three percent per year, he's in the
driver's seat. Instead of being more aggressive with his asset allocation
he might consider being *less* aggressive. After all, with a pension that
equals 70 percent of his pre-retirement salary he doesn't need a big
return on his portfolio. Indeed, given that he's going to retire in about
10 years he might actually think about going 50/50 or even 40/60.
Obviously, we don't know his circumstances. He may be very interested in
passing wealth to the next generation. Or perhaps he's planning to live to
a ripe old age and he can afford to be aggressive until he hits his 70s.
Just thought I'd look at the problem from a different angle.

I am 41 years old and plan to retire in about 10 years. I have a government
pension plan that will pay me 70% of my last years income for life with 3% a
year increases.

Having this would I be safe in allocating 90% of my investments in stocks? I
once read that having a pension a person could assume a "ghost" account in
fix income to account for the pension payouts.

Doing so would offset my 90% stock allocation so that I was more in balance
or would it be better to do a "normal " asset allocation for my age (60/40
split) and not take in account my pension.



Thoughts?