On Mar 21, 12:40*pm, iarwain <iarwai...[at]hotmail.com> wrote:
- quote -

Putting funds into your retirement is similar to buying an annuity, so
just look at what income you could get from an annuity.

- quote -

With an early retirement, that my be too heavy of a withdrawal.

- quote -

You may be able to convert your 401k to a Roth after you retire giving
you additional tax savings.

--
Ron

------ Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.

I agree it's pretty much of a wash between the two options, with the
advantage probably going to the pension because it's guaranteed.
Especially when you consider the doom and gloom forecast of recession
or worse in the upcoming economy, it might be tough to get even the
10% interest I mentioned. Obviously it would be helpful to know at
what age you are going to die when figuring this out, but that just
isn't possible.

When it comes to withdrawing, isn't the recommended safe amount to
withdraw in retirement 4-5% of your investments?

To answer a few of the questions, in eight years I will be 55, the
earliest possible age I could retire. I plan to hopefully retire at
least no later than 60. I have a 401k and a Roth IRA getting regular
contributions anyway - the question is what to do with this particular
$4800. My 401k isn't maxed out yet, but with return percentages
falling this past year and things expected to get worse I thought it
might be more cost effective to contribute to the pension instead.

------ Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.

On Mar 20, 7:07 pm, "Mark Freeland" <BnetOne...[at]sbcglobal.net> wrote:

- quote -

I did the calculation a number of different ways and found the two
plans were fairly
close, depending on assumptions.

So a couple of other principles come into play.

One is the principle of "tax diversity" , that is as tax laws change
it might be
better not to have all financial eggs in the same tax bracket.
The pretax and posttax IRAs are an example. Will taxes be higher in
20
years when Democrats ravish the landscape and we need to pay for
boomers retirement? Or will they be the same or lower? Will pensions
and 401Ks be taxed differently? Will one fare better? Will one be
counted
towards SS/MC means testing, but not the other?

The other principle is financial simplicity. Having helped manged the
finances
of some ill people and assisted probates, lots of different retirement
accounts
may be a burden at times in life. I currently have 40 financial
accounts myself
include many related to retirement (ohers like the yearly newspaper
subscription).
I wish life was simpler.

------ Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.

iarwain <iarwain_8[at]hotmail.com> writes:

- quote -

The current market value of such an annuity (ie. go to
<http://www.immediateannuities.com> and enter the parameters -
for a 65yr old getting 400/mo starting right now for the rest
of his life, the value is approx $60,000).

If, as you say below, it takes earning 10%/yr over the
course of your 8 years of saving to build approx that
same value, you've found the breakeven rate of return
on your savings - ie. the rate of return you need to
make for the two plans to be worth exactly the same.

The difference then is this - what rate of return can
you *guarantee*? What's the value of the risk you take?
(also, what are the chances that annuity rates will be
higher in 8 years, on the assumption that you decide
to buy an annuity with the accumulated cash after that
point)

- quote -



--
Plain Bread alone for e-mail, thanks. The rest gets trashed.
No HTML in E-Mail! -- http://www.expita.com/nomime.html
Are you posting responses that are easy for others to follow?
http://www.greenend.org.uk/rjk/2000/06/14/quoting

------ Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.

"PeterL" <po.ning[at]gmail.com> wrote in message
news:0962ecb7-9bcb-41ed-bdf5-f97a3af66a6c[at]s37g2000prg.googlegroups.com...
- quote -

This assumes that one lives forever (the income stream of $400/month is in
perpetuity). If not, then we need to see what discount rate reduces the
income stream for N years to a present value of $60K.

An income stream of $400/month, over 30 years (if N = 30) has a present
value of $60K with a discount rate of about .585%/month, or about 7%/year.
This means that if you expect to draw the pension payments for 30 years,
then you'd have to earn 7% to exhaust your $60K in the same 30 years. If
you earned more, then you *might* come out ahead. (The might is due to the
fact that your earnings can fluctuate; if you start out earning little, then
you couldn't draw the extra $400 initially, even if, over time, the earnings
averaged 7%.)

If you expect to draw payments for 40 years, then the break-even discount
rate becomes .634%/month, meaning that you'd have to earn better than 7.6%
to do better with the $60K. If you expect to draw payments for "merely" 20
years, then the discount rate becomes .426%/month, meaning that you'd "just"
have to earn better than 5.1% to do better with the $60K.

Being too lazy to really think this through, I just plugged numbers into an
annuity calculator: http://www.investopedia.com/calculator/AnnuityPV.aspx; I
used payment of $400, and number of periods of 240 (20 years), 360, and 480.

Keep in mind that aside from earnings fluctuations possibly making it harder
to beat the pension, the pension is also guaranteed not to run out. So no
matter what discount rate (or longevity) you target, the pension provides
insurance in case you guessed wrong. (How much that guarantee is worth
depends on how much you need the extra income stream.)

Mark Freeland
BnetOnewsX[at]sbcglobal.net

------ Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.

On Mar 20, 10:50*am, iarwain <iarwai...[at]hotmail.com> wrote:
- quote -


Depends on how safe that government pension is. When you say put the
money toward the government pension, do you mean buying extra service
time?

That extra $4,800 from the government pension is guaranteed and does
not fluctuate. If you were able to get $60,000 from your $400 a month
investment into the 401K (as you say, debatable), you'd then have to
earn 8% from that $60,000 to match the guaranteed government pension
payout.

The winner: government pension.

------ Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.

- quote -

Need more information:

1) what are projected retirement expenses?
2) what is pension amount without the $400/extra per month?
3) what is the retirement age in 8 years?
4) are their any other retirement assets?

------ Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.

What would you do in this situation?

If you were going to retire in eight years, and you had an extra 4800
a year to put toward your retirement, would you:
1) Put it toward your government pension? Leaving that amount in
when you retire gets you an extra $400 per month for the rest of your
life.
2) Put it in your 401k? That amount would give you $60,000 in eight
years, IF you get 10% interest during that time (which may well be
debatable at this point).

Which do you think is the better deal?

------ Misc.invest.financial-plan is a moderated newsgroup where Moderators strive
to keep the conversations on-topic for financial planning. Other posting
guidelines include a request for brevity and another for trimming posts to
which we respond. For all of the other tips and suggestions, see "FROM THE
MODERATORS: Posting to misc.invest.financial-plan", a weekly post now on the
Newsgroup.