I have a modest pension that I plan to annuitize. I am wondering what pitfalls to look for, what considerations to take into account, as I'm admittedly not very well versed in annuities.
Background: I am officially retiring from my employer in 2 days.
- I have a $1.1M 401(k) that I plan to just leave there, stay invested. Plan fee is 3 bpts, and there are plenty of funds with fees of single digit bpts. I have another $0.1M in IRAs & HSAs and $0.6M in wife's 401(k)s, so $1.8M in retirement accounts we plan to let grow for a decade.
- My wife has been building a firm, in which she is a partner, & plans to work another ten years. She has an ownership payout of $1M currently, payable when she retires (estimated to be $2M by then, in 10 years. Payout 70% in year 1, the rest over 4 years.)
- We have been living off my wife's income for the past year, and while it can vary from $150K to $250K, we also have about $70K in cash.
- I have worked too much for too long. I will not be getting another job, at least, not shortly. I may, however, take some classes in my field.
- Our house is worth close to $1M, with a $400K mortgage at 2.5%. No other debt. We plan to wait to 70 to take SS.
My pension itself is still slowly growing, invested in T-Bills. Total amount of the pension is about $78K. Assuming 100% Joint and Survivor payout starting when I retire, it's $422 monthly, or just over $5K per year. Payout is ostensibly 6.4% (I calculate 6.5%, so I assume I'm not doing the math quite right.)
If I wait 8 years to begin payments, to when the pension stops growing entirely, the pension will be worth $123K, and I can get a payout of $752 per month, or $9K per year.
I do want to annuitize the pension as 1) I can't invest it unless I take it all out and pay taxes on it, and 2) to start setting a base of annuitized income to cover expenses when we are both retired. It would also probably help in the time between now and my wife's retirement.
My questions:
1) does a 6.4% payout sound reasonable? I realize that inflation will eat into it steadily, but am comfortable with that.
2) does the rest of it all seem to hold together? I realize single income seems risky, but it's less so for a firm owner, who could work in the field and earn $150K minimum anytime she wanted; she's in a field with very high demand. Plus, in extremis, I could go back to work as well, though I am likely to see some age discrimination.
Background: I am officially retiring from my employer in 2 days.
- I have a $1.1M 401(k) that I plan to just leave there, stay invested. Plan fee is 3 bpts, and there are plenty of funds with fees of single digit bpts. I have another $0.1M in IRAs & HSAs and $0.6M in wife's 401(k)s, so $1.8M in retirement accounts we plan to let grow for a decade.
- My wife has been building a firm, in which she is a partner, & plans to work another ten years. She has an ownership payout of $1M currently, payable when she retires (estimated to be $2M by then, in 10 years. Payout 70% in year 1, the rest over 4 years.)
- We have been living off my wife's income for the past year, and while it can vary from $150K to $250K, we also have about $70K in cash.
- I have worked too much for too long. I will not be getting another job, at least, not shortly. I may, however, take some classes in my field.
- Our house is worth close to $1M, with a $400K mortgage at 2.5%. No other debt. We plan to wait to 70 to take SS.
My pension itself is still slowly growing, invested in T-Bills. Total amount of the pension is about $78K. Assuming 100% Joint and Survivor payout starting when I retire, it's $422 monthly, or just over $5K per year. Payout is ostensibly 6.4% (I calculate 6.5%, so I assume I'm not doing the math quite right.)
If I wait 8 years to begin payments, to when the pension stops growing entirely, the pension will be worth $123K, and I can get a payout of $752 per month, or $9K per year.
I do want to annuitize the pension as 1) I can't invest it unless I take it all out and pay taxes on it, and 2) to start setting a base of annuitized income to cover expenses when we are both retired. It would also probably help in the time between now and my wife's retirement.
My questions:
1) does a 6.4% payout sound reasonable? I realize that inflation will eat into it steadily, but am comfortable with that.
2) does the rest of it all seem to hold together? I realize single income seems risky, but it's less so for a firm owner, who could work in the field and earn $150K minimum anytime she wanted; she's in a field with very high demand. Plus, in extremis, I could go back to work as well, though I am likely to see some age discrimination.
Statistics: Posted by Portfolio7 — Tue Apr 09, 2024 4:45 pm — Replies 0 — Views 16