Combined Pension and SS Income

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FreeAtLast
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Combined Pension and SS Income

Post by FreeAtLast »

This post was stimulated by a discussion about Social Security income with my sibling who just retired last year.

1) I will finally be taking Social Security sometime early next year (I will be 66 soon). At that time, when you combine my annual pension and SS income, I will be taking in about $61K a year. I am very curious about other Bogleheads who also have combined pension and SS income. I figure I am at the lower end of the scale at $61K. I can easily imagine a large bunch of Bogleheads who are at $85-100K and even beyond. If you don't mind responding to this post, where are you in the combined pension/SS range?

2) As for the actionable part of this post, I can tell you that thinking about this new amount of combined income has woke me up more than a little bit. I have been bopping along on auto-pilot very complacently for 7 years of retirement, just taking some money out of my tIRA every year to supplement my pension. Now I won't have to touch my tIRA until I hit 72 y.o. Nor will I, barring some unforeseen financial or medical personal disaster, have to take any withdrawals from my stock/bond funds outside of tIRA. So the money that I have saved all my life just sits there and grows. Or, it does NOT, because we have another black swan event like the Great Recession. Some questions that then come to my mind are: Should I start gifting some of my savings to my family now, instead of them waiting until I croak? Should I re-adjust my AA, which right now is at 58% stocks/bonds? I am not expecting any of you to answer these questions for me. They are my problem to solve. I am advising that if you are approaching taking SS in the next couple of years, that you should think about the consequences now instead of being dilatory like me. :annoyed
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livesoft
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Re: Combined Pension and SS Income

Post by livesoft »

If I count my spouse's SS as a pension, then with my SS would that be a combined Pension and SS income? :)
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FreeAtLast
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Re: Combined Pension and SS Income

Post by FreeAtLast »

if you are married: for total pension income, combine both spouses' pensions. Do the same for total SS.

Thanks, livesoft. :D

Edited once.
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Beehave
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Re: Combined Pension and SS Income

Post by Beehave »

I'm in somewhat of a comparable situation as the OP, and here are my thoughts.

There are any number of possible black swans. Considering possibilites (1) intense or prolonged inflation, (2) a depression that reduces investment values AND inhibits the payers of your pension or Social Security, or (3) the need for extended long-term care, I'd suspect that #3 is the most likely.

We are self-insured for LTC, and that is a major consideration for us. In terms of gifting we did some that we were able to do to help one child with down payment for a home. We do not have long term care insurance and we are flat out not "ultra wealthy." We have saved to self-insure and we have lucked out big-time with post-retirement sequence of returns being so very favorable for us. Nevertheless, we feel that it is hard to overinsure for LTC. So in terms of increasing spending significantly or early gifting of large sums, we keep in mind the distinct possibility that we are likely to have at least one of us needing some LTC and even possibly both. Even if we had opted for LTC insurance years ago when we considered it, the amount of insurance would cover, maybe three years today, and that would still require (in my opinion) holding significant reserves in case of prolonged need or inflation.

Should our children need financial support I would gift more, but within the context of balancing consideration of our own possible needs . But absent their need I would hold off and maintain a reserve and hope that a pot of dough eventually finds its way to children or grandchildren.

Obviously, each person or couple will have different needs and preferences, so the above is not advice, but simply an answer to the OP's question about what people in similar circumstances are thinking and doing.

Edited to add:
Regarding a 58:42 asset allocation ratio, I see no need to change that just because you have started taking SS. In my opinion you need to remain invested in stocks at some level because you need some growth, but whether it is 30:70 or 70:30, the odds of your success (financial comfort throughout your retirement) are really high. If it were me, I would focus on maintaining an asset allocation with which I am emotionally comfortable (for me, roughly speaking, the point at which fear and greed are in balance and cancel each other out such that when stocks are high I can easily take RMD cashout of stock and not reinvest it, and when there's a mini-crash or prolonged downturn I happily chuck cash into stock funds. I'm a believer in rebalancing not only for buying low and selling high, but also as an emotional relief valve for controlling the emotions attached to the ups and downs of the market.

Last thing I'd suggest is to consider carefully if taking SS at age 69 or 70 might be preferable to age 66. This is simply because the expected inflation protection SS provides is so difficult to obtain, and it is a compounding feature. If the pension does not have a COLA provision, then the value of SS's inflation protection is magnified. That said, I think given the OP's situation, the delta between taking SS at FRA versus delaying to max it out won't really affect the long term success, so if depleting savings to delay SS is emotionally taxing, then it probably is not worth doing.

My thoughts, best wishes.


The one thing I might suggest considering changing is the
Last edited by Beehave on Fri Sep 17, 2021 9:09 pm, edited 1 time in total.
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FreeAtLast
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Re: Combined Pension and SS Income

Post by FreeAtLast »

Beehave -

You're a mindreader. During the discussion with my sibling, we spent a lot of time on the LTC issue.

Free
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delamer
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Re: Combined Pension and SS Income

Post by delamer »

I’m not going to answer your question about the amount of pensions plus Social Security my husband and I receive, at least directly. But I’ll say that they cover all of our regular expenses (including income taxes) with room to spare for vacations and other luxuries.

As a result, barring very high long-term care costs for both of us, our kids will inherit the large bulk of our savings. So we have started to gift them money now. It’s more valuable to them as young adults than it will be if they don’t inherit until they are in the 60’s, which is what happened to me. I already was retired when I received an inheritance from my parents.

Your stock allocation is low for someone who is essentially investing for future generations. Ours is around 72%, across taxable and tax-deferred.

The Great Recession wasn’t a black swan financial event, to my way of thinking. Periodic stock market bears are par-for-the-course. If you live, hopefully, for another 20+ years, you’ll experience some bears again : https://awealthofcommonsense.com/2020/0 ... ar-market/
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Re: Combined Pension and SS Income

Post by Boatguy »

FreeAtLast wrote: Fri Sep 17, 2021 8:55 pm Beehave -

You're a mindreader. During the discussion with my sibling, we spent a lot of time on the LTC issue.

Free
If you don’t really “need” SS now, why not consider holding off until 70 as longevity insurance?
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FreeAtLast
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Re: Combined Pension and SS Income

Post by FreeAtLast »

Boatguy wrote: Fri Sep 17, 2021 9:06 pm
FreeAtLast wrote: Fri Sep 17, 2021 8:55 pm Beehave -

You're a mindreader. During the discussion with my sibling, we spent a lot of time on the LTC issue.

Free
If you don’t really “need” SS now, why not consider holding off until 70 as longevity insurance?
Boatguy -

Good question. Taking SS next year will simplify my financial life. My Medicare premiums will be taken out of my SS payments, so I don't have to do it myself quarterly anymore. And since I won't be taking IRA withdrawals anymore, that will simplify my tax returns, at least for 6 years.

Free
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Re: Combined Pension and SS Income

Post by Kenkat »

FreeAtLast wrote: Fri Sep 17, 2021 9:24 pm
Boatguy wrote: Fri Sep 17, 2021 9:06 pm
FreeAtLast wrote: Fri Sep 17, 2021 8:55 pm Beehave -

You're a mindreader. During the discussion with my sibling, we spent a lot of time on the LTC issue.

Free
If you don’t really “need” SS now, why not consider holding off until 70 as longevity insurance?
Boatguy -

Good question. Taking SS next year will simplify my financial life. My Medicare premiums will be taken out of my SS payments, so I don't have to do it myself quarterly anymore. And since I won't be taking IRA withdrawals anymore, that will simplify my tax returns, at least for 6 years.

Free
Just realize that your social security benefit at age 70 will be approximately 32% higher than your benefit at age 66. You might even be able to squeeze in some Roth conversions between now and 70.
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Re: Combined Pension and SS Income

Post by DavidW »

+1 on Kenkat.

Taking SS early might be advantageous if you have health conditions but otherwise, converting your tIRA will help offset the dreaded RMD... Just make sure you a bit extra to cover the taxes...
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Re: Combined Pension and SS Income

Post by jfave33 »

Does it really matter what others have? I'll answer that for you. No. You just need to make sure you are comfortable with what you have based on your expenses.
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Re: Combined Pension and SS Income

Post by TimeRunner »

+2. Pay your medicare with a 2% cash-back credit card (e.g. Fidelity).
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Re: Combined Pension and SS Income

Post by marcopolo »

$0

Not sure how that helps you, but there you go.
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Re: Combined Pension and SS Income

Post by BernardShakey »

delamer wrote: Fri Sep 17, 2021 9:02 pm I’m not going to answer your question about the amount of pensions plus Social Security my husband and I receive, at least directly. But I’ll say that they cover all of our regular expenses (including income taxes) with room to spare for vacations and other luxuries.

As a result, barring very high long-term care costs for both of us, our kids will inherit the large bulk of our savings. So we have started to gift them money now. It’s more valuable to them as young adults than it will be if they don’t inherit until they are in the 60’s, which is what happened to me. I already was retired when I received an inheritance from my parents.

Your stock allocation is low for someone who is essentially investing for future generations. Ours is around 72%, across taxable and tax-deferred.

The Great Recession wasn’t a black swan financial event, to my way of thinking. Periodic stock market bears are par-for-the-course. If you live, hopefully, for another 20+ years, you’ll experience some bears again : https://awealthofcommonsense.com/2020/0 ... ar-market/
Maybe the OP doesn't have as substantial pensions & SS as you and your husband do, though he does sound comfortable. I too would be good with 72% stock allocation if all my expenses and luxuries were covered by pension and SS. They are not and so I'm at about 45% equities heading into retirement.
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Re: Combined Pension and SS Income

Post by MikeWillRetire »

Instead of sharing dollar amounts, I will say that our pensions and social security (taken at 62) will cover all of our base expenses. So we plan to take SS at 62. Our savings will be used for travel, snowbirding, gifts, and emergencies. We are very conservative, and our AA is 40:60.
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Re: Combined Pension and SS Income

Post by celia »

FreeAtLast wrote: Fri Sep 17, 2021 9:24 pm
Boatguy wrote: Fri Sep 17, 2021 9:06 pm If you don’t really “need” SS now, why not consider holding off until 70 as longevity insurance?
Boatguy -

Good question. Taking SS next year will simplify my financial life. My Medicare premiums will be taken out of my SS payments, so I don't have to do it myself quarterly anymore. And since I won't be taking IRA withdrawals anymore, that will simplify my tax returns, at least for 6 years.

Free
Just to make sure you’re not missing a big factor, have you calculated how much your still-growing tax-deferred balance and RMD will be at age 72? Do you know what the RMD will do to your taxes starting then?

Many Bogleheads defer SS until age 70 to give them more space to do Roth conversions before then. If you haven’t even thought of this, you should figure out the impact while you still have time to do something about it, rather than being blindsided by it.

If you’ve already done your calcs and the RMDs will hardly impact you, then you look like you’re all set!

AND, starting SS at age 70 instead of 62 will give you something like 70% larger benefits! For the rest of your life! And since it increases each year to compensate for cost of living expenses, it grows as you age.
A dollar in Roth is worth more than a dollar in a taxable account. A dollar in taxable is worth more than a dollar in a tax-deferred account.
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Re: Combined Pension and SS Income

Post by FreeAtLast »

celia -

The simple answer to your query is yes, I have done my calcs and my RMD's at age 72 are not a major concern. [Political comment removed by moderator oldcomputerguy]

Thanks,
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delamer
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Re: Combined Pension and SS Income

Post by delamer »

BernardShakey wrote: Fri Sep 17, 2021 10:16 pm
delamer wrote: Fri Sep 17, 2021 9:02 pm I’m not going to answer your question about the amount of pensions plus Social Security my husband and I receive, at least directly. But I’ll say that they cover all of our regular expenses (including income taxes) with room to spare for vacations and other luxuries.

As a result, barring very high long-term care costs for both of us, our kids will inherit the large bulk of our savings. So we have started to gift them money now. It’s more valuable to them as young adults than it will be if they don’t inherit until they are in the 60’s, which is what happened to me. I already was retired when I received an inheritance from my parents.

Your stock allocation is low for someone who is essentially investing for future generations. Ours is around 72%, across taxable and tax-deferred.

The Great Recession wasn’t a black swan financial event, to my way of thinking. Periodic stock market bears are par-for-the-course. If you live, hopefully, for another 20+ years, you’ll experience some bears again : https://awealthofcommonsense.com/2020/0 ... ar-market/
Maybe the OP doesn't have as substantial pensions & SS as you and your husband do, though he does sound comfortable. I too would be good with 72% stock allocation if all my expenses and luxuries were covered by pension and SS. They are not and so I'm at about 45% equities heading into retirement.
There’s a lot we don’t know about the OP — how large are his tax-deferred and taxable accounts, does he own a home, is he married?

Those factors should all play into his asset allocation.

If he’s really expecting his assets to just grow unused and go to his heirs, then 70% in stocks is reasonable. As is starting to do some gifting now.

Your 45% allocation certainly sounds reasonable for your situation.
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mindboggling
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Re: Combined Pension and SS Income

Post by mindboggling »

I'm 68 and have a fixed pension of 37k and SS of 30k. There, I said it!
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SQRT
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Re: Combined Pension and SS Income

Post by SQRT »

I retired 15 years ago at 56. My pensions are significant but still only represent about 40% of my total spending. This percentage has been dropping since my main pension is not cola’d and income from my portfolio has continued to increase.
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Re: Combined Pension and SS Income

Post by vested1 »

You don't say if you have a spouse, which complicates and lengthens any response. I'll assume you have one for arguments sake, but it would be nice to know that basic variable. However, IMHO it is still a good decision to delay until age 70 even if you're single. Having a larger portion of income derived from a more favorably taxed source that also has a COLA gives you more options.

We're able to make it comfortably on my wife's pension and a combined SS of her filing at 65 and me filing a restricted application when I turned 66. She's been retired for over 6 years and I joined her 5.5 years ago. Our totals are a bit higher than yours. When I turn 70 next year our SS will increase dramatically when I file for my own benefit.

I too would suggest looking into the possibility of delaying SS until 70 for the longevity insurance aspect and for a guaranteed COLA protected amount that will increase almost every year. Spending down some of your tax-deferred retirement savings and/or converting some to ROTH will help as well. The more favorable tax treatment of SS benefits should be taken into account also.

RMD's aren't the only tripwire out there though. Consider the fact that when one of you dies the survivor will transition to single filing rather than joint filing. While some expenses are less, or disappear entirely, like contributions to retirement accounts while working, and FICA tax, health care costs will continue to rise, even with Medicare coverage.

As for AA, my wife and I are at 65/35 at ages 68/69 respectively. I will feel comfortable allowing that to drift to 70/30 once I file for maximum SS benefits next year. The reason is that the retirement savings won't be needed, even for most discretionary spending.

Lastly, if you do decide to continue your delay of SS until age 70 I would keep it to yourself. Most people don't delay, and some will attack your decision and will try to talk you out of doing so. I could speculate as to why this happens but since I'm not in their shoes it wouldn't be fair to do so. I get a fair amount of criticism from those who find out I'm delaying, and who occasionally check in to ask if I have filed yet. I don't volunteer that information, but for some reason, those who are retired or contemplating it ask what my filing status is. I prefer not to lie, or even more reluctant to tell them the truth; that's it's none of their business.
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Re: Combined Pension and SS Income

Post by Dandy »

I'm 73 and our pension and SS income about equals our normal expenses making RMDs essentially not needed. We adjusted our overall allocation to about 50/50, take taxable equity distributions in cash rather then reinvest, and gift about 80% of our net RMD to our children as "early inheritance".

I'm hoping our heirs will inherit our taxable equites on a stepped up basis to avoid large cap gains.

Our focus is more on asset preservation than growth and we may reduce our overall equity exposure a bit more. Also have about half of our fixed income in FDIC products, money markets and short term bond funds.
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Re: Combined Pension and SS Income

Post by dbr »

The answer to your question about all the money you saved that you don't need now might be two things:

1. You get to do whatever you want with it. Some uses may benefit from doing them now, such as gifts where it can be used immediately. Others might be fine waiting as inheritances. Note there are tax considerations that can get complicated so you have to look and see. Example: I gave some appreciated stock to one of my kids rather than cash because he can sell the stock at almost no cap gains tax and I would have paid quite a bit. Gifts to charities will avoid tax on the gains. Waiting till you die benefits from basis step-up but often a gift is more timely than waiting. Money in IRAs follows specific rules for heirs but taking the money out costs in taxes. If it is an RMD you pay anyway.

Another option is to spend more or go buy the proverbial yacht.

2. Your needs in the future may be more than they are now. Having eyes open on old age care and contingency for ill health, disability, death of a spouse, etc. is important.
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Re: Combined Pension and SS Income

Post by FreeAtLast »

OP here -

1) I want to thank everybody for your advice and comments so far. I am considering it all very carefully.

2) I asked the question about combined incomes for one reason only: Pure Curiosity. Nothing I learn on this thread is going to make me feel either better or worse about my life or financial situation. I am totally blessed and grateful to be where I am now.

3) To answer some speculation: I am divorced with no children. My will is set up so that most of my estate goes to my nieces and nephews with some residual going to my siblings.

Thanks,
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Re: Combined Pension and SS Income

Post by AlohaBill »

We retired 4 years ago. Our combined ss and pension comes to about $75,000. We needed about $55,000 to live before retirement. We are about 42/ 58% stk/bnd/cash. Our retirement portfolio has increased more than $400,000 since 2017. We don’t care about asset allocation or swr or SORR. Health is another story.
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Re: Combined Pension and SS Income

Post by nguy44 »

FreeAtLast wrote: Fri Sep 17, 2021 8:03 pm If you don't mind responding to this post, where are you in the combined pension/SS range?
63, retired 3 years. I paid the maximum SS tax for 35 of my working years, so will receive the maximum SS benefit. Our target "live like kings" annual spending target is currently $130K (that is our goal, we have only achieved it once in 3 years, darn pandemic...)

- Current pension (mine) + SS (wife, she took at 62) combined income: $80K
- Pension + my SS + wife spousal benefit SS at my age 65+5 months (2023): $125K
- Pension + my SS + wife spousal benefit SS at my FRA (2024): $130K
- Pension + my SS + wife spousal benefit SS at my age 70 (2028): $140K

None of these take SS COLA increases into account (though that will be offset by corresponding inflation in our expenses), or the future SS reduction if the law is not changed.

I will delay SS primarily to maximize the survivor benefit for my wife. My current target is to delay until 70 (I re-evaluate yearly). It also gives us room to continue Roth conversions. We still will have large RMDs, but that "problem" is fine with me.
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Re: Combined Pension and SS Income

Post by Ranunculus »

Once my spouse and I reach 72 we will be earning considerably more than we are now with pensions, SS and RMD combined. Even if one of us dies early the other will have enough to live comfortably on SS and pension survivor benefits.

Our plan is to convert as much to Roth IRAs as possible in the years before RMD and reduce risk as much as possible in portfolios. Stocks are currently 25% and we will probably reduce further. Large chunk is in cash and real estate and we are adding to a municipal bond ladder. We don't see any point in taking on unnecessary risk at this point.
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Re: Combined Pension and SS Income

Post by likegarden »

I am soon 82, wife 77, we are having my SS, her SS, my pension for 17 years and total income is now what I earned with my salary when I retired. Expenses are low, there is no house payment, no kid in college. We also had no vacations due to Covid fear. The only increasing cost is from Long Term Care insurance premiums, about $11,000 per year, increasing each year. I will estimate how much those LTC premium will be in 8 years when I am 90.
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Re: Combined Pension and SS Income

Post by Ron »

What's a pension? 🤷‍♂️...

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Re: Combined Pension and SS Income

Post by DonFifer »

We are both retired and living off 3 pensions and 2 Social Security Checks. We pull down enough that RMDs are not needed and when we get them, they go into our brokerage account. In addition to which I put $250/week and any rewards from our credit cards into our brokerage account.
I didn't receive my inheritance until I was in my 50s when I was already well established. Most of the inheritance was in real estate, which we continued to manage until I retired last year, at which time it was sold and the money went into brokerage accounts. More than half our savings are now in brokerage accounts and Roths.

Our AA is 60/40 and is primarily allocated for LTC if needed, with no plans to give away anything until we both croak.

I took SS at 70, wife took it at 62 (told her to wait, but she said she needed the money, to which I replied, she needed a job, that argument went nowhere). When I turned FRA, I took a spousal benefit off her SS until I reached 70 yo. I have two close friends who took SS at 62, and both of them (and my wife) say it's the biggest mistake they ever made (comes up every year when the SS COLA is announced and they look at my increase compared to theirs).
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Re: Combined Pension and SS Income

Post by One Ping »

FreeAtLast wrote: Fri Sep 17, 2021 8:03 pm This post was stimulated by a discussion about Social Security income with my sibling who just retired last year.

1) ... If you don't mind responding to this post, where are you in the combined pension/SS range?

2) As for the actionable part of this post, ... I have been bopping along on auto-pilot very complacently for 7 years of retirement, just taking some money out of my tIRA every year to supplement my pension. ... So the money that I have saved all my life just sits there and grows. Or, it does NOT, ...
At ages 70 (me) and 76 (spouse) our 7th year post-retirement combined (uncola'd) pension and SS (delayed to age 70) income is now $30k to $60k more than our (essentially unconstrained from our perspective) expenses. I consider this additional income a 'deposit' into our (uninsured) LTC fund.

There is nothing more satisfying then having a substantial surplus in income over expenses to provide a cushion against the unforseeable. Over-saving is an advantage whose benefits cannot be overstated.

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Re: Combined Pension and SS Income

Post by MHA556 »

Deciding to give away some of your savings early to me would really depend on how much there actually is total, and how much I consider needs to be kept for unforeseen circumstances or long term care needs. Personally I am hoping my kids get squared away financially early on, step 1 was making sure they made it thru college with good degrees with zero debt. That meant 529 plans plus some extra $$. Mission accomplished with one, STEM degree with starter job now. The second one should have excess money from the 529 account due to merit scholarships so it is looking good. I think them entering the working world when I am recently retired also means that we have a lot of financial and savings discussions that we might not have had otherwise at their young ages. (Conversations my parents did not have with me). Also I would be more than happy to loan them some money for a first house if needed. Maybe someday help with grandchildren’s college funds (if/when they have kids). Beyond that however, they can wait until we either kick off, or at least are so far along in retirement that there is zero concern about transferring some assets over. I think hard work is important, so you don’t want to rob them of those lean and hungry years too much...

I think your AA is fine. If it is all extra anyhow, no reason to be too conservative and stifle your gains. I might go more aggressive actually. I plan to be 80/20 or 70/30 most likely, which is only possible because of the stability of the income streams.

Our situation is basically a good pension with a partial COLA (me) and a smaller pension with a decent COLA (wife). Both can pull SS. Both have some retirement savings. By my calculations at age 62 we could have about 45% more income from pensions +SS than expenses, and we could get by for a short while only on pensions if we delay SS, would need to spend a little less. Due to my COLA, at some point SS+pensions will only equal out our normal expenses, but at 3% inflation that is near age 100, at which point I likely will not care...

I am hoping to be a bit better about actually spending some of our savings in retirement than my dad- he pulls a pension + SS, and still saves some as he doesn’t spend nearly as much as comes in. His RMD’s he just pays the taxes on and reinvests. He doesn’t have a lot of $$ saved up- however when it is all extra it likely seems like plenty. (I think the same way- why spend money just to spend it.). My concern is that when my parents die they will leave me and my brother a decent chunk of change that they should have used themselves. My intention is to both spend more on myself while also leaving my kids enough to make a difference in their own retirement situations. So possibly a low 2 or 3% withdrawal rate- spend some, save some, always increasing your net worth.

You sound like you are sitting fine, and I am guessing in a low cost of living area (unlike myself). No recommendation on SS age from me as I am educating myself on that currently.
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