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I am a very fortunate employee. I am actually eligible to receive a pension. Today, less than 20% of workers are eligible to receive a pension plan, and this percentage is dropping every year. At the height in 1980, 66% of workers were covered by a pension plan. I know it is very advantageous to have a pension, but even so, I am debating what I should do moving forward. Do I continue to work for ten more years, or do I retire sooner?
Over the last fourteen years, I have been busting my hump. These years have been characterized by paying off mortgage, maximizing my 401k and Roth IRA, and saving any additional money that I could. As previously stated, it appears that by the end of 2020, I will finally reach FIRE (Financial Independence and Retiring Early). At that point, I will not need to work any longer. And, if I choose to work, I would have the flexibility to pursue something I am really passionate about.
Retiring Earlier vs. Later
Now here is the dilemma for me. If I retire by 2020, I will be eligible to receive roughly an $18,000 pension starting at age 50 for the rest of my life, indexed for inflation each year. This would mean that I would have to wait for this income for ten years. This breaks down to roughly $1,500 a month for the rest of my life. Now if I delay retirement until 2030, I will be able to roughly double this amount to $36,000, or $3,000 a month.
In addition to the extra money that I would receive in delaying my early retirement, I will also be able to receive my company’s health insurance the rest of my life, which is significantly cheaper than what is available on the open exchanges through Obamacare.
This is a really nice benefit since they pay roughly 75% of my health insurance premiums every year, leaving me responsible for only 25% out of pocket. In addition, it’s a PPO, so I get to choose my doctors, which isn’t too shabby. Running the numbers, it appears that this benefit alone is worth about $12,000 a year.
I’d be remiss if I didn’t include salary and the benefits that came along with the job. That too would probably be an additional million dollars when it was all said and done.
So in theory, by retiring ten years early, I would be forgoing $30,000 in potential benefits, plus forgone salary. This is following the actuarial table for myself and the age that I am suppose to live to, 85 years old. That would mean that I would be missing out on potentially over two million dollars in forgone salary, pension payouts and benefits until I die.
Two things to address
- First, I know some believe that when they reach FIRE, there is no need to worry about anything they are missing out on. They are absolutely correct. With my son at one year old and with the hope of having more kids in the future, I can’t imagine living a retired lifestyle in the next fifteen years traveling and what not with a few school-aged kids. I guess I fear giving up so much money when all that it involves is another decade of work.
- Some also believe pensions are underfunded and shouldn’t be relied upon as a guarantee. I understand this belief, but I feel confident in the government’s ability to pay all future liabilities. The government is current in fully funding all obligations, and I don’t see this changing under the current structure. If they couldn’t pay the pension, then I’d be pretty sure the world was ending and the US currency would no longer be in use.
Now I will be completely honest with you. I don’t love my job. I not even sure I like my job. For the most part I compile financial statements and make sure that the team does what it’s suppose to. It’s unfortunate that I don’t look at this as a career but as a job that allows me to make decent money while allowing me to have a great work-life balance. This is probably the main reason that I haven’t accepted any other opportunities that have come my way.
A nice benefit with this job is that I get to rotate every two or three years into different departments, so that I am not stuck in one job. This has allowed me the opportunity to meet tons of new faces every year.
So while my job is unfortunately not my passion, I do seem to come alive at work when I start to talk to others about their finances and their goals in life. Since I get new colleagues every couple of years, I have the ability to share and learn from new groups of people about how to handle finances.
I find tremendous fulfillment in helping others optimize their finances and boost their financials savings. I’ve had my fair share of finance trials and tribulations and enjoy using the knowledge I have learned over the years. In addition, I personally find writing on the blog, interacting with others on the internet, and meeting people allows me to share this small gift that I have with others.
So that is really my passion– helping people improve upon their financial situations. This is why I help facilitate a Dave Ramsey Financial Peace course even though I have some minor quibbles with him. I can’t stand that he pushes mutual funds over low cost index funds. I also think his stated returns are completely out of line. But that is a conversation for another day. Overall, Dave’s brand has a good reputation that draws people in, and I am able to help steer people in the right direction. Now ideally, I would prefer a brand that had a good reputation and provided sound financial advice, but I realize that you have to work with what you got.
So this is where I ask you, the readers, to provide input. Should I stay in a job for another decade that I am not passionate about, although I have the ability to share my knowledge day-to-day with my colleagues, for the equivalent of two million dollars? Or should I break free into the unknown without a set plan with the hope of pursuing deeper purpose in my life?
Please share your thoughts below.