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Thread: buying service credit

  1. #11
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    Yeah, the handbook said the earlier you buy the years, the cheaper it is.

  2. #12
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    A factor to include in the comparison is the COLA or risk-sharing that would be paid along with pension benefits "bought" from the pension plan.

    COLA in a Single Premium Immediate Annuity can usually be included in the contract: 1,2,3,4,or 5% increases in the annuity payment on each anniversary. The amount of the first year annuity payment is reduced by the insurance company. No insurance company offers an annuity with a COLA tied to the CPI.

    In my opinion a COLA based on the CPI is a very good inflation hedge. A fixed COLA percentage such as one can get with a SPIA is a partial hedge.

    A source of SPIA quotations is http://immediateannuities.com

  3. #13
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    Another decision in retirement income planning concerns how long to wait to collect social security retirement benefits. With 2 spouses, each might decide to wait a different period. As the linked article suggests considering the difference between the earnings of each spouse, and also working through scenarios of either spouse being the second-to-die (thus begin to receive survivor benefits). Waiting to age 70 increases the amount of the monthly social security benefit.

    www.aarp.org/retirement/social-security/info-2022/best-time-to-start-taking-benefits

  4. #14
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    Quote Originally Posted by dado potato View Post
    Another decision in retirement income planning concerns how long to wait to collect social security retirement benefits. With 2 spouses, each might decide to wait a different period. As the linked article suggests considering the difference between the earnings of each spouse, and also working through scenarios of either spouse being the second-to-die (thus begin to receive survivor benefits). Waiting to age 70 increases the amount of the monthly social security benefit.

    www.aarp.org/retirement/social-security/info-2022/best-time-to-start-taking-benefits
    Thanks, dado. We are already on Social Security so this is a rubicon crossed.
    The COLA thing showed up when I was looking into the pension yesterday, so I think there is one built into the pension, so yes, that is something to consider too.

  5. #15
    Senior Member Teacher Terry's Avatar
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    Not only that but in Nevada the years you earned them made a difference. Mine were all high cost years. Some of my coworkers only had to pay 5k/year to buy them whereas mine were 20k/year.

  6. #16
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    Quote Originally Posted by Teacher Terry View Post
    Not only that but in Nevada the years you earned them made a difference. Mine were all high cost years. Some of my coworkers only had to pay 5k/year to buy them whereas mine were 20k/year.
    That was true in my case as well. The years of service I bought were performed in the 1980s, so my present value formula included a lot of years of excellent investment returns. On the plus side, in the Wisconsin system, years served prior to 2000 also had a higher payout percentage. It was a pretty complicated formula.

  7. #17
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    Will you fall under The IRS Windfall Provision Act?
    a lot of teachers have lost a lot of benefits with that

  8. #18
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    Quote Originally Posted by mschrisgo2 View Post
    Will you fall under The IRS Windfall Provision Act?
    a lot of teachers have lost a lot of benefits with that
    Not currently. If I took a new job teaching K-12 in Maine I might. But currently, I do not fall under that.

  9. #19
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    I guess I am confused about buying service credit years. The years that I would have credit for start with 1981 and 1982, for example. I did not realize you bought specific years, thought you just bought "additional years."

  10. #20
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    Quote Originally Posted by Tybee View Post
    I guess I am confused about buying service credit years. The years that I would have credit for start with 1981 and 1982, for example. I did not realize you bought specific years, thought you just bought "additional years."
    From what I understand, that can vary quite a bit between plans. Some do allow you to buy years of service without the need to have actually having worked in specific jobs.

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