Yeah, the handbook said the earlier you buy the years, the cheaper it is.
Yeah, the handbook said the earlier you buy the years, the cheaper it is.
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
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
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.
Will you fall under The IRS Windfall Provision Act?
a lot of teachers have lost a lot of benefits with that
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."
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