Put Your (Pension) Money Where Your (House) Mouth Is

Permanence and Pension Money

Greetings, long-lost readers! It’s been over a year since I published my last post about my return to work to qualify for a New Zealand residence visa. A lot happened over that time, so much so that a separate update is warranted. However, for this article, the easiest thing to say is that my return-to-work plan … worked! My family and I obtained NZ residence based on my employment in April 2023, I transitioned to part-time work in August 2023, and we bought and moved into a house in December 2023. It was a hectic but ultimately successful year, with few setbacks and much growth. As a result, my family and I feel truly blessed when we wake up to the stunning views each morning at our New Zealand home and are comforted by the permanence it provides. Couple that with the financial stability afforded through our monthly defined benefit (DB) pension money, and we are sitting well indeed.

Pension Money

The view from our new back yard.

The remainder of this post is about some of the concepts I put into action to purchase our house and achieve that permanence. As you may have deduced from the play-on-words in my title, the money from my DB pension played, and will continue to play, a key role in making that happen. As such, there are potential lessons to be learned for anyone with a DB pension playing a central role in their retirement who might also wish to purchase a house.

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FIRE in New Zealand: One Thing a Pension Cannot Buy

Here’s an imaginary conversation that’s been playing in my head recently:

      • Almost non-existent long-term reader: “Hey Grumpus, I noticed you haven’t posted any new articles in a while. Is everything OK?”
      • Grumpus: “Thanks for asking, but unfortunately, no, everything is not OK. I’ve been mourning a personal loss.”
      • Almost non-existent long-term reader: “Oh…I’m sorry for your loss. Who are you mourning?”
      • Grumpus:“Not who but what.”
      • Almost non-existent long-term reader: “OK … That’s strange … What are you mourning?”
      • Grumpus:“I’m mourning the death of my defined benefit pension-enabled Financial Independence Retire Early (FIRE) in New Zealand lifestyle. It died in October 2022, when I returned to full-time work.”
      • Almost non-existent long-term reader: “Oh, I’m sorry to hear that! However, I’m afraid I must report you to the Internet Retirement Police (IRP) that Mr. Money Mustache talks about.”
      • Grumpus: “I understand. I’m now a FIRE imposter. Tell the IRP that I’ll go willingly.”

(Moments later, as the IRP is dragging a defeated Grumpus into the police van)

      • Grumpus: “My first attempt at a FIRE in New Zealand lifestyle is dead. LONG LIVE MY SECOND FIRE IN NEW ZEALAND LIFESTYLE!”
The End of a Short Era

You read that imaginary conversation correctly. My defined benefit pension-enabled FIRE in New Zealand lifestyle only lasted 1 year, 4 months, & 23 days. By FIRE in New Zealand lifestyle, I mean the time I spent in retirement with no GI Bill-sponsored or other full-time work-related income. During that time, my family and I lived in New Zealand, relying solely on the income from my Department of Defense and Veteran’s Administration (VA) pensions. I must admit, with a small amount of pride, we did an excellent job of staying under those spending limits.

Why, then, did I return to full-time work? I did it because a defined benefit (DB) pension cannot buy a New Zealand residence-class visa. And without a resident visa, an immigrant family like mine cannot FIRE in New Zealand. That’s not to say that money can’t buy residence in New Zealand because it most certainly can through an investor visa. However, in the post-pandemic New Zealand immigration system, that potential visa pathway was moved beyond my family’s ability to achieve. As a result, even though I’m guaranteed to earn the same inflation-protected amount of money each month until the day that I die, it wasn’t enough. I found myself at the uncomfortable crossroads of a return-to-work decision around September 2022. Continue reading

This Is Your Pension On Inflation

What do you think will be the Word of the Year for 2022?

My heart says it should be “Ukraine,” but my head says it will be “inflation.”

If I was a betting man, I’d bet with my head.

To be fair, one of the driving factors of 2022’s inflation is Russia’s illegal and immoral war in Ukraine. Specifically, it is the grain and gas shortages caused by the war and the international sanctions against Russia. However, that’s not the only cause of 2022’s inflation problem. It turns out that inflation’s rise in 2022 is a complicated story, one with many villains and few heroes, which also means it may be sticking around for some time. As a result, it’s an excellent time to analyze the vulnerabilities of a pension without an inflation-fighting mechanism. Continue reading

The Pension Couch: Replacing Pension Income

Back in Action

I’m back with another edition of the Pension Couch. I produce Pension Couch articles from edited and sanitized exchanges with readers who ask me defined benefit (DB) pension questions. It’s a way for me to create posts with useful pension-related information without the additional work required to write one from scratch. In this edition, I answer a reader’s “what if” question about replacing lost pension income by taking a higher-paying non-pensionable job. As a question, it fits well with this blog’s stay-or-go Golden Albatross theme. Therefore, I believe it’s worth your time.

This article’s request came from a reader who I called Kai. He specifically asked how much he’d need to save and invest at a new non-pensionable job to replace lost annual pension income from his current pensionable job… if he decided to leave six years earlier than planned. On the face of it, that’s a straightforward question. The answer, however, required modeling his retirement savings and investment options and then determining if they could replace the potential lost pension income.

Readers ask me some form of the “replacing pension income” question a lot, which tells me two things. First, many readers have contemplated leaving their often lower-salaried pensionable jobs for higher salaried non-pensionable jobs. Second, many readers also understand these scenarios involve trade-offs connected to their pension’s ultimate value in retirement. But, as just mentioned, mathematically modeling these “what if” questions can be complicated. Fortunately, in this article, I demonstrate how to determine if replacing pension income is feasible without resorting to complex math formulas. Instead, I use a free website and free retirement planning software, which you can easily replicate, should you need to answer the same question. Continue reading

The Pension Series (Part 30): Pension Maximization

Pension Maximization

Helping pensionable workers determine the value of their defined benefit (DB) pension to make well-informed Golden Albatross decisions is the raison d’être for this website. Thus, I write most of my articles for pensionable workers trying to determine whether staying for their DB pension is worth it. However, those aren’t the only articles I write. Although much smaller in number, I also publish articles for pensionable workers who decide to stay. If a unifying theme to those articles exists, it’s pension maximization.

What’s pension maximization? In practical terms, pension maximization ensures your pension’s positive impact in retirement is as significant as possible. You maximize your pension by taking active steps during your pensionable career. My Gap Number, Roth vs. Traditional, buying back years, and pension geoarbitrage articles provide examples of actionable steps pensioners can take. That said, unlike my Golden Albatross-themed articles, I never laid out a framework for pension maximization. In other words, after a worker decides to stay, I never answered the simple “now what?” question.

The remainder of this article, and its follow-on, layout my framework for answering “now what?” I call this framework Grumpus Maximization.

Yes, it’s a somewhat cheesy metaphor. But, Grumpus Maximization is a catchphrase designed to stick, much like the Golden Albatross. Who knows? It might even aid future marketing attempts like printing t-shirts with “Got Pension?” on the front and “Get Maximized @ grumpusmaximus.com” on the back …

That’s not helping, is it? Fine, I’ll sidebar the marketing discussion for now. Continue reading

Death Binder 2.0: The Pensioner’s Edition

A New Hope … For Time to Create a Better Death Binder

Young kids fractionalize your free time as a parent, making long-term projects difficult. That may sound ironic coming from an early retiree and pensioner like me, but it’s nonetheless true, especially during the summer holidays. As I pen this post, it’s February, and we’re nearing the end of summer in New Zealand (NZ). The kids recently started their new school year, which is great because my family and I were busy with all the fun things that typify the NZ summer lifestyle for the six preceding weeks. This includes going to the beach, road-tripping, camping, hiking, kayaking, bike riding, summer football (i.e., soccer), and rock jumping into emerald pools of cold mountain river water! Needless to say, all that fun didn’t leave much time for the long-overdue transformation of my original death binder into a pensioner’s death binder. Continue reading

The Pension Couch: A Lump-Sum Offer Mystery

As the title of this Pension Couch post suggests, I help solve the mystery behind a lump-sum offer for a reader. I decided to code-name that reader Charleston because I have relatives who live in South Carolina. As with all Pension Couch posts, most of this article is made up of my lightly edited email to Charleston. In that email, I analyzed her two options: either take the lump sum or stick with the pension annuity. The wild card that makes this article different from my other lump-sum articles is that her lump-sum offer was from what’s known as a church pension plan (aka church plan).

I’ve never written about a lump-sum offer from a church plan. Actually, I’ve never written about church pension plans full-stop. Moreover, while I discuss them in this article, I don’t go too deep. I’ve made a note to write a post on church plans for the Pension Series in the future, though, because they’re an important topic. In the meantime, all you need to know is church plans don’t have to abide by the US’s Employee Retirement Income Security Act of 1974 (ERISA). For those of you unfamiliar with ERISA, it is the “federal law that sets minimum standards for most … retirement and health plans in private industry to provide protection for individuals in these plans.

Since church plans in the US don’t have to follow the federal minimum standards, their inner workings are somewhat opaque. This opacity can create some severe pension safety concerns for plan members. Moreover, it also turns out the lax rules governing church plans impact how these plans can calculate lump-sum offers. Therefore, the mystery in this story isn’t a “who’s done it?” but a “how was it done?” Continue reading

The Pension Couch: Pension Roll-Over Questions

What should pensionable employees who leave their job before normal retirement age (NRA) do with their pension at their former employer? Should they roll the pension over into a self-directed retirement account like an IRA? Or, should they wait until NRA and collect the annuity?

These are simple enough questions, but not ones I ever had to deal with personally since my pension never accrued a value while I worked. That said, there are ways to determine the answers to these questions. But, as with many things connected to pensions, such as the Golden Albatross inflection point, it often involves a mix of math and emotion. It certainly did for one reader who had a pension roll-over question, so I made it the topic of this Pension Couch post.

For those that don’t remember, Pension Couch articles are created from lightly edited and sanitized email/message exchanges in which I answer readers’ pension questions. Names and some details have been sanitized to protect the innocent. Also, don’t forget that I speak in general about pensions throughout this post because every pension plan is different. So, make sure you research your specific plan before taking any action! Continue reading

The Pension Couch: Early Retirement Penalties

I run a Facebook group for pensioners, pensionable workers, and/or their significant others called Golden Albatross/Golden Handcuffs. The group relies on the wisdom of the crowd to answer members’ pension-related questions and/or discuss pension-related topics. From time to time, the group serves up good topics to write about. For instance, I recently exchanged comments about the early retirement penalties built into their pension with a group member. It didn’t appear that the group member understood the reason for these penalties. As a result, I provided a short explanation as to why they did.

Fortunately, the Facebook exchange reminded me of a more in-depth email exchange I had with a reader a few months ago on the topic of early retirement penalties. Since the email conversation was far better organized (and researched) than my Facebook exchange, it seemed like a good candidate for a Pension Couch post. For those that don’t remember, Pension Couch articles are posts created from lightly edited and sanitized email exchanges in which I answer readers’ pension questions. In this instance, I answer McGruff’s (the crime dog from Public Service Announcements in my childhood) questions about the early retirement penalties built into his/her law enforcement pension plan.

Do early retirement penalties spell death for pensioners’ early retirement hopes?

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18 Months of Kiwiarbitrage

In my original Kiwiarbitrage article, I explained how I determined that my family and I could afford to “retire” to New Zealand (NZ). I also stated that I would write many more articles on New Zealand and geoarbitrage. Since then, I’ve written precisely none … until now!

This article starts with general lessons that any expatriate (EXPAT) pensioner should know before moving, some of which I didn’t. Secondly, since several readers contacted me over the past few months and asked what the cost of living in New Zealand is like, I discuss that below. The article is organized so people can read the sections they’re interested in and skip the rest. I also try not to concentrate too much on COVID-19 pandemic-specific lessons but rather lessons that apply to all environments.

Finally, this article is anything but definitive. There will be others. For instance, I want to write one for EXPAT US military retirees and veterans. However, I limited this article to just the general lessons I’ve learned from retiring overseas and cost of living insights for the sake of time. Continue reading