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: 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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The Pension Series (Part 11) : Pension Lump Sum Case Study — Updated

Substantive Revision

This is a substantive revision to the original Pension Series Part 11 article I published on 18 JAN 2018. I updated this article because I have a new method for calculating the Total Dollar Value (TDV) of pensions that do not possess a Cost of Living Adjustment (COLA). The new method is far more accurate than the old method, so I am updating all articles in which I used the old method. That said, the new formula didn’t change the results of this case study because the estimated value of the pension annuities on offer increased vice decreased. As a result, the new method only strengthened the recommendation I made for the ChooseFI listener to concentrate on comparing the difference in value between her $75,740 lump sum offer and the lifetime annuity starting at age 60. 

Any additions I made to the text are in blue. Sentences from the old version of this article that discuss my old TDV method are struck through. I only used the feature a few times in the text, mostly to replace the old TDV steps with the new. As a result, the article itself remains fairly coherent.  Continue reading

The Pension Series (Part 13): The Master Pension Value Calculator (Updated)

Substantive Revision

This is a substantive revision to the original Pension Series Part 13 article I published on 04 FEB 2018. I updated this article because I have a new method for calculating the Total Dollar Value (TDV) of pensions that do not possess a Cost of Living Adjustment (COLA). The new method is far more accurate than the old method, so I am updating all articles in which I used the old method. That said, the new formula didn’t change the results of this case study because the estimated value of the pension increased, instead of decreased. As a result, it only strengthened the argument for Ms. Money Penny to stick with the lifetime annuity. 

The major changes for this article are in the spreadsheet, not in the text itself. If you downloaded and used the old spreadsheet, you should delete it and download the updated version. Any additions I made to the text are blue, and I only used the strikethrough feature a few times in the text, mostly to replace the old TDV with the new sum. As a result, the article itself remains fairly coherent.  Continue reading

The Pension Series (Part 4): Total Dollar Value (TDV) of Your Pension (Updated)

Mea Culpa

This is a substantive revision to the original article I published on 01 October 2017 entitled “The Pension Series (Part 4): Total Dollar Value (TDV) of Your Pension.” I am making this substantive revision because I have updated the formula to calculate the Total Dollar Value (TDV) for pensions without a Cost of Living Adjustment (COLA).

In my two-and-a-half years of blogging, this is only the second major revision I’ve made to an article. However, as a result of updating the formula, it will not be my last. Several other articles in which I attempt to calculate the TDV of people’s pensions also need to be changed. I will update and re-publish those articles, much as I did with this one, with notifications to all my readers. But, since this article explains TDV calculations of no COLA pensions, I needed to start with this one. Continue reading

Retirement Anxiety: How I Retired Mine

Anxiety Check

Retirement anxiety

I think it will take more than this to calm me down.

How are your retirement anxiety levels at the moment? I must admit my levels were high earlier this week. As described in my previous post, I recently realized that I’m (probably) not going to make it to 21-years of military service. Thus, I’m (probably) going to retire after my pension vests at 20-years. This means that I won’t secure the transferability of my GI Bill to my kids prior to retiring. As a result, I’m leaving a lot of potential money on the table.

I spiked my anxiety levels even further this week by breaking the above news to Mrs. Grumpus. She doesn’t routinely read my blog. She’s too busy with the kids and running the household to find the time to read my 3500+ word tomes (i.e. articles). As a result, if I come to some major insight about my life while writing, I can’t rely on her to read about it. This means I actually have to talk to her. Unfortunately, I’m a much better writer than a talker, so I usually make a mess of the conversation. Continue reading

The Golden Albatross Financial Philosophy

The Request

Golden Albatross

Professor X enjoying his lunch break.

A few months ago a military member from a mid-career service school approached me through my blog with a request. He’s an instructor, so let’s call him Professor X. One of Professor X’s topics is personal finance as it relates to effective management of one’s career. He’d read my blog and believed several of my articles were appropriate material for his students. As a result, he asked me to speak via video to his class. After we exchanged a few emails on proposed topics, legal conflicts of interest, and technical hurdles; I agreed to appear in uniform as a military member, smart in the ways of finance, but without mention of my blog.

With this scheduled event now only a few days away, I thought it prudent to script my remarks. I also thought it would be worth turning those remarks into a blog post. Since Professor X’s request forced me to distill numerous blog posts into one coherent speech about my financial philosophy, I figured some of my readers might find it useful. As a result, this post doesn’t cover any new territory. It simply synthesizes a lot of what I’ve written previously in one place. Who knows? If I ever write a book, this article might form a good basis for the first chapter.

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The Golden Albatross vs. The Insurance Industry (Part 1): Fees

What’s Your Opinion on Insurance Products?

Let me level with you up front: I don’t have a lot of experience with insurance products — especially the type that mirror investments. Prior to my experience related in the below story; the only other time I dealt with insurance investments was successfully extracting Mrs. Grumpus from one of the two products she invested in as a young worker in her home country. Up to now, I really hadn’t given them a lot of thought. As a result, I never held strong opinions about them in either direction. Maybe the most I ever felt was lucky for not getting involved with them — which I suppose is better than the regret I routinely express from other investment choices!

Of course, I’m not completely unaware of the arguments for and against such products. I hear them routinely denounced on several podcasts I listen to. Jill Schlesinger from “Jill on Money” is probably the most vocal, but certainly not the only one. The costs associated with such insurance “investment” products are often what draws the most negativity. Insurance sales people who push insurance products as a panacea to all money problems, is another issue that stirs emotion the wrong way.

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The Gap Number Method in … ACTION!

Click Bait

Like what I did there with the title? I created what’s called click bait. Most of the time my titles are boring, other times they are obscure. This time though I created an “action” title to capture readers’ interest in the Gap Number Method, because it gained some recent publicity. That’s about as creative as I get, adding the word “action” in all caps to a title.

Gap Number Method

How’s that for action? Mrs. Grumpus hiking in Kauai

Yes, I know. You’re wondering how, with only two readers who aren’t related to me, did I gain any publicity? Well, it turns out I have a face built for radio — or podcasting as the case may be.  Not so sure about the voice though.

In any case, on a recent (and so far my only) podcast interview on ChooseFI, the hosts asked me to explain my concept of the Gap Number. For those of you who need a refresher on the Gap Number, you can find the post where I coined the term here. In general, the Gap Number is the difference between your fixed income in retirement and your expenses. Expressed mathematically it looks like: Continue reading

Track Your Money (Part 3): Passive Tracking

A Passive Tracking Experiment

Passive Tracking

I’m ready to blow up this lab whenever you are!

In case you can’t tell from my title, this article is a follow-on to my previous two “Tracking Your Money” posts. In the first article, I reviewed my historical use of various software applications to track my money over the past 20 years or so. In the second, my brother (Grumpus Brotherus the Younger) reviewed the software application called You Need A Budget (YNAB).

If you did not read the first post in this series, you probably should. I don’t just say that because my brother’s post sucked (it did), and I think mine is much better (it was), or I want the extra site traffic (I do). No, I say that because I actually made a few worthwhile points in the post … if I do say so myself. However, if you’re unwilling or unable to go to the post, let me provide you a re-cap. Continue reading