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 31): Grumpus Maximization

Posted on 12-June-22 by Grumpus

Pension Maximization Part Deux

This post is a direct continuation of Pension Series Part 30. In that article, I introduced my general framework for maximizing your defined benefit (DB) pension, which I call Grumpus Maximization. I also walked through the first two steps of Grumpus Maximization, which were (1) setting expectations and (2) orienting on yourself and your pension. These two steps are about understanding your retirement needs and your pension. In fact, step 2 required answering nine questions along those lines, not all of which were easy.

This article covers steps 3 through 5 of the Grumpus Maximization framework. As a preview, step 3 involves determining your Gap Number, which I discuss in detail below. Step 4 identifies tax minimization and investment maximization strategies that complement your pension’s steady earned income. Finally, step 5 discusses identifying other pension maximization opportunities. Continue reading →

The Pension Series (Part 30): Pension Maximization

Posted on 25-April-22 by Grumpus

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 →

The Gap Number Method in … ACTION!

Posted on 14-January-18 by Grumpus

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.

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 →