How Should Your Pension Affect Your Savings Rate?
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As you start planning for retirement, you may wonder how much to save in addition to the pension you’re expected to receive. It’s natural to want to safeguard your future, but determining how your pension should affect your savings rate can be a challenge.
A pension is a retirement benefit plan that provides you with a fixed income once you retire. The amount of money you receive is typically based on a number of factors, including your years of service, your salary, and the plan’s specific formula. Depending on the plan, you may also be required to contribute a certain percentage of your income to the pension fund.
So, how should your pension affect your savings rate? It largely depends on how much you’re receiving in retirement income. If your pension provides enough money to cover your expenses and you don’t have any significant debts, you may not need to save as much as someone who has no pension income.
However, it’s important to remember that just because you have a pension doesn’t mean you should stop saving altogether. You may want to consider saving at least 10% to 15% of your income to build up an emergency fund and to cover unexpected expenses that may arise.
If your pension income is not enough to meet your retirement expenses, you’ll need to save more. The general rule of thumb is to save enough to replace 70% to 80% of your pre-retirement income. If your pension only provides a portion of that percentage, you may need to save more than 15% of your income. In this case, it’s crucial to ensure that you are living within your means and avoid overspending in order to build a sufficient nest egg.
It’s also important to consider your retirement goals and lifestyle when determining your savings rate. Do you want to travel extensively during retirement, or do you plan to stay close to home? Will you be downsizing your home, or staying put? All these factors should be taken into account when figuring out how much to save.
Finally, it’s also recommended that you consult with a financial advisor who can help you determine how much to save for retirement. They can provide you with personalized advice and help you create a comprehensive retirement plan tailored to your specific needs and goals.
In conclusion, while your pension income may impact how much you need to save for retirement, it’s essential to consider your personal goals and financial situation. Saving at least 10% to 15% of your income is generally recommended, but your specific circumstances should guide your savings rate. Contacting a financial advisor can also be helpful in ensuring that you are on track for a secure and comfortable retirement.
Someone needs to cover RR (railroad retirement). It’s the gold standard pension wise so should my savings/investing rate change due to this?
Glad to see taxpayers are funding these awesome pensions for people that are already making high salaries on the taxpayers dime.
MISSOURI TEACHERS BEWARE: Social Security will STEAL your benefits….especially….your SURVIVOR BENEFITS! Repeal: WEP & GOVERNMENT PENSION OFFSET. HR 82. S 1302.
Doesn't having a pension severely diminish your social security?
So delta screwed there piolets. Figures
Save until it hurts, when you retire you will appreciate it. I have a pension and I am contributing 27% into my 401K. When I retire I don't want to have to go back to work unless I want to.
The devil is in the details. Does that person’s pension get cost of living adjustments after the person starts taking it? Or is it like the Pennsylvania teacher’s pension where when you start taking your pension it’s a set dollar amount and it is never increased as inflation goes up?
Also, if you run out of money in your retirement accounts and you have a pension there are several government programs that you’re not eligible for that you would be eligible for if you didn’t have a pension. So people like me who have small pensions need to have a more robust financial plan than people who don’t have pensions need to have. A pension of 63% of your final income is much bigger than my pension will be!
I worked for Pennsylvania school districts for 7 and a half years so I’m getting a pension from PSERS when I retire. That’s why I’m aware of this.
I’m not a mutant
Your statement about bonds baffled me! If you have a guaranteed pension for life why waste precious investment dollars with low yielding bonds? My military retirement is the security blanket I need to ensure I never have to invest in bonds.
No. He should seek to increase his savings rate having that pension.Lots of times the way people can save is because they actually have a pension.
This guy should not depend on a pension. Especially at his age. I worked for a company for 14 years then they sold my department. The new company was supposed to keep all of our benefits as they were…pension, 401K contributions and medical. Four years later the company filed for bankruptcy. While going thru the courts they stopped paying into the pension fund. Meaning anyone who wanted to retire could not opt for the lump sum payment. It took a little over a year for the company to come out of bankruptcy. They're "supposed" to fully fund the pension sometime in the future! Needless to say I'm not holding my breath. I have 2 years before I would be eligible for the 20 years of service. At which time the pension would increase quite a bit. Thank goodness I have close to 3 years of income saved and no debt. I can live comfortably off my SS and 401K. If my pension is still available, it will just be a bonus.
A friend of mine says to think of a pension as an annuity.
You should save like you have no pension. You can count on 75% of your social security and that’s about it. They could fire you before you are eligible.
It would be nice to see a video on how owning rental property should affect my savings rate.
Does it reduce the amount I should save, or is the income also included in the 20%.
This is the very subject I’ve been struggling with, I’ve got a pension that’ll give me 75% after 30 years of service. The company also offers a (non matching) Roth 457b that I contribute too.
I have a pension that covers my living expenses. I am retired and probably will find a fun part time job to stay active and for social reasons.
What job pays 63% of average salary pension?
The Ohio PERS already takes 10% of my income for the pension. I put another 8% into the deferred compensation. I feel like I will never be ready to retire.
Sounds like another California government pension. Taxpayers are screwed. One of the reasons I'm leaving the state.
There is an entire generation in the Midwest that had their retirements stolen from them by the steel industries or other manufacturers. Imagine a state or federal worker at 55 being told that 63 percent went to zero and by the way, go find another job that isn’t where you’ve live for your lifetime and start at zero on the pay scale to learn a job you’ve never done.
It’s like someone taking your 401k and getting you fired and banned from your industry.
Never say never and make your own plans, IMO.
I’m in a similar situation. Since the pension will bump my income into higher tax bands would you focus more on Roth investments even making over 6 figures?
I also have a government pension that will be 50% and social security. I have always put 15% in my tsp. It has been plenty. I saved enough to retire comfortable without the pension. I also put 3-7 % in college savings for my tsp kids. If you save since you start your career, you will probably have plenty.
As a disabled veteran that receives a "pension", I've asked this very question to VA financial advisors. Thank you for covering this topic. Appreciate your support in the finance field.
I really needed this talk. The only problem for me is I'm 51 retired from my job of 30 years and went back to work contracting with another company just to stay busy. Still saving 40 percent of my salary. Seems like I can't let up to start spending.
I can only say 'SEARS'.