Do you know how much a pension is worth? In this video, we discuss the value of a pension and how you can take advantage of it if you have one.
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A pension is a valuable asset for many individuals as they reach retirement age. It is a form of income that is paid to a person after they retire from their job and often continues until their death. But how much is a pension really worth, and how do you determine its value?
The value of a pension can vary widely depending on a number of factors such as the amount of contributions made by the employee and employer, the length of time the individual has worked, and the specific terms of the pension plan. In many cases, pensions are calculated based on a formula that takes into account a person’s salary and the number of years they have worked for a company.
One common method for calculating the value of a pension is to multiply the number of years worked by a certain percentage of the employee’s average salary over their final years of employment. For example, if a person worked for 30 years and their average salary in their final years was $50,000, and the pension plan pays out 2% for each year worked, the calculated pension amount would be $30,000 per year.
Another important consideration in determining the value of a pension is the type of pension plan. There are various types of pension plans, including defined benefit plans, defined contribution plans, and cash balance plans, each with their own unique methods for determining the value of the pension.
Additionally, the value of a pension can be impacted by other factors such as cost of living adjustments, early retirement options, survivor benefits, and other provisions specified in the pension plan.
It is also important to consider that the value of a pension can be affected by external factors such as inflation, changes in the economy, and the financial stability of the company or organization providing the pension.
In many cases, the value of a pension can also be impacted by decisions made by the individual, such as choosing to take a lump sum payment instead of regular pension payments, or deciding to retire early or later than the standard retirement age.
Overall, the value of a pension can be significant in providing financial security and stability during retirement. It is important for individuals to carefully consider the value of their pension and how it fits into their overall retirement savings and income plan.
In conclusion, the value of a pension can vary widely depending on a number of factors, and it is important for individuals to understand how their pension is calculated and how it can impact their retirement finances. By carefully considering the value of their pension and how it fits into their overall retirement plan, individuals can make informed decisions to ensure a comfortable and secure retirement.
Pensions don t just go away. If the company cannot pay they declare Bankruptcy and the obligation often at a reduced rate is taken over by PBGC in accordance with ERISA ? Correct ?
Not all people get big pensions like that. I paid into the Teamsters pension for 16 years and my pension is $675 dollars a month.
A pension is gold, no matter how small. It lasts for the rest of your life. That plus SSA is your safety net. If you have a paid off home, even better. If not, pay it off or get rid of it before you retire. You want no mortgage, no rent. What you earn beyond that is your rainy day fund and your quality of life.
Ok' I'm now 80 years of age and on a very fragmented income. (but I live in Perth Western Australia where things are very very different). Born (1943) and living and working in England for 30 years I get a part-British government age pension, I get a part-British Airways age pension, I also get a part-Australian government age pension which together with the required drawdown from my superannuation account (monies from the sale of an online business and you absolutely have to have an online business; or some sort of business to sell on retirement) given I have no debts and no mortgage allows me to live very happily on something between 50k and 55k year., you really don't need vast amounts of money to live a very mellow contented life. (it also helps if you're 94% hard-core introvert, Chuckels) 😉
While I appreciate you put a value on a $5k/month pension so i can then figure out what my $1800/month pension is worth, it would have been nice if you had shown why/how that $5k is worth a million dollars …
Simple and really helped. Thanks
Finally someone preaches this truth. Thank you sir!
Thank you so much for this video.
I have a pension that is an annuity and will have a COLA at 61.
Would think the value is also dependent on inflation, unless there is an inflation rider of some type. The higher the inflation rate, the lower the value.
"To obtain financial freedom, one must be either a business owner, an investor, or both, generating passive income, particularly on a monthly basis." — Robert Kiyosaki. I wasnt financial free until my 40’s and I’m still in my 40’s, bought my second house already,earn on a monthly through passive income and got 4 out of 5 goals, just hope it encourages someone that it doesn’t matter if you don’t have any of them right now, you can start TODAY regardless your age INVEST and change your future! Investing is a grand choice I made..
We retired in 2019 and yes a pension is a big deal. Our income is 140,000/yr. $100,000 comes from pension and 40k from SS. With a portfolio of over 2.3vmillon we feel secure. It is a shame when pensions and profit sharing are leaving the work force
Is the "$5000 per month" pension "worth $1 million" assuming drawing at 65 y/o with NO COLA?
Curious what is my pension worth in total dollar$?
I'm a Retired Ca. Corrections Officer. I have a Defined Benefit Pension I was eligible (and did) start drawing at 50 y/o when I retired. Initially it was $89,000/yr (when I retired Fall of 2019) with 2% COLA/year and full 'free' medical & dental insurance, which converts to Medicare with Medicare Suppliment Insurance at age 65. It is now paying me $94000/year and I'm 1 month shy of 54 y/o. My pension also has an 'inflation protector' that kicks in when it's inflation adjusted purchasing power reaches 75% of purchasing power, backdated to retirement date (mine in 2019), at which time the COLA matches CPI instead of 2% (usually takes 25 years after retirement to kick in, but maybe within 15 years with current & predicted future high inflation trend). Seems mine is a Cadillac multi-million$$$ pension, maybe 2.5 – 3 million$$$!!! Good chance I'll live to at least 85, maybe 90 y/o, probably $4-5 million paid. However Calpers may go bust???
Another question: Defined Benefit Pensions aren't calculated in net worth, but Annuities (which have to be purchased by the pensioner) are. So if someone in the private sector, or a business owner purchased MY exact equivalent pension, and retired at 50 y/o like I did, they'd have to be a multimillionaire, likely with at least a $3 million net worth, if my calculations are correct (assuming adding the home equity, cars paid off and moderate savings/investments they'd likely have, that I have).
Question: Not to sound 'vain', but am I technically a "Multimillionaire", or at least a "Pension Multimillionaire"?
Does this prop me up from "Sub HNWI" to "HNWI"?
I have been "officially retired" since my 50th BD and do not work anymore. I'm a 'SINK' (Single Income No Kids) and have NO 'Garnishments'.
My 'educated mathematical guess': Seems in order to pull this off if I wasn't a "Govt Employee", I'd need to pay at least $2.5 million to buy an equivalent annuity?
Fun fact. Not to 'brag' or anything, and he's MUCH Richer than I, but my Pension pays MORE than Paul Ryan's, the retired former Speaker of the House of Representatives before Nancy Pelosi, and Paul Ryan was a Representative of the House for 20 years (I get quite the kick out of that fact). Seems, as long as Calpers doesn't go bust, I hit the jackpot as far as Pensions go. Mine's probably in the top 10% of highest paying Pensions.
Maybe TMI, hope I don't sound pompous, not my intention.
I am highly curious of the accurate dollar amount my pension is worth, and hope you respond.
Great video btw!
I ave a pension from the federal government and I get down on my knees and thank God. It is great. And I wasn't an SES
I'm one of the lucky ones that is a Teamster and will have a nice pension and401k. My wife will also have a nice pension and has a 403b
NOT MUCH IF BOTH DIE
Pensions are by FAR a substandard choice when measuring it on a purely ROI criteria.
Pensions (the 100%) "dies" when the person dies.
A 401K with 40 years of dollar cost averaging in the S&P500 Index fund/ ETF contributions do not die and can live on in perpetuity as they get passes on to the next generation(s). Pensions (by far) do not keep up !
VA 100% disability, chances of living to 90 years old, very very slim. Health wise this person has serious problems.