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

Golden Albatrosses Killed Your Golden Goose

No Birds Were Hurt In The Making of This Post

Wondering where I’ve been lately? Well, I’ve taken advantage of some post-operative convalescent leave to concentrate on finishing my book. As a result, I haven’t spent any time writing new content for the blog. Fortunately, though, Chris Pascale saved the day and offered to write a guest post for this month. Chris is a published author, father, husband, accountant, teacher, and former U.S. Marine (although I’ve been informed there’s no such thing as a former Marine). He’s also a big fan and friend of the blog.

Chris reached out to me last year (2018) after he heard my interview on the ChooseFI podcast. He believed we had a lot in common including military service, money issues, and PTS. To prove it, he sent me a copy of his most recent book of published poetry called War Poems: A Marine’s Tour 2003-2008. Continue reading

The Golden Albatross vs. Risk (Part 1)

Doubting Grumpus

I spent a recent weekend and a good part of the following week “engaging” in the main ChooseFI Facebook group on the topic of whether or not it’s a good idea to invest your Emergency Fund (EF). This debate was prompted by ChooseFI Episodes 66 and 66R in which the “Invest Your Emergency Fund” thesis was broached, examined, and positively endorsed by the hosts and their guest. Just to be clear, I argued (congenially, of course) that in general terms, it was a doubtful thesis. More importantly, though, I pointed out (along with several other people) that the framework for the debate was poorly constructed. This was primarily due to a lack of defined terms.

risk

Fund?

For the record, I’m a big fan of the ChooseFI Podcast, and not only because they interviewed me. The hosts, Brad and Jonathan, typically dole out challenging but sound Financial Independence (FI) advice. Although they stooped low to interview me, their guests are also typically top notch. In fact, their guest for the “Invest Your Emergency Fund” episode was Big Ern McCracken. Ern runs the Early Retirement Now blog — of which I’m also a big fan. Ern’s not only a valued member of my Golden Albatross FB group, but we even collaborated on an article for my website. Continue reading

The Pension Series (Part 12): More Pension Lump Sum Analysis (Updated)

Nerd Alert!

This article is a follow-up on the lump sum case study I conducted for the ChooseFI listener, Tess, in Part 11 of the Pension Series. If you missed it, that case study also aired as Episode 58R on the ChooseFI Podcast. I mentally debated if I should make this Part 11a considering the links between the two articles.  However, given this article’s length, and the alternate pension lump sum analysis method it outlines, I decided it warrants its own part in the series.

I’ll warn you now, this article is another deep dive into the world of pension lump sum offers. It won’t be my last either. Pension lump sum analysis is a rabbit hole. As I pointed out in my previous article, there’s no one correct method. A lot depends on what the pensioner values and the questions they are trying to answer. Proper analysis is also based on the strings attached to either the lump sum or the annuities.

pension lump sum analysis

Hello? Can anyone up there hear me? I got stuck down here analyzing my pension lump sum!

Fortunately, as a result of my appearance on ChooseFI 58R, several people reached out to discuss methods of calculating pension value and conducting lump sum analysis. We are currently in the process of compiling a spreadsheet with many of those methods baked in. It’s not quite ready though. So, for now, you have to put up with another wordy pension lump sum analysis from yours truly. Forewarned is forearmed. Continue reading

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

The Pension Series (Part 7): How to Create Your Own COLA

St. George’s Thesis

Build Your Own Cola

“Cry — God for Harry! England and Saint George!”

How was your week? Productive I hope.  I spent most of my spare time drafting my pièce de résistance for the Pension Series as a guest post for one of my favorite blogs and bloggers. I’m excited, so stay tuned for the announcement as to when and where you can find it. Unfortunately, it means I’m short an article because I (stupidly) don’t keep any posts in the bank.

However, I am about to let you in on a little blogging secret.  Facebook provides an endless amount of material to write about. As proof of this point, about 10 days ago George, one of my awesome Golden Albatross Facebook Group members, asked the following sizzler of a question related to pensions and inflation-adjusted Cost of Living Allowance (COLA):

Basically, if my pension is say $50k [a year] with no COLA provided by my employer, what do I have to have saved in an IRA to be able to grow my pension with cost of living for the next 30 years? (50k+4%)+4%)+4%)etc. For 30 years…)
Continue reading