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Take The Money and Run or Higher Secured Income?

Discussion in 'General Entrepreneur Discussion' started by Legacy Dad, Sep 10, 2007.

  1. Legacy Dad
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    Legacy Dad New Contributor

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    Here is my situation:

    At 15 years of service I have to make a decision:

    Take $30,000 and have a reduced pension
    or don't take it and have a higher pension.

    Here is some figures:

    The first column is my age at retirement
    The second column is the pension per year if I take the $30,000
    The Third column is the pension if I do not take the $30,000


    Retirement Year 1 - Age 46 $37,630 vs. $42,846
    Retirement Year 8 - Age 53 $43,225 vs. $52,695
    Retirement Year 16 - Age 61 $50,645 vs. $66,752
    Retirement Year 17 Age 62 $68,755 vs. $68,755
    Retirement Year 25 Age 70 $80,557 vs. $87,097
    Retirement Year 30 Age 75 $88,942 vs. $100,969
    Retirement Year 35 Age 80 $98,199 vs. $117,051
    Retirement Year 40 Age 85 $108,420 vs. $135,694



    Here is also a chart showing the figures:

    http://tinyurl.com/2tvxpn

    The question is can I take $30,000 and make roughly $500 per month cashflow from that and increase it by 3.5% per year? My thoughts are a multi-unit and add value?

    What would you do?

    Just trying to generate some ideas and pro and cons?

    Lance
     
  2. RAiMA
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    RAiMA New Contributor

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    So you're looking for a vehicle that roughly makes 23.5% in cashflow p.a. or 2% per month in cashflow.

    Options on the stock market, either by covered calls or stock collars come to mind.

    You can also consider cfd's (not sure if they're available in the US) or futures if you're good with market analysis and picking trends, but they're more of a long term vehicle. Good if you're good at managing money.

    Before taking any steps, I'd suggest doing a lot of research into these vehicles and creating the mindset before commiting. Consider them as driving lessons for getting you from A to B in your financials.
     
  3. Russ H
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    Russ H Gold Contributor Read Millionaire Fastlane Speedway Pass

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    Lance-

    Any chance your bennies would change after you were out?

    -Russ H.
     
  4. Legacy Dad
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    Legacy Dad New Contributor

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    We should be grandfathered in to any future changes.

    Example: Eliminating the pension and going to a matched 401(k)

    They have been talking about this and we have been told we would be grandfathered in to any pension changes.

    I could also get some disability, got some hearing loss? That would bump it up 10-20% but I am not counting on it.

    The figures are also COLA'd at 2.5% increases which is conservative.
     
  5. S928
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    S928 Contributor

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    You might want to factor in fed and state taxes into the $30,000 payout. When I received my 30k SRB lump payment, I ended up receiving a lot less than I was expecting.
     
  6. kurtyordy
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    kurtyordy Bronze Contributor

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    just so we have all the variables-
    do you start recieving the pension payout the same year your recieve the 30k, or is there a gap?

    If it is simultanious, it is 6 years roughly to break even point. After that, it is a 5k+ deficit. After 8 years, it is roughly 9k per year deficit. So in 6 years, can you have 30k generating 5k+ per year?
     
  7. Legacy Dad
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    Legacy Dad New Contributor

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    Figure 30% to taxes unless I am downrange we'll say $21,000

    There is a 5-7 year gap between the 30K (minus taxes) and the time my pension starts.
     
  8. AroundTheWorld
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    AroundTheWorld Be in the Moment Speedway Pass

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    I would take the money and run for sure....

    Why?

    1) I decided long ago not to depend on anyone for my income (government, pensions, and SS included)

    2) I believe that I could take 30K (or less after tax) and turn it into more than what your pension payments would be.

    3) I would have oh-so-much more fun doing #2.

    How would I do it?

    That's not really the point.... As Steve O says, Find Your Pony.

    If you make up your mind to Find the Pony, Learn all you can about the Pony, then Ride the Pony...

    You will have a fun ride and get to your destination.
     
  9. nomadjanet
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    nomadjanet Contributor

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    Take the money & run, invest & work what you want to work instead of what you have to work. If I understand your calc. you are giving up 500 a month? $16.50 a day not to have to work at a JOB, you still get your bennies and you have time to do your investing on your own? What was the question.
     
  10. Legacy Dad
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    Legacy Dad New Contributor

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    I do not pay into the pension.

    The questions truly is, can I make the difference in the pension payouts by investing the $30K minus taxes or should I not take the $30k and have a higher life time pension payout.

    At this time I will still be maxing my 401(k) and A Roth and my wifes 401(k) and Roth. As well as doing real estate deals, hopefully the big 100+ Unit types.

    Lance
     
  11. AroundTheWorld
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    AroundTheWorld Be in the Moment Speedway Pass

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    I should have written "the payments you receive from the pension"

    So, it sounds like the "path" you want to take is apartment buildings. Your 30K can give you a start there if you decide to partner up for the first deal.
     
  12. kurtyordy
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    kurtyordy Bronze Contributor

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    ok, I am a spreadsheet geek, so I built one to simulate this scenario.

    30k=after tax 21k earning 12%/year and assuming all earnings are rolled into balance. Pension starts drawing 6 years after recieving the 21k.

    Retirement Year 1 of retirement 21k will be 41,450 and will earn 4974 net compared to pension approx -250 not in your favor

    Year 8 21k will be 91,633 and earn 10,966 net compared to pension approx 1500 in your favor, and it gets better from there.

    Math says take the 30k and run like the wind. You can do much better than 12% per year.
     
    S928 likes this.

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