OT: Retirement Options...Help

[Ti-Boy]

Work offered early retirement. Incentive is lifetime no cost medical for me and wife. Leaves me with approximately 50% of current income for life.

Options two: Take full retirement in 4 years. NO paid medical, but leaves me with approximately 65% of my income 4 years from now which will include 4 annual raises.

Money or medical? Thoughts? Experiences? Help.

[SoCalSteve]

If it were me, there would be NO decision. I'd take option # 1.

With the rising cost of health care, free medical for life is an amazing option.

Of course, we dont know your age, income level, debt amount, home paid for, etc...You may NOT be able to retire now. All things to consider.

But, if you can afford to live comfortably on the $$$ they are offering you now, then that would be my option.

Good luck to you!

Steve

PS: Do you love your job? Will you miss it? Are you ready to be done? All questions that only you can answer....

[Ray]

Work offered early retirement. Incentive is lifetime no cost medical for me and wife. Leaves me with approximately 50% of current income for life.

Options two: Take full retirement in 4 years. NO paid medical, but leaves me with approximately 65% of my income 4 years from now which will include 4 annual raises.

Money or medical? Thoughts? Experiences? Help.
You need to run the numbers, but my gut says go now and take the medical. The cost of medical is going to keep getting bigger and bigger and that 15% of current income is going to get smaller and smaller over the years. Plus, nothing's stopping you from taking other work, full time or part time to augment your income for as long as you want. I guess if you make enough, the 15% might outweigh medical, but benefits are usually something like 20% of salary, so I still say take the medical coverage.

-Ray

[Tom]

What's in the medical? If it includes long term care for daily living activities in your home, that's something to think about.

Figure out what you're spending these days and what you won't be spending because you won't be going to work and figure out if 50% maintains the standard of living you want. We went through the exercise and I was really surprised where the money goes and how little you actually need.

Talk to a financial planner. Talking to a bonehead like me that is one bad day from leaving the cubicle farm forever probably isn't giving you the best picture.

[spiderman]

Work offered early retirement. Incentive is lifetime no cost medical for me and wife. Leaves me with approximately 50% of current income for life.

Options two: Take full retirement in 4 years. NO paid medical, but leaves me with approximately 65% of my income 4 years from now which will include 4 annual raises.

Money or medical? Thoughts? Experiences? Help.

and retire your wheelsets over and over again
with dugasts, vittorias and continentals...

[CNY rider]

One little thing we've all forgotten so far: What's the creditworthiness of your company? What's the likelihood they will be there in 15 years to pay you these benefits?

To start answering the question, find out the ratings and forecasts assigned to company debt. fly and the other econo dudes can probably help you with how to do that.

The package might sound well and good but if they are out of business in 2 years it's not going to matter. Think all these retired GM dudes are going to be sucking down benefits in coming decades? Think again.

Good luck with whatever you decide.

[Ginger]

Yes, Look into your companies stability, check to see if the contract can be changed in the future and if there are measures in place to ensure continued coverage, look into the *kind* of medical benefits you're looking at.

The medical benefits you use now are probably minimal compared to what you might need in the future.

[alancw3]

option #1. no brainer!! good luck you lucky guy!

[Ray]

One little thing we've all forgotten so far: What's the creditworthiness of your company? What's the likelihood they will be there in 15 years to pay you these benefits?

To start answering the question, find out the ratings and forecasts assigned to company debt. fly and the other econo dudes can probably help you with how to do that.

The package might sound well and good but if they are out of business in 2 years it's not going to matter. Think all these retired GM dudes are going to be sucking down benefits in coming decades? Think again.

Good luck with whatever you decide.
Right, but those risks are the same whether you take the medical or the income, no? That being the case, the company's stability shouldn't affect whether you take the medical or the increased income.

-Ray

[Bradford]

Big Willie,

Perhaps you should dip into your inspiration archive and dish out some advice on this subject.

Tell Ti-Boy the story of Billy Joe and Bobbie Sue and what happened when they headed down to old El Paso and got into a great big hassle…

[CNY rider]

Right, but those risks are the same whether you take the medical or the income, no? That being the case, the company's stability shouldn't affect whether you take the medical or the increased income.

-Ray


You're of course correct. I was referring more to making future plans, and relying on that income to subsidize a real, lasting retirement. I think you need to know the creditworthiness of the company before banking your future plans on it.

[CNY rider]

I'll also add, that at my youthful age of 36, I make the assumption that I will receive nothing of tangible benefit from social security at the time of my retirement. That's along the lines of judging the creditworthiness of the entity you expect to pay your benefits.

[Ti-Boy]

Company stability not a real issue; it's the government. In either scenario I'm gone by age 50. Plan is to downsize house and relocate to eliminate/drastically reduce mortgage. Work part time for peace of mind and spending money; ride a whole lot more. Payback for the 3 hour round trip communte I've been doing for the last 10 years. 65% makes that more viable, plus 4 more years to save. Plus more likely not to have a mortgage. 50% may mean having to get another real job. But, as all pointed out here, medical is big and getting more expensive every day.

Still open to feedback. If nothing else it will help sway the misses.

Thanks all.

[67-59]

What do they mean by "no cost medical?" Does it just mean that they'll pay your entire premium, but they get to pick the plan? Or does it mean they'll be required to provide a "no cost" plan (i.e., no deductibles or copays)? If it's the latter, it really does sound like a great deal. But if it's the former, beware -- they might pay your entire premium, but if they can pick a really lousy plan, it might not be worth the extra 15% salary you'd get by going the other route. There are some pretty cheap (and relatively worthless) plans out there....

[martianbait]

In either scenario I'm gone by age 50.


Oh, if only I were in your shoes....

I am not the person to offer advice on something so personal. I would reiterate what others have said: (1) run the numbers, and (2) consult a financial advisor whom you trust.

[Ken Robb]

at age 63 I pay about $525 a month for health insurance with $2500 deductible after which I get 80% reimbursement. It goes up every year. My wife is younger and pays less for a Kaiser plan.

I would think the kind of policy you describe would be worth about $1,000 a month soon if not now.

[Kevin]

Lifetime insurance at 50, take it and run.

Kevin

[Rapid Tourist]

Ginger hit the nail on the head. Ask what authority the company has to amend its benefit package in the future. The "lifetime medical" promised to you is offered under a benefit plan, and benefit plans can be amended or terminated at any time for the most part. Ask what authority the company has to basically amend the program in the future to discontinue the lifetime medical.

I've seen these kinds of promises reniged by companies. I work in the benefits field.

[catulle]

If it were me, there would be NO decision. I'd take option # 1.

With the rising cost of health care, free medical for life is an amazing option.

Of course, we dont know your age, income level, debt amount, home paid for, etc...You may NOT be able to retire now. All things to consider.

But, if you can afford to live comfortably on the $$$ they are offering you now, then that would be my option.

Good luck to you!

Steve

PS: Do you love your job? Will you miss it? Are you ready to be done? All questions that only you can answer....

Word.

[djg]

have been asked, with one answered.

You are not concerned about the stability of the guarantor (the federal government? state?). The remaining questions of importance seem to be (1) what is the employer's ability to amend the coverage package down the road? and (2) 15% of what?

You already seem to be leaning toward staying put, on the notion that you don't yet have an adequate pension coming to you. Is there another job you have in mind to make up the difference?

[Ti-Boy]

Thanks for all the feedback. Exactly what I need.

Regarding changing the terms/medical coverage. Cannot be done according to the contractual guarentee. Has not been done to those who went before me in the over 20 years I've been employed. Having said that, I've been in government long enough to know it does what ever it wants and a poor retiree sitting on a well worn saddle is hard pressed to take it on. Even if your right, government takes you into bankruptsy trying to prove it. But that's true no matter when I leave. You cross the "t's and dot the "i's" and live on faith to some extent. But, isn't that life? Have not seen an ironclad contract yet in my life.

The difference between 50% now and 65% four years from now will be about $25k/yr. The medical is Horizon Blue Cross/Blue Shield Direct Access. (No primary needed and no referrals required. It is the plan I now have.
The fly in the medical coverage ointment is my wife has some pre-existing issues. If I go, they are covered. If I have to buy on my own they may not be or will cost greatly.

I can work in the same field in the private sector and probably make more than I do working for the government. But that's what I'm trying to get away from. I have a plan to work at something I think would be fun, but low paying. ie Guinness and Hagan Daaz money.

[shaq-d]

well.....

life is short

sd

[93legendti]

Company stability not a real issue; it's the government. In either scenario I'm gone by age 50. Plan is to downsize house and relocate to eliminate/drastically reduce mortgage. Work part time for peace of mind and spending money; ride a whole lot more. Payback for the 3 hour round trip communte I've been doing for the last 10 years. 65% makes that more viable, plus 4 more years to save. Plus more likely not to have a mortgage. 50% may mean having to get another real job. But, as all pointed out here, medical is big and getting more expensive every day.

Still open to feedback. If nothing else it will help sway the misses.

Thanks all.
Have you priced medical insurance yet? Until you do, it is hard to make an informed decision.

[Ray]

Thanks for all the feedback. Exactly what I need.

Regarding changing the terms/medical coverage. Cannot be done according to the contractual guarentee. Has not been done to those who went before me in the over 20 years I've been employed. Having said that, I've been in government long enough to know it does what ever it wants and a poor retiree sitting on a well worn saddle is hard pressed to take it on. Even if your right, government takes you into bankruptsy trying to prove it. But that's true no matter when I leave. You cross the "t's and dot the "i's" and live on faith to some extent. But, isn't that life? Have not seen an ironclad contract yet in my life.

The difference between 50% now and 65% four years from now will be about $25k/yr. The medical is Horizon Blue Cross/Blue Shield Direct Access. (No primary needed and no referrals required. It is the plan I now have.
The fly in the medical coverage ointment is my wife has some pre-existing issues. If I go, they are covered. If I have to buy on my own they may not be or will cost greatly.

I can work in the same field in the private sector and probably make more than I do working for the government. But that's what I'm trying to get away from. I have a plan to work at something I think would be fun, but low paying. ie Guinness and Hagan Daaz money.

Well, sounds like you know the variables. From a medical standpoint, your wife's pre-existing conditions just strengthen the argument for going now. The difference in pension income is substantial though, so I understand why it's not all that easy a call. BUT, if you have the fallback (if needed) of being able to do the same thing in the private sector for more money, you probably also have the option to do it part time for more than enough money to make up any deficit if it turns out you need to.

I left a govt job a bit over a year ago without anything like the deal you'd get (I just left, no buyout or healthcare offered, but with real pension implications) and am now doing very similar work on my own, out of an office at home. The money can be more or less, depending on how hard I want to work, but the flexibility is unbelievable. If we didn't have ongoing med benefits (from my wife's teaching job), I wouldn't have done it. But I'm damn glad I did.

Good luck,

-Ray

[Ray]

Have you priced medical insurance yet? Until you do, it is hard to make an informed decision.
Would you assume that any price you got today would be relevant over the next 20+ years? I wouldn't.

-Ray

[alancw3]

Ginger hit the nail on the head. Ask what authority the company has to amend its benefit package in the future. The "lifetime medical" promised to you is offered under a benefit plan, and benefit plans can be amended or terminated at any time for the most part. Ask what authority the company has to basically amend the program in the future to discontinue the lifetime medical.

I've seen these kinds of promises reniged by companies. I work in the benefits field.

ditto!!!!

[sailorboy]

I'm sure Enron looked pretty stable for the long-term too at one point...

[stevep]

easy choice/. take box #1 and get your butt out.
the medical will eat more that 15% over a few years anyway.