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Author: Hawkwin Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 76394  
Subject: Re: Pension info to consider Date: 10/5/2012 4:42 PM
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Their funding target attainment is 87%

That is actually not bad. Many plans have dropped below the 80% or 60% threshold. Any plan above 80% is generally considered well funded. 95% would be better (which is another threshold that requires disclosure).

http://hr.cch.com/news/pension/102209a.asp

Significantly underfunded plans, referred to as "at-risk," have special rules for determining funding targets. In general, the regulations provide that a plan is in at-risk status for a plan year if the funding target attainment percentage (FTAP) for the preceding plan year is less than 80% (65%, 70%, and 75%, respectively, for plan years beginning in 2008, 2009, and 2010), and the at-risk FTAP for the preceding plan year is less than 70%.

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I found no cost of living info in their plan materials.

Not good; and that is something you should clarify. Does the $670 a month ever have a chance of increasing and is that $670 in today's dollars or future dollars (e.g. next year, will that number be $684, for example, and so on).

With no COLA, the cost of the insurance at 62 might actually be more than the difference between the single and the joint life - but since you already pay for that, it should be less of an issue.

Tougher choice, but still clear for me with the pension. The lump sum does not get a COLA adjustment either so at 65 you could get $670 from the pension or take a lump sum and if you earn 6%, take the SWR (Safe Withdrawal Rate*) of 4% and get $333 a month. Your $35,000 would need to grow to $201,000 to use the SWR to replicate the $670 a month in income.

*Many people, including myself, no longer believe the SWR is 4%. Something closer to 3% is likely more accurate with the low interest rates, volatility, and longer life expectancy. Some think the rate is as low as 2%. Google such and you will find many different opinions.

http://www.cbsnews.com/8301-505146_162-39945237/four-percent...
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