UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev Thread | Prev | Next | Next Thread
Author: marcusfan One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 74759  
Subject: What analysis do I use? Date: 3/7/2002 7:12 PM
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Recommendations: 0
I am a state employee covered by a state defined benefit pension plan. I have the opportunity to purchase up to four years of service credit. Our pension amount is based on final average pay times 1.7% times years of service.

If I purchased the pension service, in 15 years I would be able to retire two years earlier than I can retire now. The amount required to purchase this service credit is substantial (at least to me). Another benefit to purchasing this service is that my employer bases their contribution for retirees health insurance on years of service and I think that as health insurance costs increase that may be a large factor.

I could probably come up with the amount required within the next six months or so, but how do I determine if that's something I should do. I know there should be some mathematical formula for figuring this out but I am lost.

I already have an emergency fund and contribute the maximum to my 457 plan and my Roth IRA. Also, I understand that if I wanted to I could pay the amount required to purchase the service out of money in my 457 plan. I don't think this is something that I want to do because I couldn't later make this amount up and therefore I lose out on all of the compounding of the amount that I currently have in there. Is this right? Am I missing something that is obvious to everyone else.

I just have no idea where to start when trying to analyze what I should do. Does anyone have any suggestions? Thanks in advance.

Marcusfan
Post New | Post Reply | Reply Later | Create Poll . Report this Post | Recommend it!
Print the post  
UnThreaded | Threaded | Whole Thread (5) | Ignore Thread Prev Thread | Prev | Next | Next Thread

Announcements

The Retire Early Home Page
Discussion on accelerating retirement day.
2013 Feste Award Voting Begins!
Who will win the 2013 Feste Award? Vote now for the Fool that most exemplifies the Fool Community mission of Learning Together!
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Post of the Day:
Tax Strategies

TMFPMarti-Feeling Good
What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
Community Home
Speak Your Mind, Start Your Blog, Rate Your Stocks

Community Team Fools - who are those TMF's?
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and "#1 Media Company to Work For" (BusinessInsider 2011)! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.
Advertisement