[USER]

I have the option of buying back 4 years of service for a public agency pension at the cost of $330,000. This translates to an extra $1750 a month or $21,000 per year.

This $ will compound with COLA increases at an average of 2.5%.

It is a ton of money but it would allow me to retire at 55 comfortably. (I am 53) Has anyone purchased time back for a pension and was it worth it?

I have $2.1 million in retirement savings so it wouldn’t be a huge hit.

My brain says it isn’t worth it but my heart says it will make life easier with the extra guaranteed income.

[Amar]

Better off using that $ to get a rental property, get cash flow, reduces your taxes from other income and then you can hand it down to your kids tax free cuz the pension is gone when you are for the most part

[Teresa]

Many moons ago I purchased 3.5 years for my pension. It was way cheaper back then. No regrets.

[Reba]

My question, as the spouse of a local government retiree, what happens when you die?

You’ve paid all this money in, and if you die, the retirement system keeps it, then my answer is no.

If you die, and a spouse or other dependent, will receive lifelong benefits, then maybe.

I’m just not to sure I’d give up guaranteed $330,000 for a maybe situation.

[Dan]

I bought 4 years in CalPERS. It was much less than you stated, but much more than others have stated.

I don’t regret it when I did it (over a decade ago) and I’m a pensioner at 53 today.

If it makes sense for you, do it. good luck
*btw my pension goes directly into investments and savings.

I didn’t see if people factored that either. I continue to work in an unrelated field.

[Valerie]

That’s crazy. I bought back 4 yrs of my husbands military service to increase the survivor pension and it only cost me $3k but added $500 a month for the rest of my life.

[Aaron]

IMO depends on your goals and plans. I’m always in the camp to take the lump sum and keep control of my money but if you know you would basically just put this in stocks or something and draw down on it maybe this is fine.

I’d calculate how many years you have to live to break even on the 330k and incorporate that into your considerations as wel.

For me it would still be a no but if I was willing to give up control of my money that’s what I’d look at

[Rick]

It’s an annuity right? Meaning mortality credit gives “extra” payout to those who die late at the expense of those who die early.

I expect an annuity calc would give you some insight on how good or not this is.

[Jacob]

When I worked for the state. Anybody who could afford to do it, did it. I’d look at break even and decide if you think you’re going to live that long.

Seems like a no brainer to me.

Were you given the opportunity to buy out years ago when it was quite a bit cheaper?

[Jeff]

Run the amount you need to contribute ($330,000) through an investment return calculator for 15 years because you’re going to be missing out on the return on that money.

So, the break even of 15 years is only on the principal.

[Lori]

Financially it doesn’t sound good. But if you are debt free and know it will come close to covering your expenses then go for it.

Work sucks.

[Kathryn]

At a conservative 5% return, you’d be making $1,375/month off that $330,000, plus you get to keep the $330,000, so I’d probably just keep my money!

The only exception might be if there are health insurance benefits and spouse gets the pension even if I predecease.

[Author]

Posts