Hello! I'm 51 and will start receiving a pension when I retire at age 55. I'm able to purchase one year of prior service (for work before starting with my current employer). The cost to purchase this year is $36,218.52. I can roll that amount from my Vanguard Trad. IRA to the pension. Purchasing this year would increase my annual pension payment by $4,356/year. My pension has a cola with a maximum increase of 5%/year.
Does purchasing this year of service make sense? I am thinking it does make sense because I went to Schwab.com to get a fixed annuity estimate. According to their calculator an initial investment of $36,218.52 produces an income of only $2,712/year until death. $1,644 less than purchasing the year of prior service. But perhaps I should take into account what the $36,218.52 is currently invested in with Vanguard (Total Stock Market Index Fund, VTI).
Does purchasing this year of service make sense? I am thinking it does make sense because I went to Schwab.com to get a fixed annuity estimate. According to their calculator an initial investment of $36,218.52 produces an income of only $2,712/year until death. $1,644 less than purchasing the year of prior service. But perhaps I should take into account what the $36,218.52 is currently invested in with Vanguard (Total Stock Market Index Fund, VTI).
Statistics: Posted by mesaverde — Thu Feb 22, 2024 6:42 pm — Replies 12 — Views 1041