09 Jan Taking a pension now or later

 Q. Due to the pension offset program, I’m eligible for a reduced pension from other non-government work. The difference between now (62) and waiting four years to age 66 is $100 for the year. Do you think it’s really worth waiting like people suggest?

A. It’s often wise to wait longer — if you can afford it, and if you’re in good health — so you can receive the largest possible pension.

But you’re right. A hundred bucks a year isn’t much.

To decide what to do, you need to see how much money would be left on the table from age 62 to age 66, and how many years it would take for the $100 per year extra benefit to make that money back.

Brian Power, a certified financial planner with Gateway Advisory in Westfield, offered this example:

If at age 62, you have a $500 per month pension, or, $6,000 per year, ($6,000/yr) pension, you’d have a total of $24,000 from age 62 to 66, he said.

“It would take 240 years ($24,000/$100) to make back the $24,000 left on the table with the additional $100 per year if you wait until age 66,” Power said, noting that the scenario is obviously not happening.

If, on the other hand, you have a $50 per month pension, or $600 a year, at age 62, you’d have a total of $2,400 of income from age 62 to age 66. Power said it would take 24 years ($2,400/$100) to make back the $2,400 left on the table if you wait until age 66 — still a very long time to wait to get your money back.

“With either example, it’s going to take a very long time to make up the money left on the table if you wait,” Power said. “So without knowing more about how much the pension is, it seems like waiting is not a good idea.”

You should be able to run more scenarios with your benefits administrator. Good luck!
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This story was first posted in January 2015.