• Question
  • pension replacement Income

    Asked by a 69 year old man from Roswell, GA on 9/26/2012

    I am 62 and retired with a annual pension of $120,000. My wife is 58 and has minimal income.I have an taxable IRA of $1,100,000
    My pension will decrease by $12,000 at age 63 and remain at $108,000 annually for life. Should I replace the $12,000 decrease from IRA investment or begin to take Social Security, which at age 63 would be $1972 per month.SS at age 66 is 2465.00 per month

  • Categories: Retirement Planning, Retirement Assets and Savings, Guaranteeing Income, Pensions and Retirement Benefits


  • Editorial 


    San Francisco, CA

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  • Congratulations for having a good understanding of your finances and for having significant finances to begin with! With the resources you have, you can actually explore a variety of options.

    It sounds like you want to guarantee your current income level of $120,000 a year. I would add another primary goal -- protecting this income from inflationary pressures. Secondary goals might include: 1) Protecting your savings from inflation and maximizing returns while minimizing risk on those investments and 2) Efficiently funding healthcare and possible long term costs.

    While you could replace your pension income with Social Security, this is probably not the most financially efficient option. If you wait to claim Social Security till a later date, you will significantly increase your monthly benefit -- and likely increase your overall lifetime benefit. Experts have recommended the following rules of thumb for trying to maximize Social Security:
    -- Don’t take Social Security at age 62 unless you have a very short life expectancy.
    -- If you think that you will likely die before 80, start Social Security sometime between ages 65 and 67.
    -- If you think that you will live beyond 85, delay the start of Social Security until you are 70.

    Another option for replacing your income would be to purchase a Fixed Annuity. You could purchase income for a specified term or for the rest of your life. You could also just draw down your existing savings.

    However, because of the complexity of your question and not really being able to advise you about tax efficiency, interest rates and investment returns, I would recommend that you consult with a financial advisor who could easily help you assess all of your options. NewRetirement can arrange a free consultation with an advisor who could give you a more personalized response about how to best replace your pension income:
    --> Find Advisor: https://www.newretirement.com/free-retirement-consultation.aspx

    We wish you all the best!

  • Login to rate this answer:   Answered on 10/2/2012
**All above answers are provided as general information only. No warranty is made regarding the fitness or accuracy of the information provided in this answer. You should seek advice from a licensed CPA, attorney or CERTIFIED FINANCIAL PLANNER™ as to your unique financial situation.