How to evaluate the value of a (state) pension
I read a few articles and posts about putting some money aside for retirement,
but it was mostly for America/Canada where if I understand it right, you have to actively save your money in 401K/RRSP.
In France I am automatically deducted from my paycheck a certain amount by the government, and after working 42years I will touch a pension, which will be calculated as a percentage of my earnings during my career.
Also, if my readings are correct, if I put aside 25 times my annual spending, I should be able to retrieve 4% of the interest annually and be safe with my money. [link]
My question is how can I evaluate the value of the government pension? Say the pension is 25K€ per year, can I consider it to be equal to having 625K€ put aside, earning interests or does the math is different?
(1)1 Comments
Sorted by latest first Latest Oldest Best
That's how the math works, mostly.
The 4% rule (not 4% of the interest, but an assumed 4% withdrawal based on first year value of a portfolio), suggests that M in assets would permit a K/yr withdrawal. When anyone analyses their retirement goal, it's typical to look at Social security or other pension money as part of the math.
Not needing to withdraw K from a retirement account multiplies up to a M balance that one doesn't need to save.
To be clear, a couple looks as earnings and spending, and decides K is their desired yearly number. Since their Social Security adds to k/yr, they only need to save to withdraw K from savings, and that multiplies to M needed.
The difference, if any, is that (a) the pension/SS will not flow to a beneficiary, it stops after the death of the worker (or spouse in some circumstances). And (b) the flow of cash is fixed. If I have an emergency, I can always withdraw a bit more in one year, and adjust withdrawals accordingly. No such flexibility with a pension.
Terms of Use Privacy policy Contact About Cancellation policy © freshhoot.com2025 All Rights reserved.