Ever wonder how much your pension will be worth at retirement? Why you need a 401(k)...

 

Perhaps the best way to demonstrate why you need a 401(k) is by showing you how much your pension will be worth. Don't get me wrong, your PERA pension is awesome but it probably won't be enough. I expect my pension to make up about half of our retirement spending. I'm budgeting 18k-36k for health insurance alone, until we qualify for Medicare. That cost alone could be over half of my yearly pension. And since most of us don't pay into social security, we won't be getting social security benefits. Those that did pay into social security will only get a fraction of what they are owed due to the windfall elimination provision. It's not all doom and gloom. With your pension alone, you'll be better off than most Americans.

Here are the steps to find out your monthly pension:

Step 1. Log in to PERA at  https://www.copera.org/.  If you don’t know your username and password, you will need to call PERA for assistance.  Follow the log in prompts.

Step 2. After you login, scroll down and click on Colorado PERA Calculators.

Step 3. Scroll down and then click on Colorado PERA Monthly Retirement Benefit.

Step 4. Make sure your numbers are correct.  Call PERA if your numbers don’t look correct.  I found a mistake with mine last week.  NOTE: Your HAS (highest annual salary) is much lower now than it will be at retirement.  You can calculate your expected HAS and enter that into the box.  For example, if you're expecting to make 60k/yr during your last few years, you would divide that by 12 months and come up with a 5,000 HAS.

Step 5. Make sure that your PERA membership is correct.

Step 7. Make sure your co-beneficiary information is correct (spouse’s birthdate).  Next, click calculate.

Step 8. View your estimated monthly salary and lump sum payout.  NOTE: These numbers are going to be much smaller than what you’ll actually receive at retirement due to your lower HAS now.  Your last few years of employment will likely be your highest!  Don’t worry if these numbers seem small--they will get larger as you approach retirement.  You can look at your PERA table to determine what percentage of your HAS you will receive at various ages.

Take a look at the 3 options that are listed. 

●     The first option is if you only need a monthly salary for yourself (i.e. you have no spouse, or your spouse will not need the income). 

●     The second option will pay the full monthly salary until you die and then your spouse will receive half of monthly salary until he/she dies.

●     The third option will pay both you and your spouse the amount displayed until you both pass.  This is the option that I will probably pick as there is a decent chance that my wife may outlive me.

Finally, the lump sum payment option is shown below the three options.  While it may seem tempting to take this large sum of money, you should do the math carefully.  In my case, investing the lump sum payout would not provide nearly as much as the monthly salary options.