2 Replies Latest reply on Jan 18, 2011 2:28 PM by Mskitty13

    Buying Service Credit

    Rjquirk

      I am interested in the pros and cons on buying service credit to add to my retirement.    I am with CAL PERS and have 36 years of service and am just turing 56 in mid January and retiring on the same date... with my sick leave built up,  I will get about 76% of my pay and life time medical.

      I can buy 5 additional years of service with a tax free transfer from my TIAA CREF account bringing me to about 87% of my pay,  or about another $1,200 a month.   But it will cost me about $150,000 from my account of which there is a balance of about 250,000.

      I know there are a lot of variables I can't control or predict,  but would be interested in opinions of those with experience in this area.

      Rob

        • Re: Buying Service Credit
          castlemodesto

          What a bargain! If you go to immediateannuities.com you will see that an annuity for $150,000 for life will return only $779 at age 56.
          You may get more from the stock market if you like to gamble, but why bother when you would get a great return like that. Nearly all financial experts are downgrading what the stock market might return in the foreseeable future.  If you think you can get by on $100,000 in savings for large unforseen expenses then additional service years  seems a good deal to me
          The only other issue I can think about is Calpers cannot be passed on to heirs, but  TIAA Cref retirement savings could be if you dont spend it all before dying>  but hopefully you have a house and other assets you can pass on, so maybe thats not an issue for you

          derek