Buyback Evaluation (Five Years by Quarter).
Buying back service time makes good financial sense unless the returns you REASONABLY expect from other investments are likely to EXCEED the increase in your pension income. And keep in mind one key difference between your service buyback and other potential investments: The increase in your pension is GUARANTEED.
IMPORTANT NOTE: Buyback costs must be calculated by the retirement system. Specific factors that determine your buyback costs – such as the credited interest on contributions and the applicable employer contribution rate – are determined on a case-by-case basis. BCN can submit the request, expedite the calculation, and evaluate the advisability of your buyback once we know the exact costs.
Action Step: Service Buyback (Richard Sample).
Buying back Richard's 2.200 years of service is HIGHLY RECOMMENDED if the cost is $20,500.00 (or less). Unless the costs are expected to increase substantially in the near future, Richard should BEGIN the buyback after age 50.
Buy back your service time unless the returns you expect from other investments are likely to EXCEED the increase in your pension income. For example: Stock mutual funds have averaged 8 - 10% historically (but not without substantial risk and volatility). Here the buyback is HIGHLY recommended – given that your pension increase is GUARANTEED.
The benefits of your service buyback vary depending on when you retire. This chart shows the increase in your MONTHLY pension income over a 5-year range of retirement ages.