Fiology: The Study of Financial Independence (FI)

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Fiology Lesson 14: The Pension Dimension


Fiology thanks Grumpus Maximus, the pension expert of the FI community, for shaping this lesson.

In the U.S., prior to the 1980s, a company or government Defined Benefit Plan (DBP), commonly referred to as a pension, was potentially all a person needed for retirement. Times have changed. DBPs are now found in a few private sector industries and government work at the federal, state, and local level. Outside the U.S., various forms of DBPs are still common, but they too are coming under fiscal pressure to varying degrees.

If you work a job with access to a DBP, the steady stream of income it offers in “retirement” could potentially shave hundreds of thousands to millions of dollars from the nest egg total needed to successfully employ a Safe Withdrawal Rate (SWR). Calculating this “savings” is known as calculating one’s “Gap Number.”

Utilizing a pension to help achieve FI does not come without cost or risk; especially since not all pensions are created equal. While some pensions start immediately upon “retirement”; others start at a certain age, or time frame, in the future. Some pensions provide healthcare; others don’t. Many private and some public sector DBPs face serious questions about their financial safety or solvency.

As a result, reliance on a DBP for part of an FI plan requires serious consideration. Fortunately, these types of calculations can be made, and several FI bloggers have paved the way on methods for valuing a pension in order to achieve FI.

Listen:  057 | The Golden Albatross | Grumpus Maximus  by Grumpus Maximus of

Listen:  058R | Dark Side Of Value  by Brad Barrett and Jonathan Mendonsa of

Read:  The Pension Series  by Grumpus Maximus of

Read:  How to Model the Retirement Income Gap  by Darrow Kirkpatrick of

Read:  Valuing a Pension Actuary Style  by Actuary on Fire of

Take Action: If you’re eligible for a pension, take the time to understand the specifics. What is it worth to you? Consider whether or not it should be part of your FI plan.

Additional Resources:

Read:  Boston College’s Center for Retirement Research  numerous articles and searchable database on U.S. public and private sector pensions.

Read:  The Ultimate Guide to Safe Withdrawal Rates – Part 4: Social Security and Pensions  by  Big Ern of

Read:  The Ultimate Guide to Safe Withdrawal Rates – Part 17: More on Social Security and Pensions (and why we should call the 4% Rule the “4% Rule of Thumb”)  by Big Ern of

Listen:  095 | A Military Path to FI  by Airman Mildollar  of


This is a battle cry for the common people

The forgotten nowhere kids stuck in the middle

We’re singing this song for all of the common people

Who’ve given up so much and gotten back so little

Street Dogs – “Common People” Lyrics is an educational resource designed to teach Financial Independence (FI). We scoured the internet to find content from the best and brightest of the FI community and created lessons covering the critical concepts.

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