Disclaimer: I’m in my mid 30s, so still in the accumulation phase and this question will be more relevant as I approach retirement. I also recognize that I could change jobs, or my employer could decide to eliminate the pension program. I’m currently saving at a rate that isn’t factoring in the pension, I view it as gravy for the time being.
My wife and I both work as physicians, we max out our retirement accounts (403b’s, 457, Roth IRAs, HSA) and then invest additional money in our taxable brokerage up to a total of 25% of our gross income. Pre-tax accounts are invested in TDFs, Roth IRA in VTWAX, and taxable accounts are 70/30 VTSAX/VTIAX.
My employer (large hospital system) also offers a pension plan. We vest after 5 years (about 2.5 years from now). If I stay with this employer for 25-30 years, I would receive a monthly benefit that would replace about 15% of our current gross income, but would probably be about 30-40% of our monthly spend in retirement (this is obviously a rough projection this far out).
So, if I hypothetically stay at this job for the duration of my career, should I add bonds as I approach retirement age, or should I view the pension as a surrogate for the bond portion of my portfolio?
I am currently happy at this job and could see myself staying here for the long term. And although things could change, the hospital system is growing and seems to be in good financial health.
I have no problem adding bonds as I approach retirement if any of the above circumstances change, and again I’m not banking on it to afford retirement, I’m just curious to see if my thinking is reasonable and if there are any other factors or alternatives I should consider.