Why I don’t include my pension in my financial independence calculations

By Sam •  Updated: 04/23/19 

One of the biggest differences between the public and private sector jobs is that public sector jobs still (as of today) have pensions.  A pension, (defined benefit plan), is a guaranteed stream of payments from a starting date until death. Previously I wrote about what happens to your pension benefits if you retire early from the Federal Government.  

Both my wife (state) and I (federal) have a pension, but we are not counting on them as part of our financial independence strategy.  This may be a controversial decision; nearly 60% of people include their pensions in their net worth calculations. This post details why we’re choosing not to consider these future sources of income in our FI calculations.

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Please do not confuse my personal blog for financial advice, tax advice or an official position of the U.S. Government. This post may contain affiliate links. If you make a purchase after clicking on a link, I get a small percentage of the sale at no additional cost to you.

Reason 1: We don’t know how big the pension will be to include in our financial independence calculations

One of the biggest reasons we are not including our future pension in our financial independence calculations is that we have no idea how big our pensions will be.  

My federal pension is quite easy to calculate.  If you’re a fed and don’t know how to calculate it, check out my post on how to calculate your federal pension benefits.

On the other hand, my wife’s pension cannot be calculated.  There is a 20 page booklet provided by the state to calculate your monthly pension benefit.  This calculation method has so many IF/THEN/ELSE decision trees that it’s impossible to even make a reasonable estimation of what it might be unless we knew the exact date she was quitting.  

We don’t have a set dollar amount for “early retirement” yet (see Reason 4). However, even if we did have a dollar goal for early retirement, we wouldn’t know when we’d reach it. Without knowing “when” we don’t know how big it’ll be.

Reason 2: We cannot access the pensions for for 20 years

We are extremely grateful to have jobs with a defined benefit program. Pensions are a terrific source of guaranteed income in retirement. However, both of our pensions are structured in a way that we cannot access them until we are 57. We’d still need to find sources of income for approximately 20 years.

In theory, you could calculate the amount of money that your pension would generate in the future. You could then come up with a modified “number” you’d need to achieve FI.  That is, you could design a strategy to withdraw more than 4% of your portfolio at the beginning of early retirement because you knew you’d have a pension starting in your 60s. But that seems overly risky and complicated.

Reason 3: There is a chance the pensions might not be there

There’s been a lot of stories in the news about private sector pensions disappearing when companies declare bankruptcy. A pension is really nothing more than a promise. And sometimes promises are broken.

I think it’s highly unlikely that the federal pension benefits I’ve already earned will get vaporized. I’m trying to imagine a scenario in which that happens. Perhaps if there is some sort of global war and we lose. But if that’s the case, I have worse problems.

And while it used to be unthinkable that a state government would stop paying pension benefits, several state and local governments are trying to file for bankruptcy because they don’t have enough money to pay pensions. Luckily our state has one of the most solvent retirement systems in the country.*

In summary, it’s likely that both of our pensions are safe. However, you never know what might happen. And many private sector pensions are being dissolved and leaving retirees in a tough place. Which also brings me to the main reason (Reason 4) why we don’t include the pensions in our FI calculations.

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Reason 4: We care more about the “Financial Independence” (FI) part of FIRE than the “Retire Early”

One of the biggest appeals of the FIRE movement to me is that idea of being financially independent. To me, FI means that I could work if I wanted to work, or not engage in paid work if I didn’t want to. It means not having to worry during the next round of RIFs because I know that no matter what happens I’ll be fine. Also, it means that I could walk away from a toxic work environment if I wanted to. Not to mention the fact that I don’t have to worry about where my next mortgage payment is coming from during the next government shutdown.

Along those same lines, knowing that I have several years of living expenses saved up has made me more likely to say “no” to tasks that kill me on the inside. In that way, the closer we are to FI, the happier and better my job becomes. At this point, I’m not sure if I want a full out early retirement or something else. But no matter what, achieving FI is going to allow me to have options. And right now, options are what I really want.

So in that way, my biggest objective right now is to obtain FI. A financial independence that is independent of a potential future pension. And once we’ve reached that level of FI, I know we’ll have options to pursue whatever we want in the future.


*It’s not a coincidence that the state with a 20 page booklet on how to calculate pension benefits is the most solvent one. The State allows pension benefits to go up and down from year to year to retain solvency.

What do you think? Should you include your pension in financial independence calculations?


Sam i.e. "Gov Worker" started working for the government at age 18 and loved it so much that he never left. He started GovernmentWorkerFI in 2019 to help fellow federal employees understand their benefits, take control of their finances, and live their best lives.

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