Fool.com: Pension vs. Playtime [Fribble] April 14, 2000

Fribble Pension vs. Playtime

By Deborah Abrams Kaplan
April 14, 2000

Prior to getting married in March 1998, I had to make a decision: the non-vested portion of my pension plan, or the trip of a lifetime. I had been working at a company with a generous pension plan for six and a half years, and it was partially vested. At seven years, 100% of the pension would be mine. My fianc�, Mark, would officially get his Ph.D. a few weeks before the wedding, and he had a job offer with a flexible start date in another state. Knowing that we might move, we explored the possibility of an extended honeymoon. Like, a six-month honeymoon. To somewhere exotic and faraway.

This was probably our last chance for a long trip before Mark continued on his ambitious scientific career path, and before we increased our immediate family size from two to four (five, if you include a dog). What better way to see the world and create lasting memories than to globe-trot with your new spouse?

But this would require some major planning. When would we write thank-you notes if we were in Japan and Thailand for six months? What would we do with all our household items while trekking with a backpack through India? Most of all, what would become of the $14,800 we would lose in vesting if I left the company before seven years?

If we were going to do this, now was the time. I insisted that if we bailed on the trip, I would stay at my job until 100% of that money could be rolled over into an IRA.

To help make the decision, we sat down to do the math. Barring any drops in the stock market, we'd have an extra $14,800 when vested. It would have been more had I not been a complete moron the first few years, investing in money market and guaranteed interest funds rather than more aggressive stock funds.

We conservatively estimated that the money would double every seven years, so if I retired at age 64, it would double five times. Even though I'm allergic to algebra I could multiply $14,800 x 2 x 2 x 2 x 2 x 2. That partial vesting could be worth $473,600 at age 64.

With a half-million dollar carrot dangling in front of us, we did the fiscally responsible thing. Our extended vacation instead became a two-week honeymoon in New Zealand, and later that year we rolled the pension money into an IRA.

Did we make the right decision? I'd like to say yes, but the answer is, probably not. We already had savings and investments, and our nonexistent house wasn't on the line. The half million greenbacks certainly will come in handy in our golden years, when visiting grand-kids, volunteering at the hospital gift shop and checking out affordable nursing homes. We plan to be life-long travelers, and want to see the Taj Mahal, the Great Barrier Reef, the Giza Pyramids, and the Great Wall of China. But it's going to be much more difficult now to find the time. And that's a pity.