Sheryll and Doug Evans of Colorado Springs were depending on his public pension.
Doug, 51, has worked in IT for the same Colorado Springs hospital for 18 years, building up a hefty pension. Sheryll, 52, is a nursing director at a boarding school, where she gets free housing—allowing the couple to rent out their home. Plus, she has accrued a small pension of her own.
| Total Assets | $541,000 |
| Retirement assets | $271,000 |
| Home value | $256,000 |
| Cash | $14,000 |
| Total Liabilities | $181,200 |
| Student loan | $1,400 |
| 401(k) loan | $1,800 |
| Car and RV loans | $55,000 |
| Mortgage and home-equity loan | $123,000 |
Their five grown kids are independent, and their combined $142,000 income has helped them stash $271,000 in 401(k)s.
"The plan was to work 30 years and have a nice retirement," says Doug.
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Now a pending acquisition of his employer has them worried.
Doug had been on track to get $5,000 a month from the pension starting at age 60. If the new owner scraps the plan—a likely scenario—he'll gross $3,000.
Doug does have one option for upping his take: Pay $48,000 for extra service credits and start getting checks at 55, while still working. Should he do it?
Three Fixes
Plan to prepay for the pension. By paying $48,000 for the pension booster, Doug would be entitled to about $2,900 a month starting at age 55, vs. about $3,000 a month starting at 60. That's $174,000 extra over five years, money he can bank if he continues working.
"To get the same return on $48,000, you'd need to earn 15% a year," says Denver financial planner Bob Morrison. "It's a no-brainer."
Tap the home to raise funds. The Evanses don't have $48,000 in cash, but they should qualify for a cash-out refinance that would allow them to buy the credits and consolidate $14,000 in higher-interest RV and home-equity loans.
With a 4.75% rate—a conservative estimate for a rental property—they'll cut their total debt payments by $400 a month. Refinancing will add 11 years to their mortgage, but they can accelerate payments later.
Cram on retirement savings. Even with their pensions, the Evanses need to save more in order to retire in their mid-sixties and maintain their lifestyle, Morrison says.
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He suggests they up 401(k) contributions—now $16,000 for Doug and $12,000 for Sheryll, with employer match—by $11,500 a year total.
Initially, some of that can come from cash freed by the refi; once Doug gets his pension at 55, he can save that much more. 
| Overnight Avg Rate | Latest | Change | Last Week |
|---|---|---|---|
| 30 yr fixed | 3.57% | 3.69% | |
| 15 yr fixed | 2.78% | 2.93% | |
| 5/1 ARM | 2.64% | 2.82% | |
| 30 yr refi | 3.55% | 3.76% | |
| 15 yr refi | 2.77% | 3.02% |
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