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Early retirement - the golden era of benefits...
Old 04-22-2015, 05:47 AM   #1
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Early retirement - the golden era of benefits...

Four years ago my firm was contributing 14% of my salary to my retirement fund (highest % because over 25 years in) and they matched 5% on my 401k I put in 8% so 'all in' 27% of my salary was gong in each year. Now those numbers seem outrageous!

Bam the 14% is now 4% for everyone and the 5% match is contingent on the firms performance and must be approved by the board before it is funded at year end. So far they have every year. But the message is clear we decide if you get it and we can take it away.

Retirement health benefits are gone - my colleagues are on their own. My sister-in-law missed it by 3 weeks. A very sore subject. Those of us vested discover the subsidized retirement benefits pricing is not competitive. You can do better with Ocare.

No question I'm the oldest person there ... Few of my younger colleagues will likely never be able to build the nest egg we have. The golden era of benefits are gone... They will have to make up the difference.. I wonder just how many will?

The result...
A particularly bright and well regarded colleague confided in me that he had another job offer. It crystalized the truth - the golden handcuffs are gone - many would leave for a hundred bucks a week. Why not $400-$500 a month probably $250 more in the bank each month. Or perhaps more to throw against some student loans.

Once an upper management type told us the relationship starts new with each paycheck. I doubt he really understood how true that has become. I feel blessed to have worked at the right time. I worry about my kids retirements. All I can suggest will be save, save and save some more. (Boy I am getting redundant I say that about reading and studying too.)


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Old 04-22-2015, 06:36 AM   #2
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While I understand that benefits change over time I am concerned with the rise of the annual 401k contributions instead of the continual match each paycheck. It almost seems illegal to me that a company can promise a match throughout the year and require you to make contributions each paycheck, then wait until all the expenses and income for the entire year is accounted for before deciding if they actually want to provide their part. Not only does that give incentive for management to fudge numbers and slash benefits over time, but it gives motivation to cut people right before the vesting period just to save a few bucks.
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Old 04-22-2015, 06:37 AM   #3
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Frugality and savings are the only answers for the younger generation.

Where I worked they chipped away bit by bit at the benefits.
Examples:
Used to get a sick day a month. Now people get a yearly PTO bank, every sick day comes off your vacation time. Those with grandfathered sick bank days could not used them unless on short term disability, which means sick more than 5 days in a row. So you had to burn 5 vacation days before getting to use any sick bank days at all.

Pension frozen 12/31/2013. Replaced by a few percentage added to your 401k if you had enough years.

Implemented a PTO scheme that took away a week of vacation from those with 5 weeks vacation.

Removal of two holidays.

Frozen raises, instead of 12 months, moved to 18 months for a while.

Create another office in a state without a union, move half the staff. Break the union by diminishing its size. Claim it is for contingency purposes. Pay scale lowered for the new location.

Move jobs to India, China, and other places, cheaper labor.

Luckily they outsourced my job and was packaged out. So glad I don't have to work there any more.
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Old 04-22-2015, 07:26 AM   #4
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Easy solution - become a top executive. They generally continue to get nice post retirement benefits, but then of course, and unlike you, they earn it.
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Old 04-22-2015, 08:50 AM   #5
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While I understand that benefits change over time I am concerned with the rise of the annual 401k contributions instead of the continual match each paycheck. It almost seems illegal to me that a company can promise a match throughout the year and require you to make contributions each paycheck, then wait until all the expenses and income for the entire year is accounted for before deciding if they actually want to provide their part. Not only does that give incentive for management to fudge numbers and slash benefits over time, but it gives motivation to cut people right before the vesting period just to save a few bucks.
Here's what one Megacorp did about 401k contributions.

They withhold until the end of the year. If you quit mid year, tough. This is really a painful change for anyone at that Megacorp. I have friends there and they are seeing red about it. A few are praying hard they can make it to retirement without being laid off.

I entered the workforce with paternalistic benefits. I had to quit my first Megacorp with minimal vesting. Now I'm on my own. It was interesting to see the bitter complaining of folks ahead of me who got some benefit reductions (but at least still had benefits, like medical retirement).

It is even more interesting to see the youngsters behind me who are complete free agents and embrace it. Good for them.
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Old 04-22-2015, 09:02 AM   #6
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No doubt it's a very different environment out there. I've been with Megacorp almost 22 years. About 15 years ago, they changed the pension calculation methodology. Existing employees were grandfathered in such that they will calculate the pension both ways, and whichever is better for me, I get.

Then about 10 years ago, they changed the retiree medical program. My age + years of service were 4 months shy of being grandfathered in to that one. Used to be VERY generous. Now it's quite a bit less so, and I think ACA will probably make more sense when I retire in a few years, assuming it doesn't get mucked with too much.

They also only give annual salary increases to the top 10-15% of employees (and even then it's generally not more than 2%), unless you are very low in your salary range.

I realize I'm still very lucky to have a pension at all. It will provide a decent lump sum, or an annual payout of almost 30% of my current salary (although non-COLA). Glad to have it!
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Old 04-22-2015, 09:58 AM   #7
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All I can suggest will be save, save and save some more.
This. Save at least 15% of gross (hopefully more). And start early.
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Old 04-22-2015, 11:45 AM   #8
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I've never worked at a megacorp that offered a pension, though my DW did. When offered last year, however, we elected to roll a lump sump into her rollover IRA. I worked at one megacorp with a fairly generous 401K match that happened with each paycheck and was fully vested on day 1. My current company is much like what many are discussing here - the amount of match is determined annually and the actual deposit is made in April of the following year. And if that's not bad enough, there is a linear vesting period that starts at year 2. In actual $'s, it appears to be more generous than what I've had in the past, but the vesting period sucks.
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Old 04-22-2015, 11:51 AM   #9
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minimum statutory vesting for dc plans is 3 yr cliff or 6 yr graded


here's something interesting - http://finance.yahoo.com/news/when-a...162344633.html
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Old 04-22-2015, 11:54 AM   #10
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minimum statutory vesting for dc plans is 3 yr cliff or 6 yr graded
What's a dc plan? BTW, my previous company had a 5 year vesting that started after year 1.
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Old 04-22-2015, 11:56 AM   #11
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defined contribution plan
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Old 04-22-2015, 12:02 PM   #12
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defined contribution plan
Ah, OK - thanks! BTW, an article that describes this is located here: What You Should Know About Your Retirement Plan

I only wish my employer would follow this particular sentence in the article referenced above: "Plans may provide a different schedule as long as it is more generous than these vesting schedules."
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Old 04-22-2015, 12:29 PM   #13
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I tell my kids to get government jobs and sincerely mean it. the other choices imo are horrible.
Seriously,
I feel bad for niece. lives in NY only makes 22000K a year. after student loans and rent she has absolutely no money left. she does participate in her 401K but no way could save 15% and the sad part about it is, she and her peers will never have any type of enjoyment while they are young.

My youngest son has decided to never have kids. Primarily because of the obstacle of the cost of raising kids, home ownership, saving for college and trying to save for retirement.
Since he does not want to work until he drops dead he made the decision not to have kids. His fiancee feels the same way. I'm sure there maybe more too it but in some fashion I totally understand.
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Old 04-22-2015, 12:32 PM   #14
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minimum statutory vesting for dc plans is 3 yr cliff or 6 yr graded


here's something interesting - http://finance.yahoo.com/news/when-a...162344633.html
That is a nice summary of some of the findings in the EBRI study. IMHO it's worth reading the full report that the yahoo article is based upon:

http://www.ebri.org/pdf/briefspdf/EB...5_RCS-2015.pdf

Lots of interesting facts and figures about retiree savings (by income level), spending as well as the retirement-age data presented in the yahoo article. The savings levels cited are well below many of the ERers on this site and are sobering.
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Old 04-22-2015, 12:41 PM   #15
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I told my son the same thing, I tell my kids to get government jobs and sincerely mean it. the other choices are horrible.


My wife works for the government and over the years she made less money and did fine.
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Old 04-22-2015, 12:48 PM   #16
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I too am fortunate. 25 years with Megacorp and I managed to keep my grandfathered DB plan.

I saw jobs move offshore and benefits chopped. No more DB and company DC contribution is based on company performance. Salary freezes, the lot.

The big decrease was benefits. The total wage bill used to be 153 percent of salary. Benefits/training etc. accounted for 53 percent. Fast forward about ten years (just before I left) that total wage bill had been reduced to just over 120 percent.
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Old 04-22-2015, 02:19 PM   #17
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But look at the flipside:


We are moving to a "gig" labor market. To some extent more and more of the labor force are effectively contract workers for their employers. That means that you cannot expect to find a cushy job, tune out, and wait 30 years for the pension. But it also means there is no reason to stick around in a boring, abusive, or poorly paid position because you are stuck in the "pension trap." Keep that resume polished and shop yourself around regularly. It usually comes with a raise when you leap and you learn a lot more that way.
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Old 04-22-2015, 03:00 PM   #18
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I think there's been significant wage growth for the top quintile of workers over the past few decades. So for these folks, even if they lost pensions and so forth, it may be easier to FIRE.

I suspect that the golden age of early retirement is actually right now. My guess is that there are more people FIREing early (say 30s / 40s) than ever before -- but I have no data to back this up.

ACA and guaranteed issue of healthcare is going to speed up this trend. ACA was much more important to me than a pension.
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Old 04-22-2015, 03:58 PM   #19
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I tell my kids to get government jobs and sincerely mean it. the other choices imo are horrible.
I was just discussing this with DW a few days ago, how lucky we are. The elder law attorney we dealt with on FIL's issues said I was a "financial dinosaur". Have a government DB COLA'd pension, SS benefits coming, decent savings. Not wealthy by any stretch but comfortable. The pension plan is near fully funded so (almost) no worries.

Even where I used to work they don't offer that plan any more and haven't since the mid 1980's (I started in 1973). They offered half of your previous retirement contributions back if you switched to the new plan. I didn't take the bait but a lot of guys did, buying boats, motorcycles, cars, etc. and they are sorry now. But the new plan is still lots better than what private industry offers.
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Old 04-22-2015, 04:03 PM   #20
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I worked for a GE sub from 2002-2006, when it was acquired by another MegaCorp. While my GE pension was cut off (I was vested in a whopping $10K/year beginning at age 60 with no extra if you deferred) and cut out of the DB plan of the acquiring company (let's all them AC) because they'd terminated it to new entrants years ago, the tradeoff wasn't bad. They matched up to 100% of your first 6% in the 401(k) and also threw in 6% regardless of whether you participated or not if you weren't in the DB plan. They also had a "phantom stock" purchase plan that was lucrative for a lot of us in the year the stock price quadrupled as it rebounded from the financial crisis.


Well, they tell me that plan is gone. The 401(k) match isn't as generous, the health insurance plan is an HDHP instead of traditional indemnity, and this year's bonus was about 70% of last year's. (Salary increases were already minimal because they wanted a bigger % of compensation to be variable- and now you can see why.)


The 6% to those who weren't in the DB plan was always paid the following March but they actually paid it even if you left. I was impressed. As for the normal 401(k) match being annual and only if you're still there, Chubb, which is otherwise a very good company, started that years ago.


DS works for an insurance company with a DB plan and they treat him well. He keeps applying for positions that add to his expertise and has a good record of getting them (with generous raises). I tell him over and over again to be grateful he works for such a good employer.
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