Originally Posted by Patrick
That's how our program would have been, too. But the retirement system opposed it because they didn't know how much it would cost them to establish and oversee the DROP accounts with the cash in them.
Oh, well, it's probably better that it didn't pass because I would have stayed 5 more years (over DW's objections) to get the cash. Of course, I wouldn't have squandered the lump sum on extravagant impulse purchases!
I did a spreadsheet on it and figured that the breakeven point for me was about 15 years into retirement due to the fact that I wasn't topped-out on my pension yet and would have got a few COLAs on my salary. But I figured cash now is better because I don't know if I'll make it for 15 more years. Water under the bridge. If it's available for you, I'd definitely consider it, though.
I am, as we are known here, a Dropasaurus
DROP was created here as a means to keep older workers on the job. Most people retired here at the earliest opportunity and then collected their pensions while working elsewhere. Now, with DROP, we work longer than the minimum, but we can afford (in most cases) to not have to start a second career. There is no maximum or minimum time limit applied to participation. You stop working when you think the time is right. Of course, the longer the participation in DROP the greater the lump sum.
Current demographics make finding qualified new hires to replace us very expensive and difficult to find. so the employer wants to keep us around as long as they can.
My career closed out during a brief period when the employer was desperately trying to keep employees and was throwing money into programs to keep people working longer. Like the version of DROP that you described, when we entered DROP our pension was frozen, and that amount was contributed to the DROP account on a monthly basis. Salaries could rise because of salary hikes and promotions, but upon actual retirement, the pension was whatever it was at the time of DROP entry (plus COLA's). That was changed in favor of refiguring our pensions at time of actual retirement to what it would have been if we never entered DROP (i.e., we got the full effect of all raises in the interim). It didn't affect what you have paid into DROP, but you would get the DROP benefit and the higher pension payments.
The absolute best goodie that they dangled to keep the slaves on the boat older employees working was what they called "Back-DROP". I called it the what-if clause. Basically, if after entering DROP you had a significant salary increase (usually through promotions) then you could play a game of "what if". As in, "what if I had waited until after my promotion to enter DROP - how would the corresponding increased contributions to DROP affect my account balance?" If you were going to work a few years more you could significantly increase your balance. People had to give up some of their accumulated DROP money up front, but gained an increased salary and percentage contribution upon which DROP was calculated. If you were going to work for a few more years it meant a lot more money to retire on. The pension system automatically ran a break even point for everyone. In my case the difference was only a couple of grand, but a friend "gave back" $300k while doubling his future lump sum payout and adding significantly to his future pension check as well (changing DROP entry date means your pre-DROP longevity increases and that increases the percentage of final salary paid as pension).
Some things have changed and a lot of those windows are closed now (but not before I made it
). But most people around here still think DROP is almost
better than sex.