Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Most Americans In the Dark About Their Pensions
Old 07-30-2011, 02:13 PM   #1
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W
Posts: 5,884
Most Americans In the Dark About Their Pensions

I suppose that I should not be surprised how little folks know about their pension plans. Most employees are pretty ignorant about their 401(K) plans and they make regular contributions to that fund every payday whereas they do not normally pay into a pension plan. I do have to admit to the same inattention in the early years of receiving my annual "pension statement" from the employer.

Quote:
Meanwhile, 61% of those surveyed said they have never asked how much money they will receive when they retire, Fidelity reported. The reason: 43% said they rely on their employer to provide the information if needed and 29% report they aren’t knowledgeable about the plan or they do not know whom to ask for information.
With pension participants expecting their pensions to supply one quarter of their retirement income, it is worrying that so few participants understand their plans. Fifty-six percent of those surveyed said they will rely on their pension payouts to cover living expenses during their retirement years, not for travel or hobbies.
Although 56% of the pension plan participants surveyed said they expect to receive annuitized payments from their plans when they retire, 10% plan to take lump sum payments and 9% expect a combination of both, one-quarter of those surveyed said they don’t know how they will be paid.
most americans don t understand how their pensions work, Fidelity Investments and pensions, vesting schedule - Financial Planning
__________________

__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 07-30-2011, 02:54 PM   #2
Thinks s/he gets paid by the post
GregLee's Avatar
 
Join Date: Oct 2010
Location: Waimanalo, HI
Posts: 1,881
When I retired a year ago on a state pension, I did not understand how benefits were calculated or what my benefit would be. I didn't, and still don't, understand what the point of investigating it would be. While I worked, there were no choices to be made. I had to participate in the system, and I had to contribute 7% of my salary. I didn't have any spare cash to invest elsewhere. Why do research when there is no way to make use of the knowledge?
__________________

__________________
Greg (retired in 2010 at age 68, state pension)
GregLee is offline   Reply With Quote
Old 07-30-2011, 02:58 PM   #3
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
REWahoo's Avatar
 
Join Date: Jun 2002
Location: Texas Hill Country
Posts: 42,134
Quote:
Originally Posted by GregLee View Post
Why do research when there is no way to make use of the knowledge?
Ever curious to see if your benefits were calculated correctly? Guess not...
__________________
Numbers is hard

When I hit 70, it hit back

Retired in 2005 at age 58, no pension
REWahoo is offline   Reply With Quote
Old 07-30-2011, 03:05 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,384
I've read a few times the average person in their lifetime, spend more time planning for vacations than planning and preparing for retirement, so this article fits right in with what I have read before. But then again, planning the perfect vacation does take a lot of time!
__________________
Mulligan is offline   Reply With Quote
Old 07-30-2011, 03:18 PM   #5
Thinks s/he gets paid by the post
GregLee's Avatar
 
Join Date: Oct 2010
Location: Waimanalo, HI
Posts: 1,881
Quote:
Originally Posted by REWahoo View Post
Ever curious to see if your benefits were calculated correctly? Guess not...
When I retired and learned what benefits I would get, I became curious about that. But not before retiring. It never seemed interesting.
__________________
Greg (retired in 2010 at age 68, state pension)
GregLee is offline   Reply With Quote
Old 07-30-2011, 03:18 PM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
mickeyd's Avatar
 
Join Date: Apr 2004
Location: South Texas~29N/98W
Posts: 5,884
Quote:
I've read a few times the average person in their lifetime, spend more time planning for vacations than planning and preparing for retirement
I've read that a number of times also. I wonder if there is any solid academic research on the issue? Common sense and knowledge of my fellow citizens indicates that it's probably correct.
__________________
Part-Owner of Texas

Outside of a dog, a book is man's best friend. Inside of a dog, it's too dark to read. Groucho Marx

In dire need of: faster horses, younger woman, older whiskey, more money.
mickeyd is offline   Reply With Quote
Old 07-30-2011, 03:32 PM   #7
Moderator
Alan's Avatar
 
Join Date: Jul 2005
Location: Eee Bah Gum
Posts: 21,135
Quote:
Originally Posted by GregLee View Post
When I retired and learned what benefits I would get, I became curious about that. But not before retiring. It never seemed interesting.
Is this because you knew it was going to be enough? Or that it was too little to worry about?

All our pension details were available on-line and I annually checked out the current benefits to ensure no mistakes had been made, and got an estimate for RE'ing at 55 which I plugged into FIRECALC.
__________________
Retired in Jan, 2010 at 55, moved to England in May 2016
Now it's adventure before dementia
Alan is offline   Reply With Quote
Old 07-30-2011, 03:53 PM   #8
Thinks s/he gets paid by the post
Rustward's Avatar
 
Join Date: Apr 2006
Posts: 1,573
Quote:
Originally Posted by GregLee View Post
When I retired a year ago on a state pension, I did not understand how benefits were calculated or what my benefit would be. <snip<
How did you know that you could afford to retire?
__________________
Rustward is offline   Reply With Quote
Old 07-30-2011, 03:53 PM   #9
Moderator Emeritus
Bestwifeever's Avatar
 
Join Date: Sep 2007
Posts: 16,375
DH's company went through at least 5 different pension plans in the three decades he spent working there (in the past 3 years they've had another new one). Not surprised that many people there (a pretty outspoken industry and work force) might not understand their pension plans.

And I wonder if calling HR to ask about pension benefits might have unintended consequences.
__________________
“Would you like an adventure now, or would you like to have your tea first?” J.M. Barrie, Peter Pan
Bestwifeever is offline   Reply With Quote
Old 07-30-2011, 04:46 PM   #10
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by mickeyd View Post
I suppose that I should not be surprised how little folks know about their pension plans. Most employees are pretty ignorant about their 401(K) plans and they make regular contributions to that fund every payday whereas they do not normally pay into a pension plan. I do have to admit to the same inattention in the early years of receiving my annual "pension statement" from the employer.
Do you have some support for your statement that employees with DB pensions "do not normally pay into" their pension plan? I know I do, i.e. there is a deduction from my paycheck that goes into the pension fund. I can see from GregLee's post that he did too. I do remember from one of the numerous threads about underfunded pensions that there was at least one plan that the employees did not pay into, but I would be very surprised if that plan was the rule, rather than the exception.

No argument from me on this one. I've been with my employer for 26 years, but the oldest annual pension statement I still have is from 1996—the end of my 11th year there. Then I have a five year gap until 2001 before I started keeping all of them. Up until 3 or 4 years ago, I had no idea at all how a pension plan works, and if it hadn't been for the market crash and its effects on the City's retirement system, I probably still wouldn't have a clue even though my target retirement date is less than two years from now.
__________________
kyounge1956 is offline   Reply With Quote
Old 07-30-2011, 04:48 PM   #11
Thinks s/he gets paid by the post
 
Join Date: Mar 2010
Location: Kerrville,Tx
Posts: 2,726
Where I worked as in Alans case there was a pension estimator on the intranet. You got an estimate of the pension you had earned to that point etc. (This happened after 2000, before then you would get a statement once a year printed out). Given how much time and effort this saves HR I suspect most companies do this, moving most benefit work to the intranet.

In my case from the day I hired on there was a book with details on the pension plan, the base formula was 1.5% times the number of years of some average, typically I believe it was highest 3 of the last 5, although there was also a career average formula as well. (It was a bit more complex because of the social security offset of course)
__________________
meierlde is offline   Reply With Quote
Old 07-30-2011, 04:54 PM   #12
Recycles dryer sheets
JmfromTx's Avatar
 
Join Date: Nov 2010
Location: Houston/Galveston area
Posts: 163
Quote:
Originally Posted by REWahoo View Post
Ever curious to see if your benefits were calculated correctly? Guess not...
Companies can make mistakes. When my wife passed away I received a lump sum from her pension plan. About three years later I got another check for over 40K with an explanation that they had miscalculated it. When I got ready to retire what scared me more for the folks I worked with(all younger than me) was that not a single one of them could explain how the company was going to handle retiree health for them. I was grandfathered (by four months) under the old plan which basically gave me an annuity to defray the cost of the company insurance. I'm pretty sure their plan will also give them an annuity but they will have to buy the insurance on the open market at a helluva higher price.
__________________
Retired 3/1/2011
JmfromTx is offline   Reply With Quote
Old 07-30-2011, 04:56 PM   #13
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
donheff's Avatar
 
Join Date: Feb 2006
Location: Washington, DC
Posts: 8,646
Quote:
Originally Posted by Rustward View Post
How did you know that you could afford to retire?
+1 The exact question I was going to ask.
__________________
Every man is, or hopes to be, an Idler. -- Samuel Johnson
donheff is offline   Reply With Quote
Old 07-30-2011, 05:20 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Mulligan's Avatar
 
Join Date: May 2009
Posts: 7,384
Quote:
Originally Posted by kyounge1956
Do you have some support for your statement that employees with DB pensions "do not normally pay into" their pension plan? I know I do, i.e. there is a deduction from my paycheck that goes into the pension fund. I can see from GregLee's post that he did too. I do remember from one of the numerous threads about underfunded pensions that there was at least one plan that the employees did not pay into, but I would be very surprised if that plan was the rule, rather than the exception.

No argument from me on this one. I've been with my employer for 26 years, but the oldest annual pension statement I still have is from 1996—the end of my 11th year there. Then I have a five year gap until 2001 before I started keeping all of them. Up until 3 or 4 years ago, I had no idea at all how a pension plan works, and if it hadn't been for the market crash and its effects on the City's retirement system, I probably still wouldn't have a clue even though my target retirement date is less than two years from now.
Kyoung, part of the confusion with pensions, I believe with the general public, is that they sometimes don't understand there are as many types of pensions as there are types of Americans. Not wanting to make this a pro/con pension issue, but there is wide extreme of pensions that are poorly funded, fully funded, cola pensions, non cola, high payout/low payout, SS as part of the package, some you can't contribute to SS, high contribution, low contribution rates, etc. Just on a light note, my GF opened up her 401k statement last week and complained it was up only 4%. I asked over how much time, she said 3 months. I told her that is like 16% averaged over a whole year. She still wasn't impressed. I guess she thinks it's supposed to double every 2 years. I saw no benefit in continuing the conversation as it wouldn't have helped the matter.
__________________
Mulligan is offline   Reply With Quote
Old 07-30-2011, 05:51 PM   #15
Thinks s/he gets paid by the post
GregLee's Avatar
 
Join Date: Oct 2010
Location: Waimanalo, HI
Posts: 1,881
Quote:
Originally Posted by Alan View Post
Quote:
Originally Posted by GregLee
When I retired and learned what benefits I would get, I became curious about that. But not before retiring. It never seemed interesting.
Is this because you knew it was going to be enough? Or that it was too little to worry about?
No, I didn't think it would be enough. But I couldn't increase the amount by finding out what it was, obviously. If an investigation had revealed that it was not going to be enough, that would have made me fretful, and also my wife, and why go out of your way to find additional reasons to fret? I didn't see anything I could do to affect the situation. I can plan around unpleasant contingencies, but only if there's a point to it.
__________________
Greg (retired in 2010 at age 68, state pension)
GregLee is offline   Reply With Quote
Old 07-30-2011, 05:54 PM   #16
Thinks s/he gets paid by the post
GregLee's Avatar
 
Join Date: Oct 2010
Location: Waimanalo, HI
Posts: 1,881
Quote:
Originally Posted by Rustward View Post
How did you know that you could afford to retire?
I was fired, basically. I didn't know I could afford to retire.
__________________
Greg (retired in 2010 at age 68, state pension)
GregLee is offline   Reply With Quote
Old 07-30-2011, 06:01 PM   #17
Thinks s/he gets paid by the post
Spanky's Avatar
 
Join Date: Dec 2004
Location: Minneapolis
Posts: 4,046
Quote:
Originally Posted by Rustward View Post
How did you know that you could afford to retire?
If Lee is retired from Hawaii's pension plan, the estimated pay is about 2% * number of years of service * average of earnings for the highest 3 years.

Benefits Estimate Calculator

For example, if the average salary is $100K per year with 30 years of service, the payout will be $60K/year for life time (option #1). There are other options, such as getting a refund of contributions.
__________________
May we live in peace and harmony and be free from all human sufferings.
Spanky is offline   Reply With Quote
Old 07-30-2011, 06:40 PM   #18
Thinks s/he gets paid by the post
GregLee's Avatar
 
Join Date: Oct 2010
Location: Waimanalo, HI
Posts: 1,881
Quote:
Originally Posted by Spanky View Post
If Lee is retired from Hawaii's pension plan, the estimated pay is about 2% * number of years of service * average of earnings for the highest 3 years.
I am. But the details are pretty darn complicated. What are my years of service? I don't know, independent of what the retirement system tells me. I worked less than full time for many of the last 39 years, and I forget what fraction I worked for which year. Then I get an increased number of years because of accumulated sick leave, because I never was sick, for those years that the union contract specified that one gets retirement credit for unused allowed sick leave. (Don't ask me which years those were.) Then there is an interesting little wrinkle about "earnings" in calculating "average of earnings for the highest 3 years" -- does it mean what you actual earned, or does it mean your base pay, which, if you're working half-time as I was, will be twice your actual gross pay?
__________________
Greg (retired in 2010 at age 68, state pension)
GregLee is offline   Reply With Quote
Old 07-30-2011, 06:51 PM   #19
Thinks s/he gets paid by the post
kyounge1956's Avatar
 
Join Date: Sep 2008
Posts: 2,171
Quote:
Originally Posted by Mulligan View Post
Kyoung, part of the confusion with pensions, I believe with the general public, is that they sometimes don't understand there are as many types of pensions as there are types of Americans. Not wanting to make this a pro/con pension issue, but there is wide extreme of pensions that are poorly funded, fully funded, cola pensions, non cola, high payout/low payout, SS as part of the package, some you can't contribute to SS, high contribution, low contribution rates, etc. Just on a light note, my GF opened up her 401k statement last week and complained it was up only 4%. I asked over how much time, she said 3 months. I told her that is like 16% averaged over a whole year. She still wasn't impressed. I guess she thinks it's supposed to double every 2 years. I saw no benefit in continuing the conversation as it wouldn't have helped the matter.
I don't dispute that the issues you mention exist. Maybe I'm too thin-skinned about it, but it irritates the heck out of me when people make blanket statements like one I responded to. Saying people with DB pensions "do not normally pay into" the funds that support our benefits makes it sound like we are getting some kind of something-for-nothing deal. I think anyone who makes that sort of a broad-brush generalization should be prepared to support it with facts, acknowledge that it's nothing more than an unsupported opinion, or retract it.
__________________
kyounge1956 is offline   Reply With Quote
Old 07-30-2011, 07:15 PM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Amethyst's Avatar
 
Join Date: Dec 2008
Posts: 5,899
Quote:
Originally Posted by kyounge1956 View Post
I do remember from one of the numerous threads about underfunded pensions that there was at least one plan that the employees did not pay into, but I would be very surprised if that plan was the rule, rather than the exception. .
A thread from 2+ years ago addresses this:

Those w/Pensions: How much do you pay in?

Amethyst
__________________

__________________
If you understood everything I say, you'd be me ~ Miles Davis
'There is only one success – to be able to spend your life in your own way.’ Christopher Morley.
Amethyst is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Dark Side of Early Retirement Enuff2Eat FIRE and Money 43 06-27-2011 11:51 PM

 

 
All times are GMT -6. The time now is 04:18 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.