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Old 07-26-2012, 05:37 PM   #61
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What to do? Take some responsibility for yourself. Build a time machine and go back and redo your life decisions for the past 34 years. See how simple it is.
I like the way you think! Just the other night I was thinking about how I overplanned a bit. I'd like to retroactively retire about three years earlier...

I heard somewhere you can do that...
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Old 07-26-2012, 05:50 PM   #62
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Originally Posted by M Paquette View Post
I like the way you think! Just the other night I was thinking about how I overplanned a bit. I'd like to retroactively retire about three years earlier...

I heard somewhere you can do that...

When you get your time machine working and go back to retire even earlier would you mind if I gave you $10,000 to buy certain stocks in my account? I would appreciate the favor.

Build Your Own Time Machine: Science Channel
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Old 07-26-2012, 06:39 PM   #63
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That would be my assumption as well.
And to you ERD50, that is exactly what they did. For all those that retired before 1997, GM bought an annuity with Prudential that would continue your pension as it was and included the survivor benefit as well (50% survivor benefit). For those that retired after 1997, three options were granted which included a lump sum payment. In any event, the pension program at GM is off their books.

I said in an earlier post that it was a bitter pill to swallow; however, it wasn't all that bitter because were it not for Generous Motors, I could not have retired at age 51 with full benefits. There is some saying about "never look a gift horse-----".
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Old 07-26-2012, 07:25 PM   #64
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When you get your time machine working and go back to retire even earlier would you mind if I gave you $10,000 to buy certain stocks in my account? I would appreciate the favor.
No problem. My plan is to buy ten grand of MSFT in 1986, then in 1999 sell all of it and buy AAPL. Then pension plan worries become irrelevant.

Now, I need to find a really long, massive cylinder, and spin it really fast (and hope I don't hit a Cauchy horizon...)

http://www.webcitation.org/query?url...10-25+23:01:39
http://prd.aps.org/abstract/PRD/v46/i2/p603_1

What could possibly go wrong?
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Old 07-26-2012, 07:48 PM   #65
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I said in an earlier post that it was a bitter pill to swallow; however, it wasn't all that bitter because were it not for Generous Motors, I could not have retired at age 51 with full benefits. There is some saying about "never look a gift horse-----".
That is certainly an excellent deal and I am happy that you have it. This information does put things into perspective. All the best in your retirement.
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Old 07-27-2012, 08:53 PM   #66
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Sorry that I couldn't read all four pages of comments, but two points I hope someone brought out:

You really need the PBGC only if your pension goes broke or your employer goes broke and turns the pension over to the PBGC.

The PBGC uses its own money only if a failed plan doesn't have enough money to pay the lesser of the promised benefits or the PBGC guarantee. And since the PBGC re-does all the math for your "promised" benefits, I can tell you from experience that the promise will be pretty small.

Worry a lot about your actual pension plan, don't worry about the PBGC 'cause it ain't gonna give you much anyway.
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Old 07-27-2012, 09:51 PM   #67
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The PBGC uses its own money only if a failed plan doesn't have enough money to pay the lesser of the promised benefits or the PBGC guarantee. And since the PBGC re-does all the math for your "promised" benefits, I can tell you from experience that the promise will be pretty small.
I think the vast majority of workers can expect a full payment (not something 'pretty small') if the PBGC takes over, unless the PBGC itself hits critical funding issues.

I know some UAW pilots, and I know they got hit hard, but it isn't typical for a more average worker. Pilots were high earners, and are forced to take an 'early retirement' - and both of those worked against them when their pensions got transferred to the PBGC. PBGC adjusts downwards if you take your pension before 65, and they cap the benefits at:

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For 2012, the maximum guaranteed amount is $4,653.41 per month ($55,840.92 per year) for workers who begin receiving payments from PBGC at age 65. The maximum guarantee is lower if you begin receiving payments from PBGC before age 65 or if your pension includes benefits for a surviving spouse or other beneficiary.
I'm sorry you were in a group that didn't get all they were promised, that is sad state of affairs, but I don't think its accurate to project that to the more typical pensioner. Anyone with a pension at less than $55,480 at 65 really should expect the whole nut (again, assuming the PBGC remains solid).

-ERD50
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Old 07-31-2012, 09:50 PM   #68
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If you are older and have a small pension, then indeed the PBGC will (theoretically) be (relatively) nice to you.

Unfortunately, many people are younger when their pension gets terminated, and they really take it in the shorts. It seems like often they lose their job at the same time as the pension, and seldom are able to adequately replace either one.

IIRC, the PBGC recalculation process includes:
They use the worst version of your pension plan in effect during the previous 5 years.
They presume you retired 3 years ago. Early retirement penalties are applied backward from age 65.

There are some other "gotchas", but I'm too lazy to look them up.

I'd say the PBGC formulas are designed so that 70 year olds don't have to go back to work at Walmart. But lots of people in the 50-70 group will discover they need to start working at Walmart right now.

In my own case, I was a fortunate beneficiary of a very unethical (in my opinion) corporation-union agreement that helped some people a lot, and left the others out to dry. So the dip in my personal finances was much smaller than I expected. I think most people who experience a pension termination will be shocked at the reduction in their pension.
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Old 07-31-2012, 10:02 PM   #69
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I'm doing this from memory, so feel free to correct any mistakes. But here's how I remember it worked for some other people.
A theoretial example of how the PBGC calcs can work out in real life: Let's say your pension was supposed to be the 2012 max of $55,840/year. Your company terminates your pension (and probably your job) when you are 55, so the PBGC calculates as if you retired at 52. A fairly common early-retirement penalty is 6%/year. Let's see, you now "retired" 13 years early x 6% = a reduction of 78%. That leaves you with 22% of your pension, or $12,285 instead of $55,840. Time to get out that Walmart application.

Again, this is just a memory example. But you can see that the PBGC guarantee can be pretty small for some people.
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Old 07-31-2012, 11:26 PM   #70
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I'm doing this from memory, so feel free to correct any mistakes. But here's how I remember it worked for some other people.
A theoretial example of how the PBGC calcs can work out in real life: Let's say your pension was supposed to be the 2012 max of $55,840/year. Your company terminates your pension (and probably your job) when you are 55, so the PBGC calculates as if you retired at 52. A fairly common early-retirement penalty is 6%/year. Let's see, you now "retired" 13 years early x 6% = a reduction of 78%. That leaves you with 22% of your pension, or $12,285 instead of $55,840. Time to get out that Walmart application.

Again, this is just a memory example. But you can see that the PBGC guarantee can be pretty small for some people.
I didn't double check all the math or PBGC policy, but it is something like that, I think. Though 6% compounded (if that's the number) would be about 47% of your final pension - you can't just multiply 6% per year, or you'd owe them money if you got hit 17 years before retirement!

edit/add: but I'm not following the 'when you are 55, so the PBGC calculates as if you retired at 52' - is that really how it works? What is the 3 year delta about?

It's the same way my pension would be calculated if I got laid off at that point, or if I left for another job, no? The PBGC isn't guaranteeing your continued employment, or your continued benefit earnings as if you were employed. They are guaranteeing (within limits) what you would have earned at that point. That's how I understand it, and I think it is all we could expect.

-ERD50
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Old 08-01-2012, 07:52 AM   #71
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If you are older and have a small pension, then indeed the PBGC will (theoretically) be (relatively) nice to you.
I agree.

My FIL/BIL were both union workers in two different large companies of which both went under. They had very good contracted benefits and mucho OT which bumped up their retirement benefits over many years.

FIL was already retired, and his pension (already receiving for a few years, transfered to the PBGC) was cut.

BIL was nearing retirement (+35 years in) and his expected pension was cut quite severly. That's why he's still wor*ing 25-30 hours a week, when approaching 70 years of age.

For a higher than average salary and expected pension, there is a loss. OTOH, it could be worse. They could possibly not get anything, depending on the pension reserves.

Then you have trucking, which retirement benefits are managed by the union, not the respective company. In this case, the Teamsters manage the pension.

I retired from a large multi-national that (in the U.S.) production workers belonged to the UAW, but the pension was/is paid by the company in the U.S. The foreign/Euro/GB/Australia/Far East retirees fall under the respective countries government retirement schemes - not the company.

Of course, I didn't/don't have a pension (white collar) so while it might have been nice to get one (our's was eliminated in the early 80's) it's something that I don't have to worry about - either covered by the PBGC or taxpayers in the public sector.
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Old 08-01-2012, 09:33 PM   #72
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I didn't double check all the math or PBGC policy, but it is something like that, I think. Though 6% compounded (if that's the number) would be about 47% of your final pension - you can't just multiply 6% per year, or you'd owe them money if you got hit 17 years before retirement!

edit/add: but I'm not following the 'when you are 55, so the PBGC calculates as if you retired at 52' - is that really how it works? What is the 3 year delta about?

It's the same way my pension would be calculated if I got laid off at that point, or if I left for another job, no? The PBGC isn't guaranteeing your continued employment, or your continued benefit earnings as if you were employed. They are guaranteeing (within limits) what you would have earned at that point. That's how I understand it, and I think it is all we could expect.

-ERD50
The 6% penalty must not go on to the point where you owe money, but IIRC our plan simply said 6%/year penalty for early retirement. Virtually no one took early voluntary early retirement more than a year or two early, so the issue never seemed to come up. Those who were in their 40's when the termination occured, will know for sure.

The 52 vs 55 thing is simply because the PBGC says so. If you are still working, they recalculate your benefit as if you had retired 3 years before the termination, regardless of the circumstances.

I'm not familiar with your (or other people's) pension plans, but I think most would be 100% vested after a few years and would get pretty much full credit if they quit or got fired. Exactly how the vested credit would be used or transferred to another job, probably varies a lot.

My original point (didn't explain that very well) is that the PBGC doesn't have nearly as much money at stake in many terminations as people worry about. In my case, I'm getting significantly more than the PBGC guarantee, because the money was there in the plan to pay us more than the guarantee. But my guarantee was only about 20% of what my pension "should have" been, and the termination came less than a year before my retirement.
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Old 08-01-2012, 10:17 PM   #73
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My original point (didn't explain that very well) is that the PBGC doesn't have nearly as much money at stake in many terminations as people worry about.
Agreed. It seemed that in the OP, he was saying that since there are $XB in outstanding pensions, that the PBGC could be on the hook for a very big portion of it. But only the really troubled companies, and only to the extent they are short, and only after these downward adjustments. The PBGC could still run short though, and they are raising some flags on their funding, so we will see.

I had poked around the PBGC site some more earlier - I didn't dig into the details, but there are/were some separate rules for airlines specifically, so maybe that 3 year rule is part of that? I really don't think it applies across the board, from what I could see. I don't know why airlines are called out - maybe because it was a somewhat regulated industry? Seems odd though.


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I'm not familiar with your (or other people's) pension plans, but I think most would be 100% vested after a few years and would get pretty much full credit if they quit or got fired. Exactly how the vested credit would be used or transferred to another job, probably varies a lot.
Yes, vesting was after 5 or 10 years at my MegaCorp (I forget, and it probably changed over time). But what I was trying to say is that a worker is earning pension credits as they go, more each year, even after vesting. Two guys starting @ 25 YO, one retires @ 50 YO the other @ 65 - the 65 YO will get a far larger pension. The other guy might have earned another 15 years at another company (or not) - though the weighting for early/late years might not make the sum near equal anyhow. But if the guy who quit @ 50 had the PBGC take over the pension from that old company, he should (as I understand it), get the same (up to the limit) at 65 as he did if the company didn't need to hand over the pension to the PBGC.

Maybe I've got it wrong, but I'm pretty sure that's how it would work for most workers (non-airline, non 'high-earners', and not one of those 'multiple employer' group things that are mentioned there).

-ERD50
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