Pensions

[JohnDoe]

Hi. A potential new employer's salary range is considerably less money than what I was making, however, the benefits are much better.

They have a pension vested after 3 years. I'm not familiar with pensions other then I know you get certain amount every yr at a certain age.

What types of questions should I ask(if I get an offer) regarding the pension?

Would you consider this a big plus over a lower salary? What can I expect to receive after 10-12 years?

Thanks.
JD

[W2R]

(1) Find out if it's COLA'd.
(2) Find out if you get any medical benefits in retirement - - if not, see if you can at least stay with their group insurance or not.
(3) See if they have "early outs" where they allow people to retire and begin collecting their pension at 55. Find out at what age you can begin collecting your pension. 62? 65? 66?

As to what you can expect, I don't know but the following is what we get in the federal government. Assuming that a person was hired after the 1980s and thus in the newer FERS pension system, the following rules apply to pensions.

After 10 years (if the retiree is at least 56 or so), you get one tenth of the average of your highest three years' pay, reduced by 5% per year under age 62 when you start collecting your pension. (Feds: I'm referring to "MRA+10" retirement here).

So, if your highest three years' pay average 48K, and you are 62 with 10 years in, you would get $48K x 10% = $4800/year = $400/month, less taxes, health premiums, and so on. Your monthly check would probably be around half that depending on what health insurance you choose.

Under the same conditions, if you are 57 with 10 years in, you would get $300/month less taxes, health premiums, and so on ($400 - 25% of $400). Or, you can quit at 57 and wait until 62 to collect, and avoid the reduction.

Our COLA is the CPI minus 1%. As retirees we get lifetime medical with the same group rates and benefits as federal employees, except a retiree's share is taken out after tax instead of before tax.

This is definitely a plus over a higher salary.

[ziggy29]

A big, big factor would be the security of the pension and the likelihood that your employer can yank it out from under you on a whim.

[CCdaCE]

Yeah, figure out the formula. Here, your earliest retirement (or first eligible to) is after your years of service plus age equal 85 (Rule of 85).

Ours is avg. of highest 3 years within the last 10 multiplied by 2% multiplied by years of service. So, say you worked 30 years and averaged $4,000 per month in salary. $4000/mo. x .02 x 30 years = $2400/mo.

Doesn't matter if you are 54 or 74. As long as you make rule of 85. If you leave early/quit after 10 years here, you just get to take some amount of cash with you, but it's nowhere near what the pension would be worth.

-CC

[kcowan]

Also whether the currrent terms are locked in in some fashion or are at the discretion of management, including COLA terms.

[tuixiu]

My wife has the 80 points rule at the city. It's a great deal for people who get in early, as they have secretaries who started working at age 20 and can retire at age 50 with medical benefits.