Join Early Retirement Today
Reply
 
Thread Tools Display Modes
What makes a pension a "good" pension
Old 12-09-2009, 12:43 PM   #1
Dryer sheet wannabe
 
Join Date: Feb 2009
Posts: 22
What makes a pension a "good" pension

I'm sure any pension is better than no pension, but what makes a pension a "good" pension? If you want to evaluate 2 different pensions, what should you look for? What do you like about your pension (if you have one)? There are so many assumptions and unknowns, it's difficult to rank them.

The pension at the company I work for, for example, is not COLA'd, and can't be taken as a lump sum at retirement, so it seems like those are 2 things that make it not as good as some pensions.

Thanks in advance.
axtec 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 12-09-2009, 12:46 PM   #2
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
ziggy29's Avatar
 
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
You touched on two of them -- whether they are COLA'd (probably the single biggest "feature" of the best pensions) and whether there is a lump sum option.

I'd also add the solvency and stability of the company funding the pension, particularly if one is expecting a payout that exceeds PBGC limits.

In addition, all else being equal I'd consider a public-sector pension better than a private sector pension, largely because it's less likely the pension will be frozen and the benefits watered down.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
ziggy29 is offline   Reply With Quote
Old 12-09-2009, 01:11 PM   #3
Dryer sheet wannabe
 
Join Date: Feb 2009
Posts: 22
I think the company is pretty stable. You never know what changes they might make in the future though. Thanks for the tip about the "PBGC limits". I'll look into that.
axtec is offline   Reply With Quote
Old 12-09-2009, 01:26 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Collin County, TX
Posts: 9,294
Is the company good about 'grandfathering'? IOW, if they stop offering the new hires pension benefits, will they continue yours?

We're receiving a non-cola'd pension from MegaCorp. Fortunately, we were able to take a partial lump sum and a smaller annuity.
__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
Old 12-09-2009, 01:53 PM   #5
Full time employment: Posting here.
hankster's Avatar
 
Join Date: Jan 2008
Posts: 649
My company's pension has a lump sum option, but taking the lump sum means no retiree medical benefits. Needless to say, I plan to take the monthly payments, even though it's non-COLA.

A friend of mine took the lump sum a few years ago. It made sense for him as he had terminal cancer and his wife was covered by her employer's medical benefits until Medicare age.
__________________
"There is no dignity quite so impressive, and no independence quite so important, as living within your means." Calvin Coolidge
hankster is offline   Reply With Quote
Old 12-09-2009, 01:56 PM   #6
Gone but not forgotten
 
Join Date: Jan 2007
Location: Sarasota,fl.
Posts: 11,447
Any pension that sends regular checks to me is a good pension and if it has cola ,it's a great pension !
Moemg is offline   Reply With Quote
Old 12-09-2009, 02:56 PM   #7
Full time employment: Posting here.
Calgary_Girl's Avatar
 
Join Date: Jun 2004
Location: Calgary
Posts: 805
DH doesn't have a "traditional" pension since it's a defined contribution pension but I still think it's pretty awesome: his employer contributes 10% of DH's gross salary (even if DH decides to contribute nothing to the plan) and DH is fully vested after two years.
__________________
I can only be nice to one person today! Today is not your day...tomorrow doesn't look good either.
Calgary_Girl is offline   Reply With Quote
Old 12-09-2009, 04:09 PM   #8
Dryer sheet wannabe
 
Join Date: Feb 2009
Posts: 22
Quote:
Originally Posted by bbbamI View Post
Is the company good about 'grandfathering'? IOW, if they stop offering the new hires pension benefits, will they continue yours?

We're receiving a non-cola'd pension from MegaCorp. Fortunately, we were able to take a partial lump sum and a smaller annuity.
That's a good question, I'll need to investigate. I heard recently that they have redefined the pension for new hires, so that may be the first indication of trouble.
axtec is offline   Reply With Quote
Old 12-09-2009, 04:38 PM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
bbbamI's Avatar
 
Join Date: Dec 2006
Location: Collin County, TX
Posts: 9,294
Quote:
Originally Posted by axtec View Post
That's a good question, I'll need to investigate. I heard recently that they have redefined the pension for new hires, so that may be the first indication of trouble.
It may not necessarily be an indication of trouble. They just may want to ensure that the employees already in place will be guaranteed their pensions. It's worth looking into however. Ask for a Pension Summary Plan Description.
__________________
There's no need to complicate, our time is short..
bbbamI is offline   Reply With Quote
Old 12-09-2009, 04:38 PM   #10
Thinks s/he gets paid by the post
Gotadimple's Avatar
 
Join Date: Feb 2007
Posts: 2,605
Quote:
Originally Posted by axtec View Post
That's a good question, I'll need to investigate. I heard recently that they have redefined the pension for new hires, so that may be the first indication of trouble.
Redefined for new hires may not be an indicator of financial trouble for your company. It may just be an indication that they are joining the mainstream of companies who don't provide defined benefits pensions.

So when wondering which is the better pension, the answer is any pension is the better pension as most companies no longer offer them.

-- Rita
__________________
Only got A dimple, would have preferred 2!
Gotadimple is offline   Reply With Quote
Old 12-09-2009, 04:44 PM   #11
Dryer sheet wannabe
 
Join Date: Feb 2009
Posts: 22
Quote:
Originally Posted by Gotadimple View Post
Redefined for new hires may not be an indicator of financial trouble for your company. It may just be an indication that they are joining the mainstream of companies who don't provide defined benefits pensions.

So when wondering which is the better pension, the answer is any pension is the better pension as most companies no longer offer them.

-- Rita
True. I am indeed thankful for the company pension. It is one of the reasons I choose to work for mega corp.
axtec is offline   Reply With Quote
Old 12-09-2009, 05:10 PM   #12
Full time employment: Posting here.
 
Join Date: Mar 2008
Posts: 799
A almost perfect pension is based on your three highest pay years, percentage based on years worked (percent increases with more years), vested after 5 years, partial inflation protection, offers a 10% COLA if you remain in the state, full medical paid and retirement age is 55 (early retirement at 50). They also offer dental, vision and auditory coverage and a LTC insurance for a monthly cost. It can be taken lump sum, but you'd lose the medical coverage.

I'm not in that Tier, so I'm retiring at 60, which is the main difference.
akck is offline   Reply With Quote
Old 12-09-2009, 05:54 PM   #13
Full time employment: Posting here.
bosco's Avatar
 
Join Date: Jul 2005
Posts: 987
Quote:
Originally Posted by akck View Post
A almost perfect pension is based on your three highest pay years, percentage based on years worked (percent increases with more years), vested after 5 years, partial inflation protection, offers a 10% COLA if you remain in the state, full medical paid and retirement age is 55 (early retirement at 50). They also offer dental, vision and auditory coverage and a LTC insurance for a monthly cost. It can be taken lump sum, but you'd lose the medical coverage.

I'm not in that Tier, so I'm retiring at 60, which is the main difference.
Pretty easy to recognize an Alaskan.

I have an Alaska State pension--Tier I. The best thing about it is the benefits are written into the state constitution. Lessening benefits would require an amendment to the constitution.

However, the COLA provisions are somewhat weak (not the COLA for staying in-state, rather the inflation-protection adjustments.) Still, you'd have to have a screw loose to cash it in. They don't give you the actuarial value of the benefit stream--they only give back your contributions in with some small (~3%) interest. Since it's a defined benefit pension, I would have recovered the lump sum in 2 1/2 years of benefits (although my case is not normal, it's still a bad deal to cash it in for just about anyone).

I am concerned, however, that the medical coverage will be considered a "cadillac" plan. Especially when my wife takes hers in 1 1/2 years.

That all being said--it is a great system (for employees). But it is no more. New hires get basically a 401k.
__________________
I have an inferiority complex, but it's not a very good one.
bosco is offline   Reply With Quote
Old 12-09-2009, 06:27 PM   #14
Thinks s/he gets paid by the post
BUM's Avatar
 
Join Date: Feb 2004
Location: Mid Hudson Valley
Posts: 1,781
Quote:
Originally Posted by Moemg View Post
Any pension that sends regular checks to me is a good pension and if it has cola ,it's a great pension !
What Moemg said!

Bottom line is a good pension is one that pays. Remember any pension can vaporize. They are not guaranteed unless stipulated in your employment contract. You have one of those?
__________________
In a panamax down by the river.
BUM is offline   Reply With Quote
Old 12-09-2009, 06:27 PM   #15
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
ziggy29's Avatar
 
Join Date: Oct 2005
Location: North Oregon Coast
Posts: 16,483
Quote:
Originally Posted by axtec View Post
That's a good question, I'll need to investigate. I heard recently that they have redefined the pension for new hires, so that may be the first indication of trouble.
Actually, it's just as likely to be more of an indication that they realize their pension plan is unsustainable and potentially bankrupting if they keep giving it to new hires -- and that the best way to make sure they can make good on existing promises is to stop making new ones to compound the problem.
__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)
ziggy29 is offline   Reply With Quote
Old 12-10-2009, 04:05 AM   #16
Thinks s/he gets paid by the post
 
Join Date: Jul 2004
Posts: 1,558
Hmm - my previous employer had a defined benefit plan which vested at 2 years, non-COLA'd based on last three years salary; a 401a, which they dumped 5% of your salary into after 2 years, no requirement for employee to contribute (no matching requirement); and a 403b, which they dumped 2% of your salary into after two years, you could begin contributing day 1 of employment, no matching requirement either. Golden Handcuffs. I left last year - will get a small pension - was 1 year short of 15 years -with 15 years could have taken a lump-sum out at 55 (early-retirement as well, although significantly reduced pension amount - ~25% reduction). Now will have to wait until 65 - will probably take annuity option as I have all of the other above and then others for 'laying around money' versus income streams. Oh and if your age plus years of service equaled 75, free healthcare from retirement on---this organization was a healthcare organization. I won't get the healthcare option, but have other options available to me.

The defined benefit portion of the benefits package will be going by the wayside someday, I believe. Or it will be significantly reduced. I saw this happen at another organization I worked for - they were awful in that you weren't vested until 7 years and they put their contribution into a 403b - My contributions were ten times what I recieved from them after three years of employment there - oh, and the healthcare options weren't very good either. Amazing the differences.
__________________
Deserat aka Bridget
“We sleep soundly in our beds because rough men stand ready in the night to visit violence on those who would do us harm.”
deserat is offline   Reply With Quote
Old 12-10-2009, 09:36 AM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
youbet's Avatar
 
Join Date: Mar 2005
Location: Chicago
Posts: 13,151
Quote:
Originally Posted by axtec View Post
True. I am indeed thankful for the company pension. It is one of the reasons I choose to work for mega corp.
Since you have 20 yrs or so to go until retirement, bear in mind that if mega corp freezes your dbp in the near future, the amount you have accumulated will wilt to near nothing by collection time due to inflation. Also, if you leave mega corp to seize a great opportunity with another firm down the road, you may have a vested pension but a pension that will be worth little when it's time to collect.

You will need to stay at mega corp for all/most of the 20 yrs until you retire and mega corp will need to not freeze their dbp pension plan for it to work out for you. I hope it does work out, but the odds, IMO, are slim. Keep your personal investments up to snuff!
__________________
"I wasn't born blue blood. I was born blue-collar." John Wort Hannam
youbet is offline   Reply With Quote
Old 12-10-2009, 10:13 AM   #18
Full time employment: Posting here.
 
Join Date: Feb 2008
Posts: 920
If you have a spouse then how the pension deals with that might be important. Does it offer different distribution rates for guaranteed spousal bennies of 50% or 60% etc. if you croak?
tuixiu is offline   Reply With Quote
Old 12-10-2009, 11:21 AM   #19
Full time employment: Posting here.
 
Join Date: Jan 2008
Posts: 838
Another thing that would make a pension 'good' is if it's not reduced to much if you retire early and start collecting the pension before the normal retirement age of 65.
DayDreaming is offline   Reply With Quote
Old 12-10-2009, 04:28 PM   #20
Thinks s/he gets paid by the post
Eagle43's Avatar
 
Join Date: Jan 2005
Location: DFW
Posts: 2,016
Well, I have two pensions.

The military pension I have had for 28 years, and it goes up a tad almost every year. I also believe it will continue for the remainder of my life. The Mega Corp pension I have had for nearly 6 and it never increases.

I like the military pension better.

But I agree that any pension is a good one.
__________________
Resist much. Obey Little. . . . Ed Abbey

Disclaimer: My Posts are for my amusement only.
Eagle43 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools
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
A little more good news - ARM "time bomb" defused REWahoo FIRE and Money 26 02-11-2009 09:20 AM
Good news for some pension funds who got screwed mickeyd FIRE and Money 0 04-13-2008 10:18 AM
Pension too good to be true? Midpack FIRE and Money 7 02-29-2008 06:36 PM
"Global Giving" - Great website for donating to good causes - thoughts? justin Other topics 3 06-30-2006 09:47 AM
Another "small pension" post. Poundkey FIRE and Money 2 05-19-2006 08:50 PM

» Quick Links

 
All times are GMT -6. The time now is 05:15 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2024, vBulletin Solutions, Inc.