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Old 06-06-2015, 07:45 PM   #61
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Thanks for the replies everyone, I appreciate the insight into this! Obviously the pension is only worthwhile if one can make the 20-30 year gauntlet which is why I'm contemplating it, since I'm still young enough to make that gauntlet while still making the goal of ER. Certainly a lot to think about and probably something I can't decide on until I have some concrete numbers in front of me.

It certainly seems like this community is torn on pensions for younger individuals which is a bit of a surprise to me! I'll see what comes down the pipeline and weigh in from there.
As others have mentioned, we've all seen employers either go bankrupt (and lay off their pension obligations to insurance), or manage to significantly cut the benefit. Either way you have to worry about the ability of the corporation to follow through on its stated obligations. 20-30 years is too long for the initial obligation to materialize without significant mutation.

You have far more human capital than your employer has pension assets. You'd do much better saving and investing your own human capital (as paychecks in your 401(k) and your taxable accounts) for your own FI rather than depending on the company funding a deferred pension that may or may not be there for you. You'll do far better by negotiating raises and being ready to switch employers when it's in your best interest, rather than being loyal to the corporate pension.

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Well the interviews are done and now its time to wait.
I probably should have said that the job is with a privately held company that recently reaffirmed its commitment to their pension as a recruiting tool. Additionally the industry competitors almost all the same benefits and the industry is incredibly stable. If I wasn't so sure that they were going to keep the benefit around for years to come I wouldn't even give the pension a second thought. I know some people currently working there so I have an idea of the culture and team that I would be working with should I receive an offer. There are some other facts that have a draw to that company such as moving back near family (for better or for worse) and a much lower cost of living as well.
Here's a metaphor: when the chicken and the pig cook the farmer's breakfast, the chicken makes a contribution. However the pig makes the real commitment.

Your company's affirmation to its commitment is noble, and it's clearly effective because it's attracting you. It might even be true, but they're still chickens. If they were really going to commit to your pension then they'd set aside the assets as per your vesting plan, buy you a deferred annuity each year, and title the annuity account in your name like the pig did for the farmer. Instead they're probably moving electrons from one virtual revenue account to another virtual pension account with the intention of someday matching your pension obligation to the assets which should be in that second account. Subject to federal labor law, of course.

Even if an employer was buying you an annuity every year, you'd still have to be concerned about the survivability of the insurance company backing the annuity.

If the industry is disrupted by a dinosaur-killing meteor, or if your execs turn out to be incompetents and crooks, then their pension commitment becomes worthless. (The pension fund might be worthless too.) Otherwise the only protection you have is the federal ERISA laws and whatever can be covered by the PBGC.

Your confidence is typical of your age and experience. For your sake, I hope it's merited. We've seen phrases on this board before like "affirmed its commitment", "all the same benefits", and "incredibly stable". Now you could set aside the confirmation bias and the cheery consensus for a bit and seek some dissenting opinions. Go talk to some 50-somethings outside of your industry about how their industry was forever changed, their careers were destabilized, and then their benefits were cut. The employer's commitment (as worthy as it may have been) turned out to be unenforceable. I think airline pilots and municipal civil servants (particularly San Diego and Detroit) would be great places to start.

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As a military officer, pension was never a recruiting tool. But it is a powerful retention tool.
My recruiting tool was my high-school best friend's older brother at the U.S. Naval Academy. Every time I saw him (which was only when he was home on leave) he had a cold beer in one hand and a hot chick in the other. Even if it was only 1 PM and he'd just awakened.

After I joined the Navy, I suddenly realized the difference between being "on duty" and "on leave"... but by then I was being paid to work on neutrons and explosives, so I was still fulfilled.

But yeah... after the 10-year point, that pension turned into retention handcuffs.
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Old 06-06-2015, 09:46 PM   #62
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... but by then I was being paid to work on neutrons and explosives, so I was still fulfilled.
An eagle-eyed alert reader (who also happens to be a submariner) has pointed out to me that I should offer full disclosure.

My workdays might have started out with neutrons and explosives, but a surprisingly large portion of them would be hijacked by sewage issues:
Sea story: "Hand me a dustpan!" - Military Guide

At those moments I was definitely not thinking positive thoughts like "I'm up to my elbows in this stuff, but they're gonna pay me a pension!"
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Old 07-17-2015, 09:56 AM   #63
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I appreciate many of the comments here and points made by those who have witnessed pension failures over the years. Per your suggestion Nords I went ahead and did a little research and agree with your chicken and pigs analogy. The more I watch the epicenter of government pension collapse happen around me the wiser I see it is to get my money under my control asap.

I opted for an employer who offered above average wages, high bonus, and a 9% 401k match instead of the employer with a pension and slightly lower wages. After watching my former employer already start to chop at the benefits during a major cost reduction program I finally understand the 1 in the hand vs 2 in the bush argument all too well now. I can't image staying for decades and being 1-2 years away from something such as employee retirement healthcare and having it cut just before I could make the deadline. I've seen it happen once, and i'd rather not have that situation happen to me.
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Old 07-17-2015, 10:22 AM   #64
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Retirement Heist: How Companies Plunder and Profit from the Nest Eggs of American Workers by Ellen E. Schultz | 9781591845652 | Paperback | Barnes & Noble


IMHO, the best pension is one that gives you all the control over you money. Or as much control as you can have given taxes, inflation, etc.
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Old 07-17-2015, 11:59 AM   #65
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My megacorp offered a no contribution DB plan after working there 15 years, many of my cohorts and I were headhunted to more lucrative paying jobs. In every interview, I was specific about the basis for compensation and in every case, they were misrepresenting the potential compensation package.

The most extreme example is a friend who finally accepted an offer with a competitor. I asked him how much he got for his pension payout and he said $80k lump sum. Three years later I got a golden handshake, and the pension was worth $750k in monthly payments. So far I have collected $1.35 million and hopefully living for another 10-15 years!

Meanwhile, my buddy bought a cottage with the $80k and has no pension. The days of such retirement luxury are now over, except for government/public workers.
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Old 07-18-2015, 12:46 AM   #66
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Originally Posted by Greencheese View Post
I appreciate many of the comments here and points made by those who have witnessed pension failures over the years. Per your suggestion Nords I went ahead and did a little research and agree with your chicken and pigs analogy. The more I watch the epicenter of government pension collapse happen around me the wiser I see it is to get my money under my control asap.

I opted for an employer who offered above average wages, high bonus, and a 9% 401k match instead of the employer with a pension and slightly lower wages. After watching my former employer already start to chop at the benefits during a major cost reduction program I finally understand the 1 in the hand vs 2 in the bush argument all too well now. I can't image staying for decades and being 1-2 years away from something such as employee retirement healthcare and having it cut just before I could make the deadline. I've seen it happen once, and i'd rather not have that situation happen to me.
Sounds good, and it gives you maximum career mobility/flexibility.

I'm in the middle of the new Google book, "Work Rules" by their HR exec. I hope it shames a lot of other corporations into realizing how ineffective their hiring & retention is, and how they could actually save money in the long run by treating their employees better in the short run. It's a great read for both the HR policies and the Google stories.

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The most extreme example is a friend who finally accepted an offer with a competitor. I asked him how much he got for his pension payout and he said $80k lump sum. Three years later I got a golden handshake, and the pension was worth $750k in monthly payments. So far I have collected $1.35 million and hopefully living for another 10-15 years!
When my spouse left active duty for the Reserves, she was a couple years short of the military's cliff vesting for the immediate active-duty pension. Instead of getting that at age 41 she'll start drawing a Reserve pension at age 60. At the time we calculated the difference to be about $750K, but of course the quality of life improvement is priceless.

Now her life goal is to collect more pension dollars than active-duty paychecks, first in nominal dollars and then adjusted for inflation. She's pretty motivated to maximize her longevity...
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Old 07-18-2015, 05:47 AM   #67
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I'm in the middle of the new Google book, "Work Rules" by their HR exec. I hope it shames a lot of other corporations into realizing how ineffective their hiring & retention is, and how they could actually save money in the long run by treating their employees better in the short run. It's a great read for both the HR policies and the Google stories.
Well, for starters they'd have to not only shame corporations, but their major shareholders (in the case of publicly held corporations). The short-term, often short-sighted "gotta hit my numbers THIS QUARTER" mentality is often counterproductive to the longer-term health of the company, and to the economy overall. If you risk a shareholder revolt every time you "leave profit on the table" by investing more in labor than the current market conditions absolutely require, where some institutional investors will want the CEO's head, you will find this short-term mindset.
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Old 07-18-2015, 05:52 AM   #68
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As a (recent) former govt worker, my DB pension is a key reason why I pulled the trigger to FIRE. Not the only reason, but an important one. While I have what I believe to be a sufficient asset level divided between taxable and tax deferred accounts, the State NET pension that I am guaranteed in approx 10 years that is equivalent to my current NET salary convinced me to go. I can enjoy the next 10 years knowing that if I completely screw up my budget or have a financial calamity I still have that pension for life kicking in (+ SS in my 60's). It's a wonderful backstop and one that none of my friends have so I count my blessings.

I earned a lower salary than comparables for my industry and in exchange, after a long career in govt I now have the pension. Works for me.
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Old 07-18-2015, 06:04 AM   #69
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I earned a lower salary than comparables for my industry and in exchange, after a long career in govt I now have the pension. Works for me.
True. That said, those who have been long-time government employees (state or federal covered under CSRS) had much more incentive to seek a job with a DB pension than many newer workers (where the deal has been watered down) or Feds under FERS (particularly very new hires).

For example, comparing a Fed with CSRS retirement to a Fed hired since 1/1/2014, not only does the CSRS employee get a much larger DB pension, but the new FERS employee has to contribute 4.4% of their income to the pension plan. (By contrast, a FERS Fed hired before 2013 contributes only 0.8%). I'm sure some state and local governments which have implemented "pension reform" for fiscal reasons have similar inequities between old-timers and new hires. If you could take that extra 4.4% and put it into your own IRA or 401K/403B plan, you might not be better off with the pension other than the security one might feel with contributing to a relatively guaranteed income stream.

So if you are a long-time govvie employee/retiree grandfathered under a much more generous pension plan, then yeah, it's easy to see the pension deal as a compelling one in terms of putting the 'golden handcuffs' on you. For many new hires where pensions have been watered down, not necessarily so much.
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Old 07-18-2015, 06:22 AM   #70
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I got lucky - ZERO contributions to pension by me. Hard to believe, but true - had to do with givebacks to unions in the 90's when the pension funds were well over 100% funded. So with 'extra' income I maxed out my 457 and 401k's each year as I was able to participate in BOTH plans as well as the pension + my non-deducticble tIRA. My 401k is already a ROTH 401k. 457 is traditional.
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Old 07-18-2015, 07:34 AM   #71
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I did not consider pensions when I joined Mega bank. I was 36 nd thought I would live and work "forever" in fact when I was eligible to join the pension plan, I declined for several years, thinking the cost was too high for a struggling guy trying to pay the mortgage and raising a family. But I got lucky. The bank merged with another and employees on both sides were grandfathered to their start of service. Furthermore when I retired I was able to role my "package" into the "top hat" pension plan,
I am now collecting a very generous pension that funds about 50% of our retirement expenses. Better to be lucky than smart any day.
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Old 07-18-2015, 08:14 AM   #72
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When I joined MegaCorp in my 20s, I think I was aware that they offered a pension and other benefits, but I didn't really consider any of them. It was my first "real" job, so I didn't really know what I should be looking for, other than salary, and the location and type of work.

So the pension didn't draw me to the j*b, but when the pension was frozen a few years ago, it certainly made me want to FIRE ASAP.
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Old 07-18-2015, 10:52 PM   #73
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Well, for starters they'd have to not only shame corporations, but their major shareholders (in the case of publicly held corporations). The short-term, often short-sighted "gotta hit my numbers THIS QUARTER" mentality is often counterproductive to the longer-term health of the company, and to the economy overall. If you risk a shareholder revolt every time you "leave profit on the table" by investing more in labor than the current market conditions absolutely require, where some institutional investors will want the CEO's head, you will find this short-term mindset.
I think that reducing employee turnover is immediately accretive to quarterly profits...

I've never had a real job, but this book is worth a read. He cheerfully reveals their mistakes as well as their successes, and points out where other companies could immediately improve productivity at very low cost.

He also admits that the usual response from HR departments at other corporations is "Oh, we could never do that here" followed by "But if we let our employees do whatever they want, then they'd do whatever they want and we'd never ever make any money!!"
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Old 07-19-2015, 07:35 AM   #74
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There was a time when my benefits kept me from moving.
My savings 8%
Companies pension contribution 14%
Companies 401k match. 5%
Discount on stock purchases 5%

So in all I was putting 27% of my salary put into my retirement. What's more the retirement 'pile' portion earned 4.5% zero risk. It was a pretty sweet deal and amounted to a set of golden handcuffs.

A funny thing happens when you save over 27% of your salary it adds up.




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Old 07-20-2015, 09:06 AM   #75
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At the beginning my Megacorp had great benefits. With each passing year they took away or diminished the benefits. Eventually they froze the pension for us and cut it entirely for new workers. At that point I was ready to leave, I had enough of the nonsense.
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Old 08-11-2015, 08:27 PM   #76
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Yep, a great DB pension along with 35 paid days off every year lured me in. We pay 9.5% into our calpers 2% @ 55 plan.
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Did a pension ever a sway you to a specific job?
Old 08-11-2015, 08:50 PM   #77
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Did a pension ever a sway you to a specific job?

DH's DB pension caused us to turn down a move for my career. It was the right decision. We are both retired now and he has a 75% joint and survivor pension that brings in $3800 per month after tax.
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Old 08-18-2015, 08:40 PM   #78
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Per CalPERS, here are the numbers (http://www.calpers.ca.gov/eip-docs/a...t-a-glance.pdf) for FY 2013-2014 retirees:


I suspect that the school member number is skewed down both due to the lower years of service and the number of part-time pension-eligible workers (e.g., substitute teachers).



The fact that many public sector employees can (and do) retire early is at least partially indicative of the value of those plans.
I'm pretty sure the average school member pension is lower because it doesn't include the public safety pensions that all of our police, FF's and others receive. The 3% tier one safety retirement was a very generous plan that is hurting many local government agencies trying to fund their obligations.
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