Worth sticking around for a corporate pension?

[soupcxan]

I'm early 30s, 5 years in at megacorp, one of the few that still offers a pension - 1.5% of your final salary per year of service. No COLA. This is a company where some actually do stick around for 30 years (we'll see if my generation does). Of course there are many factors that make someone stay or go but should I be careful about leaving it for a non-pensioned job?

 

[Mill]

I was in this situation. It depends on how much you like your job, or in my instance, the location. I was a Northerner in a southern culture with a very lucrative megacorp job with a pension in a location where good jobs are...how shall I say...hard to come by. That said, very few people leave this company voluntarily.

I was 20 months from a vested pension. (3.33 years into a 5 year sentence) and I chose to walk away. Didn't want another 20 months of a sucky life. That and the pension would have only been $150/mo non-cola'ed collectable at 65 once I hit the 5 years vested mark. It would have become more valuable the more time I spent there, but every day was becoming a struggle.

Was it a good idea in hindsight? I think so, but the jury is still out, as its only been a couple months. In changing jobs I took a significant paycut to live where I want to live, and now no pension. Im happier in my personal life, but lets be honest, nobody likes taking a step back.

 

[Lakewood90712]

I was employed by an aerospace co. for 19 years, midway, it was bought by a larger aerospace co. Had 2 RIF's, recalled after 60 days first time, at another plant, 2nd RIF, recalled after 3 weeks, again, another plant. 3rd time ,a year later someone with less seniority was getting rif'ed . The contract I was under provided for "Inverse seniority layoff" ( you could request to be laid off , in place of the lowest , and get the rif package, 6 mo free medical, and un-employment insurance , also 26 weeks at the time). I jumped. Best thing I ever did.

I was only staying for a small non cola pension , sim to yours, and free retiree medical.Would have to stay another 14 years to get the retiree medical. I hated the job, so I took the inverse layoff.

Immediately got a temp job, 1 year later a civil serv job with much better pay and pension. Don't like it much either , but the compensation overall is about double . At Mega-corp aerospace, I always worried that I could never get a better job somewhere else. How wrong I was.

The co. was not obgliated to , but asked me to come back 3 times in 7 years after the last layoff, I declined each time. I guess they liked me more than I liked them.

Looking back , I can see 5 years at megacorp , or mega civil service jobs, as a good learing phase , even if you don't like the place, but I wasted a very large portion of life in a job I hated , for the promise of free medical and a small pension in old age.

You get one life. No-replay.



Just my 2 cents worth ,

 

[2B]

Several decades ago, I calculated that if I put about 2% of my salary away it would equal the mega corp pension. As usual the gods laugh at the plans of mortals and it really works both ways.

My current salary is about 15X my original starting salary but I'm no longer at my original mega corp. My old mega corp is one of the few surviving companies that has their same (or very similiar) pension plan. Most other employers I've been with since leaving my original mega corp have either been bought out, shutdown or switched to a defined contribution plan. That means I would have been lucky sticking with my original mega corp from a pension standpoint but would have been less fortunate (as many were) if I had counted on the other pension plans.

The original mega corp pension targeted a pension with SS that would equal 60% of pay. The pension comes with no COLA. I calculate that if I stayed my pension would have been worth roughly $1MM. The value is highly dependent on the interest rate used. I'm using my best guess of a SPIA rate now. Of course, getting it would have required putting up with unpleasantries I was experiencing at the time, passing up on very interesting new positions I took and not being part of any of the RIFs mega corp has had over the last few decades. I've been a good saver so I've safely exceeded the $1MM mark but I probably would have had my current savings anyway. There's also no reason to believe I would have progressed salary-wise away from mega corp. There are too many imponderables.

This is a long rambling reply but I'm basically saying there are too many factors to consider to "prove" its worth staying in a job just for the pension.

 

[Midpack]

Like the others have said, whether you enjoy your present job and location and the future possibilities there (promotion?) should take top priority IMO. And even if you have mixed feelings about the current job, is there another job/location you're sure you'll find more satisfying (or just grass is always greener...)?

A pension is a serious consideration, but that can be frozen, changed or taken away at any time (it's happened to many here) whether private or public sector. It comes down to the job itself then...

 

[panacea]

IMO you have too many years of w*rk left to stay just for a pension. If you like it there so much that you decide to stay, then the pension is a nice benefit. Otherwise, find w*rk that you do like; there are other ways to prepare for retirement with proper planning.

 

[MichaelB]

I'm early 30s, 5 years in at megacorp, one of the few that still offers a pension - 1.5% of your final salary per year of service. No COLA. This is a company where some actually do stick around for 30 years (we'll see if my generation does). Of course there are many factors that make someone stay or go but should I be careful about leaving it for a non-pensioned job?

A pension is another component of your compensation. If you calculate how much it is worth in real $ terms and add it to your salary you know how much you gain lain or lose by taking another job.

Traditional vesting of pensions is heavily back-ended, so the cost / value is not linear. The risk for you is investing your time in the early years but losing the pension before it reaches the high value late years. This is difficult to calculate but an important part of your decision calculus.

 

[2B]

Traditional vesting of pensions is heavily back-ended, so the cost / value is not linear. The risk for you is investing your time in the early years but losing the pension before it reaches the high value late years. This is difficult to calculate but an important part of your decision calculus.

How true. I am vested in one pension with a credit of 11 years. The company "right-sized" and I was gone. I was just a few years from reaching the magic "Rule of 80" which would have given me a full pension after that. I was one of many just over 50 yo "right-sized" out of the organization. The senior people left just happened to all be people who had already reached the magic age/years of service total. I was far enough from the magic number that I knew I couldn't go after the company for age/pension bias but I was high enough up in the organization to know that the topic of pension costs/vesting was frequently discussed.

 

[Midpack]

Traditional vesting of pensions is heavily back-ended, so the cost / value is not linear. The risk for you is investing your time in the early years but losing the pension before it reaches the high value late years. This is difficult to calculate but an important part of your decision calculus.

+1. My Megacorp pension was frozen after 17 years of service, in a 35 year career. What it amounted to was a small fraction of what it was projected to be had the plan continued, not half by any means. And I couldn't touch it until I reached the former Megacorp (I finished my career elsewhere) retirement age (earliest was 56) so I couldn't invest the funds. In my case the "pension" turned out to be almost trivial in the overall scheme. FWIW

 

[NanoSour]

I just finished reading Retirement Heist by Ellen Schultz. Must read for anyone banking on a Corporate pension and retiree health care. Particularly if you have 20-30 years to go. Bottom line, don't bank on it being there. Check it out at your local library.

 

[H2ODude]

I was never "pension focused" as DF never had it and I always assumed you had to self fund. Even when went to work for local government on a very lucrative offer, I assumed I wouldn't make it to the golden ring. And I didn't at that location. However, after I'd been there 5 years I started to think, hmmmm, this looks sorta like a good deal. I was always afraid of the "golden handcuffs" and would recommend not making your decisions at such a young age be driven by a potential pension. I think the only people who could justify that are those working in government, a stable well funded one at that, and who either enjoy what they do for sure or have a good tolerance for job "meh". Even though I ended up getting a pretty good pension deal from another local government, I always self funded 401k, IRAs, and 457 to the max. When I realized in mid fifties I in fact could wrangle a fairly substantial and secure pension, it was just one boatload of gravy. Now, we could live fairly well on the pension and SS, the latter which we'll defer until 70. The investment assets could generally be classed as discretionary spending.

I guess this is a case of doubting the belt or suspenders, and ending up with both. Always told DM that yes, I'm a pessimist but pessimists are never disappointed.

 

[ERhoosier]

I'm early 30s, 5 years in at megacorp, one of the few that still offers a pension - 1.5% of your final salary per year of service. No COLA. This is a company where some actually do stick around for 30 years (we'll see if my generation does). Of course there are many factors that make someone stay or go but should I be careful about leaving it for a non-pensioned job?

Much too little info to offer opinion. Do you enjoy current job? Does current co generally treat employees fairly? How financially stable is the co & its industry? How big a pay & benefits increase would you anticipate at the non-pensioned job? A well-funded defined contribution plan could well be more valuable than 1.5% x yrs of service, particularly since many co's are cutting back or ending their traditional pension plans.

IMHO- This early in life I would say that promise of a future pension should be a minor factor in job decisions.

 

[Options]

Much too little info to offer opinion. Do you enjoy current job? Does current co generally treat employees fairly? How financially stable is the co & its industry? How big a pay & benefits increase would you anticipate at the non-pensioned job? A well-funded defined contribution plan could well be more valuable than 1.5% x yrs of service, particularly since many co's are cutting back or ending their traditional pension plans.

IMHO- This early in life I would say that promise of a future pension should be a minor factor in job decisions.

+1
The rate of organizational change is rapid and increasing. Your organization may look like a shadow of itself in 10 years. The potential for a department/organization "reorganization/restructuring" is high and will only increase. You may like the job/boss/company now, but the possibility is strong that this can and will change (even in the most stable of industries).

I firmly believe that employees should have no loyalty whatsoever to any organization. An employee's loyalty should be only to people (i.e., good bosses, co-workers who can help one another now and in the future).

It's important to realize how dramatically the world of work has changed, and how much that change is accelerating. In the ongoing struggle between labor and capital, at the present time in history labor has lost dramatically. I have seen employees at all levels--from leadership levels to line staff--released without the slightest thought to their future welfare (regardless of the "severance" offered). What this means to the average employee is that their #1 responsibility to themselves and to their families is to maximize their return on their energy/effort at all times. This translates into negotiating higher pay/benefits/perks/severance at every opportunity and as much as possible. One cannot do this if he/she is deceived by current employer offerings, which are changed all too frequently without notice. As to any current pension, it would be more beneficial to believe in the Easter Bunny than to believe in any employer promise.

 

[LoneAspen]

Speaking just for myself, I would never stay anywhere just for a pension.

It's been far more lucrative for me to keep investing in my skills, networking, keeping my ear to the ground every few years, and then jumping ship and finding a better job and increasing my salary.

My employer buys my loyalty two weeks at a time with every paycheck - no more than that. After I graduated college, got my first "real" job and saw how the world worked, after a few years I became very mercenary about my career, and wouldn't hesitate to jump ship for something better.

My first job out of college was with a large consulting firm that had some type of pension plan. Some of the folks I worked with 25 years ago are still there. One of them contacted me via LinkedIn about a year ago, and I was asking him how things were. He HATED it there, but was now compelled to stick around just for the pension.

As much as I dislike my own situation right now with some "golden handcuffs" (stock vesting) that won't fall off for another year, at least that wait's only been four years, not forty.

 

[Derslickmeister]

I worked for two Megacorps that USED to offer pensions. Both got out of that business before I was fully vested. Don't stick around for what might not turn out to be, if that is the only thing keeping you that is...

 

[pb4uski]

Until you get much nearer to retirement, I would assume the pensions will go away or be reduced and not factor it into my thinking on where to work. If it ends up there is a pension available to you at the end of your working days, then it is nice gravy but I wouldn't make job/career decisions banking on a pension.

 

[Greencheese]

I agree with pb4uski, given the current push to end pensions in the business world it isn't wise to plan a job around a pension that needs 30 years to be worth much.

I'm quite new to the job market myself and I've already seen 2 acquaintances have their pension program frozen right at the beginning of their career, effectively nipping one of their best perks right in the bud. I'd love to have a pension but with how things are going anymore I don't think I could make the 30-40 year gauntlet for it to actually be a valuable job retaining tool. Just keep on climbing the corporate ladder and if you find something better jump on any opportunity you get. You never know what'll show up

 

[Turboslacker]

Your greatest wealth build tool is your earned income over your entire career. Maximize it via promotions and job transfers. All the rest of the benefits are important but supplemental.

 

[Easy Rider]

I made the '75 point' (age plus years service) at aerospace megacorp - by just a few weeks. I would have most likely left anyway if they did not offer the VRIF, but it is so sweet how it all worked out. I'll get a full non-cola'ed pension at 55 in 3 1/2 years from now. If I left without the VRIF, my pension would have been the same but I wouldn't be able to collect that amount until 65.

Many coworkers jumped ship around the dot.com era, but they all seemed to miss that big stock option payout they hoped for. They may have received a bigger raise by switching companies, but that levels off since most mega-corp give raises based on merit and comparison to peers.

So I think it was worth it for me to stay with the same company - though I would not have stayed that long just for the pension. I like my work environment and loved biking to work everyday - I didn't need that added pressure of looking for another mega-corp job.

I did view my length of time at mega-corp as a sort of deferred compensation (as it did turn out). But new hires now have no pension so really no built-up deferred compensation really exists there anymore!

 

[jollystomper]

As others have stated, there are no guarantees. Stick to your curent job based on factors other than a pension. While I will be getting a pension, my megacorp changed their policy about 20 years into my service, and had I been a year younger I would have lost it. So your pension today could disappear tomorrow. The only silver lining was that it caused me to ramp up my savings rate just as my salary was taking off, which was a very good thing to do.

 

[ziggy29]

The frustrating thing about DB pensions is that they are so back-loaded in many cases. A pension with 10 years of service often isn't as large as half of what you'd get for 20 years, or a third of what you'd get after 30. That's why staying for the pension is such a crapshoot, given that (a) the pension be frozen at any time and (b) the job and/your bosses can start sucking so much that staying for the pension feels like a prison sentence. Even with the same salary history, three pensions for 10 years of service won't likely come close to one pension earned for 30 years of service. That kind of sucks and it's one of the most frustrating things about DB pensions today where there are few "jobs for life".

Yeah, pensions can be a wonderful (and are after you've earned them), but I do know many people who are stressed and miserable because they hate their jobs but feel absolutely trapped by the pension pot of gold at the end of the "miserable job" rainbow. So there is that to consider as well. (You said you've been there for 5 years. How long does it take until you are vested? In my first Megacorp it took 10 years, and they froze the pension after I'd been there nearly 11 years, so I barely made it.)

The contract I was under provided for "Inverse seniority layoff" ( you could request to be laid off , in place of the lowest , and get the rif package, 6 mo free medical, and un-employment insurance , also 26 weeks at the time). I jumped. Best thing I ever did.

My dad was in an aerospace job and he jumped at an early retirement incentive back in 1992. His was similar to yours, but better in two ways: first, it gave fully employer-paid health insurance for him and my mom until they reached age 65; second, they added five years to his service time for pension purposes. I suppose most miserable folks grinding toward a pension can only dream about such a deal these days. The funny thing is that he almost retired as soon as he hit 55 and could get the pension and retiree health insurance, but his bosses regularly emptied out his BS bucket (or prevented it from being filled) because they didn't want him to retire. And he was actually pretty happy there for his last three years as a result, but this retirement incentive proved too good to pass on.

 

[Chuckanut]

How true. I am vested in one pension with a credit of 11 years. The company "right-sized" and I was gone. I was just a few years from reaching the magic "Rule of 80" which would have given me a full pension after that. I was one of many just over 50 yo "right-sized" out of the organization. The senior people left just happened to all be people who had already reached the magic age/years of service total. I was far enough from the magic number that I knew I couldn't go after the company for age/pension bias but I was high enough up in the organization to know that the topic of pension costs/vesting was frequently discussed.

This kind of thing is why I hope we will go to a transportable retirement system (note that I tactfully avoided using the word 'pension') that is controlled by the individual and not by government and/or employers.

Ideally both employee and employer would make contributions and hopefully the withdrawals would be tax free/advantaged. Combine that with meaningful medicare reforms and a more enlightened attitude towards retaining older workers and the 'retirement' problem would be greatly reduced.

 

[Chuckanut]

Your greatest wealth build tool is your earned income over your entire career. Maximize it via promotions and job transfers. All the rest of the benefits are important but supplemental.

I would add the ability to live below your means.

 

[Andre1969]

Back in late 1999, I was encouraged to leave Boeing, and join up with a smaller company that was a partner on our contract. With Boeing, I had the pension, but the 401k only had a 1% company match. We were actually the "bastard children" of McDonnell-Douglas, so they treated us differently from other Boeing employees, so if we were Boeing-proper, the plan might have been different. The new company offered no pension, but the company match was better, at 3%, and a better variety of funds. Plus, I would get a 10% raise if I went to the new company. And the final bonus, was that Boeing would technically lay me off on the last workday of 1999, and give me one week of severance for every year I was with the company (came out to 7 years), but then the new company would pick me up on the first workday of 2000.

Needless to say, I followed that encouragement! If I had stayed on with Boeing, provided I was still working with them, I'd have 21 years of service. I wonder what that pension would have been up to by now? For those 7 years, I'll get $349.21 per month, non-COLA'ed, starting at age 65, in 2035.

 

[soupcxan]

I'll be vested in the pension this year. Agree that the pension is only one factor among many. The benefit is really back-end loaded and makes ER difficult - if you leave at 45 or even 50, the value of the pension is significantly reduced.