Hello board! My megacorp has announced they are freezing our traditonal pension next year. That spurred me to start doing some research and led me to this facinating board.
I am 51 and have worked for 21 years at my company. Our traditional pension formula was 2% X years of service(max 25yrs) X avg of 5 high years. Basically you counted on 50% of your pay at retirement coming from your pension, and normal retirement is age 60 so you recieved the full pension at age 60. Our 401K has always had a 50% match of first $1000 contributed, which was crummy but the pension was good.
Back in 2003 we were offered the choice of staying in the traditional plan or switching to the cash balance plan, I chose to stay in the traditional plan because of length of service and the fact that the traditional plan was fully funded and the company is in excellent financial shape. Now they have annouced because of the Pension Reform Act of 2006 they were being forced to freeze the traditional pension plan and beginning next year everyone would go to the cash balance plan.
The company will contribute 8% of my salary until I retire to this plan with an additonal 3.6% the first 5 years as a transition credit. The cash balance plan pays T-bill rate +1% which has been 5% APR compounded quarterly. In addition they will up the 401K match to 3.5% of my salary.
They have not provided me with a pension calculator for this cash balance plan yet so I really don't have a good handle on what has just been done to me. The internet is flush with articles on how long term older employees are being hurt badly by these changes. It appears to me that while it will cost me a modest amount, it is not devastating. Am I right?
I am 51 and have worked for 21 years at my company. Our traditional pension formula was 2% X years of service(max 25yrs) X avg of 5 high years. Basically you counted on 50% of your pay at retirement coming from your pension, and normal retirement is age 60 so you recieved the full pension at age 60. Our 401K has always had a 50% match of first $1000 contributed, which was crummy but the pension was good.
Back in 2003 we were offered the choice of staying in the traditional plan or switching to the cash balance plan, I chose to stay in the traditional plan because of length of service and the fact that the traditional plan was fully funded and the company is in excellent financial shape. Now they have annouced because of the Pension Reform Act of 2006 they were being forced to freeze the traditional pension plan and beginning next year everyone would go to the cash balance plan.
The company will contribute 8% of my salary until I retire to this plan with an additonal 3.6% the first 5 years as a transition credit. The cash balance plan pays T-bill rate +1% which has been 5% APR compounded quarterly. In addition they will up the 401K match to 3.5% of my salary.
They have not provided me with a pension calculator for this cash balance plan yet so I really don't have a good handle on what has just been done to me. The internet is flush with articles on how long term older employees are being hurt badly by these changes. It appears to me that while it will cost me a modest amount, it is not devastating. Am I right?