Financial Independence

[calmloki]

Well, this points out the value of the "three-legged stool" model.

I do agree with this, but because the OP phrased the question in a way that led us to make our own assumptions, I assumed "all else being equal," meaning similar investment portfolio sizes -- and with that, sure having a pension would be more secure than not. But if you assume that someone who doesn't have a pension has saved considerably more in their 401K and IRA plans, that's not *necessarily* a foregone conclusion.

That third leg could be book royalties, rental income, part time work, horticulture, lots of different things - most here seem plugged in to the stock & bond markets, but there are those who depend on other income sources as the strong leg of their stool.

 

[W2R]

Of course, mine's not COLA'd and those are the absolute amounts I'll get -- they are in 2020 dollars or 2030 dollars, not 2009 dollars. Still, beats a poke in the eye and it's certainly more than a lot of folks will get.

Mine's not COLA'd either.... y'know.... we get a "diet COLA" which is sort of a no-man's land in between non-COLA'd and COLA'd. I'll qualify to get mine about 10 years before yours, though I am 17 years older than you. Anyway, after those 10 years have passed I will buy you and your DW dinner with the difference.

I don't resent the size of my pension. It was the deal that I made when I took the job. It's not worth it to me to undergo great angst when I had my eyes open at the time I took the job. I had a job with the State of Louisiana prior to this one that would have given me a much larger pension, but I took a bet - - that bet was that Louisiana would go broke, so I quit without being invested in that pension plan and took my present federal job. Louisiana hasn't gone broke but my decision is nobody's fault but mine. With reward comes risk and I was too risk averse to go for that pension.

Oh, and I don't get any retiree health insurance. That's huge, probably more so than the pension, at least for FIREing before 65.

Health insurance? Now that's another topic. I am grateful for that too. It mean that I can get (and pay for) health insurance from age 62-65, at which point Medicare will take over. Given the mood in Washington, I don't expect there will be a post-retirement pre-Medicare insurance gap for more than another year or two if that. Again, I don't resent the fact that things will change so that everyone will get the health insurance benefits I signed up for and they didn't. I made some mistakes along the way too, but I did the best I could and do not expect any "do-overs". That's life and although some of us have been expecting an impact of the baby boom on health care, they probably just didn't foresee it. At any rate, they didn't cause the market crash that is impacting us all.

 

[W2R]

That third leg could be book royalties, rental income, part time work, horticulture, lots of different things - most here seem plugged in to the stock & bond markets, but there are those who depend on other income sources as the strong leg of their stool.

I'd give an arm and a leg if I could add a stream of rental income to my retirement plans. But I don't know how to fix things, and I am too much of a softie. I would be a terrible landlord.

 

[ziggy29]

I'd give an arm and a leg if I could add a stream of rental income to my retirement plans. But I don't know how to fix things, and I am too much of a softie. I would be a terrible landlord.

Same here. I'm just not handy. And if you're not handy, you lose too much money to maintenance issues to make rental real estate profitable.

 

[W2R]

Same here. I'm just not handy. And if you're not handy, you lose too much money to maintenance issues to make rental real estate profitable.

Had I only known, I would have decided to pursue a career as a plumber. They make decent money, don't have to pay for an education, and (I think) a hardbitten plumber would probably make a lot of money as a landlord as well.

 

[ziggy29]

Had I only known, I would have decided to pursue a career as a plumber. They make decent money, don't have to pay for an education, and (I think) a hardbitten plumber would probably make a lot of money as a landlord as well.

And it's pretty hard to replace the plumbing in a house or fix leaky pipes from India or China.

 

[W2R]

And it's pretty hard to replace the plumbing in a house or fix leaky pipes from India or China.

Yeah!!!

And my house would be a lot better to live in. I'd have beautiful remodeled bathrooms, and also that outside faucet on the side of the house wouldn't be drip-drip-dripping all the time. Got to get around to calling a plumber about that.

No "office politics" or other politics to worry and get ulcers about, either.

 

[calmloki]

So you do a h**us or a Nords (working title suggestion: steely eyed stalker, deep,deep) or sculpt, or create high buck websites (Retire on $5/day!!), or bcome a renouned pastry chef, or lead tours to Indja or China...

 

[youbet]

Some are envious of those who worked for a company that provided them with an annuity at the end of their career. Others are envious of those who have amassed a good amount of wealth. So the question is moot.

You left out being envious of folks who received both excellent pay and a generous retirement annunity. They're not mutualy exclusive by any means. An example would be teachers fortunate enough to have landed jobs in high tier suburban school districts. Here in "nicer" Chicago suburbs, beginning high school teachers (lucky enough to secure employment since it's extremely competitive) start at $50k+ and end in the low six figures. Then they FIRE on a pension annunity paying 75% of their final salary. And, if they were taking advantage of their attractive salaries, well funded 403b"s.

Just mentioning this as it is possible to have it both ways.

 

[W2R]

So you do a h**us or a Nords (working title suggestion: steely eyed stalker, deep,deep) or sculpt, or create high buck websites (Retire on $5/day!!), or bcome a renouned pastry chef, or lead tours to Indja or China...

I have a friend at work who is about 55 and single. She has taken up a hobby of making stained glass creations, and she is pretty good at it. She is planning to retire and to custom make stained glass items to order. People will pay big bux for a custom made stained glass window, for example. The income from her stained glass will allow her to bridge the gap until she is old enough to start withdrawing from the TSP without penalty.

 

[bamsphd]

I voted yes. I think the NO pension group is more financially independent (free), but less financially secure than the pension group.

To keep things as equal as possible, assume Mr NP retires with $100m, and Mr DB retires from an insurance company with a pension which pays the exact same amount as the immediate annuity the company would sell Mr NP for $100m. Mr DB has the slight advantage of partial government insurance of his pension.

However, the main difference in my mind is that Mr NP has the freedom to do wise or stupid things with his money. Mr NP can blow it all riding a rocket into orbit, or can spend it running for political office, or can donate it to charity, or can give it to his kids, or can put it all into institutional index funds, or can just wait a few years and then get a better deal on an immediate annuity. Mr NP can basically duplicate Mr DB's lifestyle by purchasing an immediate annuity, but Mr NP is also free to spend his money on lots of possibilities not available to Mr DB, so I think Mr NP is more financially independent.

 

[FinanceDude]

You left out being envious of folks who received both excellent pay and a generous retirement annunity. They're not mutualy exclusive by any means. An example would be teachers fortunate enough to have landed jobs in high tier suburban school districts. Here in "nicer" Chicago suburbs, beginning high school teachers (lucky enough to secure employment since it's extremely competitive) start at $50k+ and end in the low six figures. Then they FIRE on a pension annunity paying 75% of their final salary. And, if they were taking advantage of their attractive salaries, well funded 403b"s.

Just mentioning this as it is possible to have it both ways.

My sister had a great 403B deal, for every $1 she put in,they university put $2 in as a match.......

 

[unclemick]

Hmmm - don't we grade on the curve? No pension gets the most gold stars.

Bring out the Four Yorkshiremen and who is the cheapest CB. Go team.

And the real estate landlords are still getting no respect. And I for one shall not mention the 'A' word.

One more time - pssst Wellesley.

Have we got it all covered yet?

heh heh heh - if I had a cola'd pension plus heathcare - I would say - let'em eat cake - er something. Bye the bye - I got old enough for early SS. Snuck in some temp work early in the stretch, non cola pension at 55, let her work one extra year and owned a duplex for a while. What's a little cheating among friends - .

 

[Koolau]

My sister had a great 403B deal, for every $1 she put in,they university put $2 in as a match.......

Now THAT I would envy (would have envied)

 

[JOHNNIE36]

Anymore, guess I don't know what I am and always wondered how I would stack up. Retired at 52 (now in my 21st year of retirement) with a defined benefit pension of just over $1600/month net. Lost all health care 1-1-09. We are both on a Medicare Advantage Plan. No premium in addition to the $96/mo to SS. Social Secutity nets us both $1900/month. All investments are in CD's and provide about $14k/yr. Roughly, that equates to approx $4666/month clear ($56000/yr). No debt except for car lease of $333/mo. Guess it all depends on your life style but I feel like we are doing well. Don't know how I would make out if my company went belly up and the pension went to the government to provide.

 

[ls99]

Had I only known, I would have decided to pursue a career as a plumber. They make decent money, don't have to pay for an education, and (I think) a hardbitten plumber would probably make a lot of money as a landlord as well.

The cost of education part is learning when and where not to put your hands.

Then learn the essentials of "righty tighty" right side up and upside down as well. Plus a few more tricks in communicating with potential customers at 3 AM. Spend 4 yrs as an apprentice then you get to take the exam for a plumber's license. Which gives you a license to make a good buck.

 

[Amethyst]

Tortoise vs. Hare

The cost of education part is learning when and where not to put your hands. Uh, oh, do I detect a Haha lure?

My view is that I'm a tortoise, and some people are hares. I took a Federal govt job where I pay the same amount into my govt pension fund, as I would have if I'd taken a job where I paid into SS (which I don't). My pay didn't go up very fast, or very high, and I was quickly passed by "hares" with high-end jobs, their own businesses, or parental largesse. But I keep nose firmly to grindstone, and eventually I will get paid a sum to live on (though not SS).

Now, the way to really play the game is to be my husband, who retired a number of years ago in the full knowledge that I would be working for years to come... (plus, in the meantime, he gets to be married to me!).

 

[ls99]

The cost of education part is learning when and where not to put your hands. Uh, oh, do I detect a Haha lure?


Now, the way to really play the game is to be my husband, who retired a number of years ago in the full knowledge that I would be working for years to come... (plus, in the meantime, he gets to be married to me!).

A very smart man indeed.

Will leave the lure out there, never know who/what shows up?

 

[Bimmerbill]

Hey, I worked hard for my reserve component pension that will start in 18 years (22 years in service). Still working hard at my civil service pension.

Pensions are just a different path to FI (I HOPE!) that some choose to take.

 

[BunsGettingFirm]

Nords posted his pension payout a few weeks back, and for what's he's getting in his early 40s, I'd coop myself up in a combo coffin/sterilization machine for 20 years 6 months at a time. Heck, with my work schedule, I sometimes don't see any hot women for 6 months at a time anyways. In short, I'd take the US government pension in my earlier 40s rather than the equivalent in financial assets at god knows when.

 

[Nords]

Nords posted his pension payout a few weeks back, and for what's he's getting in his early 40s, I'd coop myself up in a combo coffin/sterilization machine for 20 years 6 months at a time. Heck, with my work schedule, I sometimes don't see any hot women for 6 months at a time anyways. In short, I'd take the US government pension in my earlier 40s rather than the equivalent in financial assets at god knows when.

In my chosen career field, "survivor bias" has a very literal meaning... when our kid waxed enthusiastic over USNA's many fine lifestyle enhancements, I took her to Memorial Hall and showed her the names of my classmates who've been killed since taking the oath. Made her cry, although she insists it was something in her eye.

Despite what they tell you in the recruiting ads, no one should join the military for the money. No one.

 

[gryffindor]

I would say that federal pensions are the most secure because the government is allowed to take on massive debt to meet its obligations. Of course the COLA protections may be altered and the real value will decrease depending on what happens to the deficit.

State pensions are another matter. Although state and federal supreme courts have ruled that those pensions cannot be unilaterally renegotiated, there is talk that some states' finances are so poor that they may be go into bankruptcy. If that is the case, it is possible that pensions could be renegotiated just like private companies. We're just seeing the tip of the iceberg now.

As a result, I think that almost all pensions do have some systematic risk behind them -- its just extremely hard to quantify. But as any GM retiree will tell you, the risk is real.

 

[Koolau]

In my chosen career field, "survivor bias" has a very literal meaning... when our kid waxed enthusiastic over USNA's many fine lifestyle enhancements, I took her to Memorial Hall and showed her the names of my classmates who've been killed since taking the oath. Made her cry, although she insists it was something in her eye.

Despite what they tell you in the recruiting ads, no one should join the military for the money. No one.

Nords, I cry every time I visit the Arizona Memorial, Punchbowl cemetery or any of the Civil War memorials on the mainland. Thanks to you and the rest of the military men and women on this forum who have served their country. Thank God there continue to be folks who are motivated by the service and not the salary.

 

[RonBoyd]

Nords, I cry every time I visit the Arizona Memorial, Punchbowl cemetery or any of the Civil War memorials on the mainland.

Me too. The Punchbowl is a sobering experience, bar none.

 

[ziggy29]

Nords, I cry every time I visit the Arizona Memorial, Punchbowl cemetery or any of the Civil War memorials on the mainland.

One time we visited Gettysburg in early March, while there was still close to a foot of snow on the ground. It was one of the more surreal experiences I've had -- it was so peaceful, pastoral and quiet -- and knowing what happened there 130 years earlier was creating a strong feeling of cognitive dissonance.