Most Americans In the Dark About Their Pensions

[martyb]

My federal govt. CSRS pension (36 yrs) will be/is/has been contributory (7%) and my military (33 yrs) (mostly reserves) was not.

 

[dgoldenz]

Sadly, most Americans are in the dark on just about anything financially-related. If I had a nickel for every time I talked to someone spending $500-1000/mo on health insurance that had no clue what they were spending or what the policy covered, I'd ER tomorrow.

 

[fritz]

Sadly, most Americans are in the dark on just about anything financially-related. If I had a nickel for every time I talked to someone spending $500-1000/mo on health insurance that had no clue what they were spending or what the policy covered, I'd ER tomorrow.

Not looking to take this thread off it's target (as this did), but it's not only the people buying health insurance that don't "completely" understand what they purchased - the health insurance companies don't always get it right either. It's only when you need them that the "Big Book of Rules" comes out. Several times in the past - I had to point out that the claim they denied (out of network), should have been covered under my corporate policy (and they paid them). Now that we are ER'd and on our own individual policies - can't even get BCBS to send us a paper copy of the expensive poor coverage policies we've purchased - only available in PDF on line...

 

[dgoldenz]

Not looking to take this thread off it's target (as this did), but it's not only the people buying health insurance that don't "completely" understand what they purchased - the health insurance companies don't always get it right either. It's only when you need them that the "Big Book of Rules" comes out. Several times in the past - I had to point out that the claim they denied (out of network), should have been covered under my corporate policy (and they paid them). Now that we are ER'd and on our own individual policies - can't even get BCBS to send us a paper copy of the expensive poor coverage policies we've purchased - only available in PDF on line...

I was more referring to the fact that people have no clue how deductibles, copayments, coinsurance, and OOP maximums work, along with not even knowing how much they pay for the insurance in the first place.

 

[fritz]

I was more referring to the fact that people have no clue how deductibles, copayments, coinsurance, and OOP maximums work, along with not even knowing how much they pay for the insurance in the first place.

There is no clear standardization between health insurance companies - let alone their own policies (find this somewhat deliberate). Don't envy you selling them, and really don't fault people for not completely understanding them.

I would say the same is true for pensions - one megacorp company I was with was sold (after I left), and the changes allowed me to cash out of the poor excuse of an pension income stream they quoted me annually - wasn't an option with the original parent company. Since doing that - I have managed to more than double it's original cash value and originally quoted income stream. Guess you could say that you can't always depend on what you're given as your retirement pension policy rules if the companies are at liberty to change those rules

 

[dgoldenz]

There is no clear standardization between health insurance companies - let alone their own policies (find this somewhat deliberate). Don't envy you selling them, and really don't fault people for not completely understanding them.

Standardization or not, the concepts still work the same way. Even if they didn't, I guarantee if I was spending $5-10k/year on something, you can be damn sure I'd understand every single facet of how it worked.

In regards to pensions, I wouldn't trust anyone to set aside money better than I can. Give me the money now and let me figure out how to spend/save it...there are no guarantees a pension will exist in the future, but money in my pocket today is real and tangible. Same thing applies to SS, but I don't want to derail the thread. Back on topic....

 

[Mulligan]

I'm 17 months away from my DB retirement commencement. But...I guarantee I've been reading and studying everything I could find about how it works for years, how much I can expect to receive, making estimates about the things that will be coming out before I get the net ie. med ins, life ins, survivor's benefit, fed taxes (not planning to pay any state income taxes) etc. While I don't know the exact bottom line just yet, I have a pretty good idea. I also know exactly how it all works. That's just my personality...no way I could just leave it all to chance. But then...I don't have the huge nest eggs many on this forum have either. I'm heavily depending on that CSRS pension for my (our) primary retirement income, along with a few other lesser sources.

I bet 80% easily of the people I knew, only had a vague idea of what their pension was. Most did not know about the retirement website and cared even less to use the calculator which all you basically would do is punch in your 3 highest years and total years worked and it would do it for you. Most would respond, I will just call them and have them send me what I'm getting.

 

[Ed_The_Gypsy]

It has been many years since I had a staff job with defined benefits. The advantage is that having separated, they told me long ago exactly what my DBs would be at age 65. The combined DBs from the two companies that I was vested in is a whopping $400/mo. Although we both have IRAs, most of our retirement income will be from SS.

 

[chinaco]

Yes they are in the dark... and many of them willfully.


I have been in discussions with people in their 30s and 40s about retirement and the comment more often than not was that retirement was so far off that they were not going to bother with it now (i.e., planning)...

as if, it was a last minute exercise?

 

[scrabbler1]

My company's pension got frozen in 2002 so the amount I qould receive every year has not changed in a long time. Before I ERed from there in2008, they ahd a series of meetings to further explain the pension and its options although none of them would apply to me because (a) I knew I would not be working there when I turned 55 and could start receiving it early (i.e. before age 65) if I retired at 55, and (b) I am single and plan to stay that way so any kind of spousal benefit was not relevant.

Not to derail the thread, but I also have a small, accumulated cash-balance amount which is supposed to rise over time even though I do not work there any more. But it is so small (low 5-figures) and if taken as an annuity it would be much less than $100 per month so I don't pay much attention to it.

 

[JakeBrake]

Back in the day my Megacorp furnished annual benefit statements that included projected retirement income. The projected retirement income estimate included pension, 401K, and SS. Now that I'm retired I've had time to look at the benefit statements. Some of them date back almost 30 years. The statements are remarkably accurate.
Magacorp, like many other experts, failed to predict the 2008 recession.

 

[kcowan]

I had the same thing: a forecast of what my annual DB pension would be if I continued to work until 65. I knew enough to know that I should retire early if given the chance (and fund other income). At age 49, a golden handshake was presented. Then I found out much about DB pensions and cash payout alternatives to make the "best" decision.

So I am not surprised at the results either. Spend time discovering things you can influence. Rather than second-guessing megacorp.

 

[ziggy29]

Just a nit about the thread title -- I think it should say "Most American Pensioners in the Dark about their Pensions" because most Americans don't have pensions.

Having said that, I know what my pension (long-ago frozen, from a previous employer) will be. Not adjusted for inflation at all, will be about $630 a month in 2030 at age 65 with 100% survivor option. That may buy a loaf of bread or a gallon of gas in 2030.

I have the option of taking it as early as 2020 (at 55) -- but that would only be about $270 a month so it's probably better to wait.

 

[FinanceDude]

Most Americans do not have pensions, and in addition, if the check comes every month, (retired)the pensioner doesn't really care about all that other stuff.........

 

[Lisa99]

I'm not understanding how those who did (or will get) a pension didn't see the point in calculating the payout until close to retirement.

While my pension will be relatively small at age 55 (about $1300/month + COLA) I calculate it yearly and plug the number into FireCalc. I want to know the full financial picture when determining how large our investments have to be to retire with a 95% success rate.

But then I'm a planner...always have been, always will be.

 

[Bimmerbill]

Oh man 36 years CSRS.... I am jealous.

 

[GregLee]

I'm not understanding how those who did (or will get) a pension didn't see the point in calculating the payout until close to retirement. ... I want to know the full financial picture when determining how large our investments have to be to retire with a 95% success rate.

Sure, if you're deciding how much spare cash to invest. But some people don't have spare cash in the run-up to retirement. I didn't. There's no point in discovering that you need to save more for retirement if you don't have anything to save. It would just make you sad.

 

[Alan]

Most Americans do not have pensions, .........

Is this true if you include all government workers, military etc?

 

[rescueme]

Most Americans do not have pensions, and in addition, if the check comes every month, (retired)the pensioner doesn't really care about all that other stuff.........

I agree. For most folks (those in non-governmental j*bs, it's a mute point) the word pension means nothing at all.

I retired from a company that had a union (I was white-collar) and the union folks knew exactly what their pension would be. That's because they voted on a new contract every 2-3 years (depending on economic cycle) and everybody got the same monthly amount in retirement, per the contract.

If there was any misunderstanding, it may have been in the SS offset that was standard in any contract. That is where the pension would be reduced at age 62, with the assumption that the union folks would apply for SS at that time, and the total income would remain the same.

On the white-collar (e.g. "company", not necessarily "management" side) with no pension (eliminated in the early 80's, replaced by a 401(k), with company matching), we were well aware of our situation and the need to provide for ourselves. Of course, we had the few "grasshoppers" who spent all (and more) than they made, but preparation was up to us. Something much different than my parents/grandparents (who were in unions) ever had to worry about.

OTOH, I feel that in my case, I turned out (financially) much better off in retirement since I was forced to plan for my own retirement future. Additionally, I don't have to worry about (like my FIL/BIL) reduction in retirement income after thir respective companies were closed down after many years, and their pensions were taken over by the PBGC.

 

[Lisa99]

Sure, if you're deciding how much spare cash to invest. But some people don't have spare cash in the run-up to retirement. I didn't. There's no point in discovering that you need to save more for retirement if you don't have anything to save. It would just make you sad.

I understand now.

 

[Mulligan]

Is this true if you include all government workers, military etc?

Alan, in another thread recently a poster had a research article showing a little under 20% of Americans have a pension, with 7% of private workforce having one, down from around 70% about 30 years ago. As far as percent of people who ARE currently retired AND have a pension, I don't know if I have ever seen such a survey.

 

[kyounge1956]

I'm not understanding how those who did (or will get) a pension didn't see the point in calculating the payout until close to retirement.

While my pension will be relatively small at age 55 (about $1300/month + COLA) I calculate it yearly and plug the number into FireCalc. I want to know the full financial picture when determining how large our investments have to be to retire with a 95% success rate.

But then I'm a planner...always have been, always will be.

Waiting until relatively close to retirement to calculate a pension payout really doesn't surprise me much. A person early in their career may not even stay with the same employer until retirement, and even if they do, how good an idea do they have of what their top salary will be (or top two years or five years or whatever), so many years in advance? If you have only a very rough idea of the top salary, you don't really know how much the pension is going to be. Even though I am within two years of my target retirement date and expect to stay in the same pay grade for the rest of my time with the City, both the "official" pension estimates I got from our retirement system just last year, and the ones I did myself using the website calculator at about the same time, are now invalid, because they used assumptions based on the COLA provisions of our old contract, which are no longer in effect. I am thinking about taking one of the "lump sum + reduced benefit" options, and even the official estimates use my accumulated contributions at the time I requested the estimate, not a projection of what they'll be when I retire. In the meantime, the COLA provision has changed, and so has the employee contribution rate, both of which will affect my accumulated contributions at the time I retire—and when the total accumulated contributions change, so does the amount the monthly benefit is reduced by, if I take the lump sum.

Since, as in my case, enough can change even in the last few years before retirement to invalidate estimates made prior to that time, I don't think it's really all that useful for employees who are still a decade or more away from retiring to get them.

 

[Alan]

Alan, in another thread recently a poster had a research article showing a little under 20% of Americans have a pension, with 7% of private workforce having one, down from around 70% about 30 years ago. As far as percent of people who ARE currently retired AND have a pension, I don't know if I have ever seen such a survey.

Thanks for that. Pretty bleak prospects for many.

There was a report recently here in the UK that 2 thirds of working folks in the private sector (aged 16 - 64) were not enrolled in a pension plan. It recommend looking for ways to get this % higher by getting pension schemes to be better understood, and having the default being auto-enrollment so that folks have to opt out rather than opt in to a pension scheme, otherwise the next generation of retired people are going to be much poorer than the current retired population.

Millions face pension poverty as 'golden' era ends - Telegraph

Last year, only 36 per cent of those aged between 16 and 64 were actively contributing to a private pension, the report states. Over the past 10 years, the proportion of men saving into a pension has fallen from 49 per cent to 38 per cent, while for women it has dropped from 36 per cent to 33 per cent. Lord McFall warned that although millions of workers would be enrolled automatically into workplace pension schemes from next year, up to nine million “may still fall through the cracks” by opting out.

 

[ERD50]

Alan, in another thread recently a poster had a research article showing a little under 20% of Americans have a pension, ....

Pretty bleak prospects for many.

I'd take a different view of that. Better to NOT have (the promise of) a pension and plan accordingly, then to HAVE (the promise of) a pension, when that promise can be (and has been) broken. How fully funded is the PBGC? How much faith do we have in that over the next 30 years, when we just heard threats that SS checks may not go out?

You're going to pay for that pension one way or another, I'd rather trust that money to myself, than some entity that may be bankrupt 30 years down the road when I need that money.

One in the hand is worth two in the bush.

-ERD50

 

[Independent]

I retired from a company that had a union (I was white-collar) and the union folks knew exactly what their pension would be. That's because they voted on a new contract every 2-3 years (depending on economic cycle) and everybody got the same monthly amount in retirement, per the contract.

Yep. I think that one excellent way to get people to understand is to let them vote.