Poll:Prefer One, Two, or Three Legs?

[youbet]

Quote:

Originally Posted by Danmar yes, if I leave anything I would rather if be a conscious decision

My guess is that you, in death, won't have enough consciousness to give a sh*it one way or the other........ If you do, come back and let us know!

[Danmar]

Quote:

Originally Posted by youbet My guess is that you, in death, won't have enough consciousness to give a sh*it one way or the other........ If you do, come back and let us know!

Not sure what you are getting at? I would like to plan any bequests well before I lose consciousness and also plan my remaining spending (also well before I lose consciousness) accordingly. If I gave the impression this planning would be postmortem, I apologize.

[Calico]

Quote:

Originally Posted by Meadbh Two things: 1. Anyone who has Social Security at the beginning of retirement has not retired early. 2. This is aim-high's first post. How long will it take before the annuity ads commence?

Aim-High has been posting since August 2013, and has 90+ posts.

[Katsmeow]

Quote:

Originally Posted by karluk Your suggestion of splitting things up with 1/3 in each is biased towards expecting an unusually long lifespan, so it's not the optimal choice.

This wasn't my suggestion. I was explaining to someone else that that is how the OP had set up the question. That is all of the choices weren't meant to be the same NAV.

From a personal standpoint, I would prefer to have SS and personal savings which is what we have. DH actually could have a pension but chose a lump sum instead.

[growing_older]

Well, there are complications inherent in the question.

When I worked for companies that had a pension plan, I was included. There was no choice. When those companies "revised" their plans to pay out a miniscule token amount in place of the pension promise, there was also no choice. I'm glad I didn't count on a pension for retirement, as I would have been very disappointed by what happened.

Likewise I have no choice about participating in Social Security. Have made my contributions, I prefer to get my benefits, but if I had had a choice I would have preferred to invest the money myself. It was not a choice that was available.

[Danmar]

Quote:

Originally Posted by growing_older Well, there are complications inherent in the question. When I worked for companies that had a pension plan, I was included. There was no choice. When those companies "revised" their plans to pay out a miniscule token amount in place of the pension promise, there was also no choice. I'm glad I didn't count on a pension for retirement, as I would have been very disappointed by what happened. Likewise I have no choice about participating in Social Security. Have made my contributions, I prefer to get my benefits, but if I had had a choice I would have preferred to invest the money myself. It was not a choice that was available.

Good point. When I retired I had a choice of rolling my retirement allowance into an enhanced pension. This I did. This greatly increased my pension. I am glad I chose the pension as the increase in annual pension I am now receiving ended up being almost 10% of the retiring allowance? There was a 5.5 year period from retirement to pension start. In today's low interest environment this turned out to be a very good decision. Annuitized income is a great foundation for retirement.

[samclem]

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Originally Posted by anethum I have many friends who are federal employees and a few who are retired federal employees. . . . Many of them have a sense of entitlement concerning their very generous benefits.

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Originally Posted by M Paquette In general, when one person agrees to perform tasks for another person in exchange for compensation, they are entitled to that compensation upon performance. It is more than a mere sense of entitlement. The employee is legally entitled to that compensation in most jurisdictions.

Yes. Anethum's friends probably feel entitled to their benefits because they actually are entitled to them. They earned them.

Quote:

Originally Posted by youbet I experienced the same situation as you. I worked for a MegaCorp which froze the DBP pension and transitioned to a 401k only situation. I didn't like it but at least the situation didn't effect the the pension I had already earned up to that point and I had my remaining years until retirement to react. It would have been worse for them to not announce a change and then, after I retired, told me I'd be getting less than expected.

Your experience seems to be the way most private employers have done things when they changed their systems from DB to DC. Maybe this is what anethum is characterizing as "pension plans completely disappearing overnight." Employees experience it as a cut in the anticipated value of the pension benefits they will accrue in the future, but their already-earned benefits remain unchanged. It's bad news for most employees, but at least they are free to make adjustments (including a new employer) going forward. That's very different from reducing retirement benefits that have already been earned (something that does happen sometimes in the private employment sphere, especially for high-earners when an employer goes bust and the PBGC gets involved)

[haha]

Quote:

Originally Posted by MichaelB The two are not comparable. The COLA reduction one party has the resources to pay but breaks the contract after the other has fulfilled the conditions. Private pensions go broke but none to my knowledge have done this.

This depends heavily on what you mean by "has the resources to pay". It is fairly obvious that unless the federal govt starts modifying various entitlements we do not actually have the resources. Our continual huge deficits speak loudly about this. From a simplistic bookkeeper's POV, perhaps we do, since the theoretical taxing power of the feds is endless. From an economic POV, we are already far behind the 8-ball.

Ha

[Chuckanut]

Regardless of where one falls in the pension debate, I think we have to realize that any corporation or government entity that is in bad financial shape, is most likely not there ONLY because of the employee pension plan.

I find it hard to believe that a company or government entity that is having problems funding its pension system, did everything else with great honesty, accountability and precision, but somehow all those skills evaporated when it came to the pension plan. It is most likely there was gross mismanagement in many areas that lead the problem, not just pensions. I offer Illinois and the 'old' General Motors as two prime examples.

We should all be wary of setting precedents for retroactively taking away the benefits of a person's labours. Remember this quote from A Man for All Seasons

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"What would you do? Cut a great road through the law to get after the Devil? ... And when the last law was down, and the Devil turned round on you – where would you hide, Roper, the laws all being flat?"

[anethum]

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Originally Posted by anethum I think there is a very big difference between getting a reduced cost-of-living increase in the future, versus an actual reduction in an annuity now. Quote: Originally Posted by youbet Not as much as you're implying. If one's retirement was based on having a COLA'd pension and that COLA is reneged on, the prudent annuitant begins spending less of his pension now in order to have a larger portfolio to use for withdrawals to offset inflation later. If the annuity monthly payment is reduced now, the annuitant spends less now. Either way, the annuitant spends less now.

You left out my next 2 sentences in quoting me. I wrote:

Quote:

I think there is a very big difference between getting a reduced cost-of-living increase in the future, versus an actual reduction in an annuity now. Or a private sector retiree suddenly being told that they will no longer be getting health insurance as part of their retirement benefits. That has happened to plenty of people.

Suddenly losing company-provided health insurance in retirement is far more detrimental to a retiree's finances than merely receiving a smaller COLA in retirement in the future. What might happen to Detroit municipal retirees could be calamitous to their lives. A 1% reduction in the amount of an increase is not calamitous.

[RockyMtn]

The fact that I have A was the motivating factor to ER when I did. I had enough in personal savings to fully fund my chosen lifestyle for life. Having a pension and SS coming at 65/66 that will cover close to 100% of my living expenses is the piece of mind that I needed to pull the plug on w*rk.

[Meadbh]

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Originally Posted by Calico Aim-High has been posting since August 2013, and has 90+ posts.

Please see my apology in post #34.

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Originally Posted by Meadbh Pardon me, I made an error. I mistook post #1 in the thread for post #1 of the poster. Still unfamiliar with the details of the new app. Apologies, aim-high!

Sent from my iPad using Tapatalk

[Chuckanut]

I offer this to help get this thread back onto track. In order to diversify my sources of income I went so far as to buy 5 more years of service to get my pension closer to 1/3 of my retirement income (after SS begins). Most people thought the cost was to high, (which it probably is) but I view the price as long term insurance. My 2 ¢.

[timwalsh300]

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Originally Posted by youbet ...But in either case, those types of actions are good reason to have your personal retirement savings completely under your control and substantial. No one cares about you like you. Not the owners at work, not the polticians you elected, not the public. Watch out for yourself.

Well said; this sums up my argument for voting #4: personal savings. Retain the option to invest, withdraw, or annuitize as much as you want. I struggle to understand why so many people are voting otherwise, unless they are interpreting the question differently.

A majority of people here would actually prefer to have a large portion of their savings managed by politicians or executives at a previous employer, rather than managing it for themselves?

Tim

[rescueme]

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Originally Posted by Bestwifeever I wonder how many pensionless people really would buy an annuity to create the third leg.

I would (and I did) at age 59 when I retired, in 2007.

It was part of the plan before I retired, not as an afterthought.

In my/our case (it's a joint life SPIA with a guaranteed payout), the intention was to provide a private pension (I didn't have one), in order to provide an income base beyond our investment portfolio, and allow us both to delay SS until age 70.

How did it work out, some 6+ years later? Well, I reached FRA yesterday , DW will do so in May. In mid-March, we'll go to the SS office to submit my file/suspend and at the same time DW will submit a restricted application to claim 50% of my FRA benefit when she reaches FRA in May.

BTW, one of the concerns was when I/we applied for the SPIA was the then reduced interest rates. Who would have thought that the rates would have actually fallen, and stayed there for an extended period of time (so much for luck ).

While the SPIA was purchased with the intent to provide a floor income for the 11 years between retirement and drawing SS, it worked out better than expected. After we both draw SS in four years at age 70, that SPIA will just be icing on the income cake for the rest of our years.

In answer to your comment - yes there are some people that will purchase an SPIA to create that third leg (and very happy they did)...

[Live And Learn]

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Originally Posted by Midpack Seems an odd poll, why would anyone choose other than option A - everything? .

Exactly. I suspect that many of us stuck in OMY syndrome is because we don't have the pension. Its our fear or running out of money in old age that keeps us working. A pension goes a long way towards mitigating this risk (as does waiting to age 70 to take SSI as a couple of people have mentioned).

Neither DH or I have a pension, which is why I postponed my ER by 2 years.

As REWahoo mentioned, at some point I might consider a SPIA if it looks like I am likely to run out of funds to maintain a "minimal" lifestyle into old age. That decision is probably 20 to 25 years away.

[Live And Learn]

A few people have mentioned that they ER'd and were not yet eligible for SSI, but the poll is asking about the NPV of those income streams so the question is relevant regardless of when one retires

[Fermion]

The cost of purchasing a COLA'd pension that kicks in at a reasonable age, like 62, has survivor benefits, and pays a reasonable retirement (say, $50,000 a year) exceeds the amount one can accrue by contributing to a 401K compounded at something like a 2% real rate (which is about what a relatively "safe" portfolio could be expected to yield).

Of course everyone will point out that you can save outside the 401k...but you could also save outside of a pension. The tax deferral value of a pension contribution is probably quite a bit greater than that of the 401K, except in an insane market where we get 30% gains every year.

[Chuckanut]

Quote:

Originally Posted by Fermion The cost of purchasing a COLA'd pension that kicks in at a reasonable age, like 62, has survivor benefits, and pays a reasonable retirement (say, $50,000 a year) exceeds the amount one can accrue by contributing to a 401K compounded at something like a 2% real rate (which is about what a relatively "safe" portfolio could be expected to yield).

That's a pretty high bar in my experience. Most people I know who have a pension get between 15-30K a year, a partial or no COLA and that's if they take it at 65. At 62, the benefit would be less. Of course, none of them are on the Executive Retirement Pension Plan.

[Fermion]

Quote:

Originally Posted by Chuckanut That's a pretty high bar in my experience. Most people I know who have a pension get between 15-30K a year, a partial or no COLA and that's if they take it at 65. At 62, the benefit would be less. Of course, none of them are on the Executive Retirement Pension Plan.

If all pensions were 15k a year with no COLA, we wouldn't even hear about pension funding issues in the news. You could buy that with $300,000 or so. 20 million retirees would only require 6 trillion dollars.