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Old 01-04-2017, 06:47 AM   #41
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huh?

maximum statutory vesting under ERISA for a db plan is 5 years, shorter if the plan is a hybrid
I think she meant if they change jobs just under 5 years so they never meet the typical 5 year vesting. You're being a bit picky.
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Old 01-04-2017, 07:02 AM   #42
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I think she meant if they change jobs just under 5 years so they never meet the typical 5 year vesting. You're being a bit picky.
Depending on demographics, it may be quite a bit less than 5 years. From the BLS's latest report on tenure:

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Median employee tenure was generally higher among older workers than younger ones. For example, the median tenure of workers ages 55 to 64 (10.1 years) was more than three times that of workers ages 25 to 34 years (2.8 years). Also, a larger proportion of older workers than younger workers had 10 years or more of tenure. Among workers ages 60 to 64, 55 percent were employed for at least 10 years with their current employer in January 2016, compared with only 13 percent of those ages 30 to 34.
Up to the mid 30's, people often have less than 3 years at an employer.
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Old 01-04-2017, 07:33 AM   #43
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Not to mention that anyone can save and invest outside of a "retirement plan" as well. I am regularly surprised when coworkers lament that they cannot save any more because they have maxed out their IRA. Not so, you don't have to limit saving for retirement inside retirement plans.
Just out of curiosity I looked at the balances in my investment accounts. Less than half is in IRA- type accounts. I didn't have 401(k)s available to me until I'd been working for 10 years, though.

Interesting point about how DB plans would have been whittled away, anyway. I think that the development of 401(k)s hastened their demise since the employer could appear to be replacing the DB plan with a shiny new benefit (generally with the employer contributions less than they would have put into the pension, and with all the rate of return and mortality risks dumped onto the employee). Many of the companies that kept their DB plans have been shutting them down to new entrants and I believe that's going to continue. You want to read posts from an unhappy group- go to an actuarial discussion board and read the comment sof pension actuaries about their career prospects.
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Old 01-04-2017, 07:39 AM   #44
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You want to read posts from an unhappy group- go to an actuarial discussion board and read the comment sof pension actuaries about their career prospects.
early or late career pension actuaries?

corporate plans maybe, but there is a lot of opportunity in the public and multi-employer arenas
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Old 01-04-2017, 07:42 AM   #45
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I think she meant if they change jobs just under 5 years so they never meet the typical 5 year vesting. You're being a bit picky.
me, picky, about something which I'm a SME?

if they change every 2-3 years or so they wouldn't be vested in the employer DC contributions either - qualified plans aren't meant to benefit job hoppers

we have a PS/K plan that puts in about 13% of pay with a 6 year graded vesting schedule - I'm 80% vested

If we had a traditional DB plan where aggregate contributions were pegged at 13% of pay, due to age-leveraging I'd be making out like a bandit, not that I'm complaining about the 13% DC contribution

100% vesting generally applies to employee contributions
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Old 01-04-2017, 08:56 AM   #46
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Many of the companies that kept their DB plans have been shutting them down to new entrants and I believe that's going to continue. You want to read posts from an unhappy group- go to an actuarial discussion board and read the comment sof pension actuaries about their career prospects.
Yes, companies shut DB pensions down because they are expensive. Replacing them with DC plans is an effective wage decrease for employees as employer contributions to a DC plan are usually lower than to a DB plan.

Interestingly my ex-employer's default plan was a DB, but there was also a DC option. The contributions to both plans were mandatory and exactly the same at 11% employee and 5% employer match, so not a rich plan for the employees as far as contributions go. Both plans were 401a, but additionally there were 403b and 457 DC plans so if you were over 55 it was possible to put $48k away for retirement in addition to the DB pension.

The employer has made cost cutting changes to the DB plan for new employees that include raising the minimum retirement age from 55 to 60, and using the last 5 years average salary to calculate the pension rather than the last 3.
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Old 01-04-2017, 03:53 PM   #47
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We were offered a choice between a DB state pension and a 403b; I took the latter since my wife was a corporate accountant and I thought it was quite possible she would have to move and take another job.
I got lucky (or did well) on the investment side, so I was able to semi-retire at 57 at a SWR that was higher than the DB pension--I'm working online about 15 hours/week, so I haven't even needed to withdraw yet.
I have many colleagues who took the 403b route for whom it hasn't worked so well--2001 and 2008-9 crushed them.


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Interestingly my ex-employer's default plan was a DB, but there was also a DC option. The contributions to both plans were mandatory and exactly the same at 11% employee and 5% employer match, so not a rich plan for the employees as far as contributions go. Both plans were 401a, but additionally there were 403b and 457 DC plans so if you were over 55 it was possible to put $48k away for retirement in addition to the DB pension.
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Old 01-04-2017, 04:18 PM   #48
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Companies would have changed DB plans no matter what... they were just becoming too costly and unpredictable (wish the gvmt entities would figure this out)....
Many of them have and are doing something about it. The plan I'm under was phased out about 1985 (I was hired in 1973) and has been changed several times since then. Fortunately they didn't pull the rug out from under then-current employees and the changes only affected new hires. Fair enough. They will pay me far more in retirement (I hope!) than they ever did when I was working.

When the first change was made everyone was given the option of changing to the new, reduced benefit plan and if they did they would get back 50% of their previous retirement plan contributions. Also your retirement contributions were lower so higher net paycheck. As hard as this was being pushed (a half-day seminar "on the clock") I figured it was a virtual certainty that doing this was not in my best interest so I did not take the bait. Another clue was that changing was irreversible.

A lot of guys took the bait and bought bigger houses, cars, boats, motorcycles, etc. At retirement most had to keep working at other jobs if their spouses didn't also have a retirement income. Me? Most days I sleep until 8:00 or later and every day is a Saturday.
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Old 01-04-2017, 04:31 PM   #49
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I don't often agree with Megan McArdle, but she is right on the money with this one https://www.bloomberg.com/view/artic...efuse-to-solve

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There’s a perpetual pundit debate over the best way to provide for retirement: defined benefit plans (pensions), defined contribution plans (401(k)s, IRAs and the like) or pay-as-you-go social insurance schemes (Social Security). Most retirement experts I’ve talked to prefer a mix of these, a “three-legged stool.” But as I’ve written before, this is a bit like arguing whether the Titanic would have survived the iceberg if only its hull had been painted green. All three types of retirement savings have different costs and benefits. But these costs and benefits are not the primary reason that people in Western countries have to worry about an impoverished old age.

The funny thing is that, for all the people arguing that some dire problem in one of these three retirement systems urgently requires that we switch to another kind at once, the major problem with all three is exactly the same. It’s even a problem that’s easy to state and easy to fix -- no need for extensive blue-ribbon commissions or elaborate white papers. Here’s the solution: Pick whichever system you prefer; it really doesn’t matter. Now slap a 10 to 15 percent surcharge on a worker's wage income, and divert that money into the system for the worker’s future use. Problem basically solved, because in all three cases, the only flaw that actually matters is that they’re badly underfunded.
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Old 01-04-2017, 04:44 PM   #50
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Well, Megan McArdle missed a good solution: We don't have to put more money in from our own pockets. We can take money from the rest of the world and pay for our retirements.
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Old 01-04-2017, 05:20 PM   #51
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I heard the titanic had an engine fire
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Old 01-04-2017, 06:48 PM   #52
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I heard the titanic had an engine fire
Maybe so, but that was a drastic way to extinguish it.
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Old 01-05-2017, 05:26 AM   #53
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I'd certainly agree that a 401k isn't perfect compared to a pension for many people, but I'd also argue that the additional transparency a 401k offers has greatly benefitted workers.

It's easier to calculate 6% of $50,000/year for your average employee than a pension formula that can either change at any point in 30+ years and depends on you guessing your final salary decades out. Sure the 401k funds aren't perfect but nowadays I can log into a Vanguard or Fidelity website and see the expense ratios and stock/bond makeup of what each fund has. Heck nowadays I can just open an account and select a low cost target date index fund and be done retirement planning for decades! Growing transparency from the internet is really helping to drive down costs for consumers as media like John Oliver hammer home to individuals that index funds + low fees are all you need. The loss of most load funds and continually declining expense ratios show that.

As a 27 year old would I prefer a pension from a mega corp if I knew I could draw at 55 penalty free and was guaranteed to not only have that job for 30 years but also my wages would be kept market rate competitive? Absolutely. But with job hoping much more the norm I'll take a more portable plan that at least gives me a shot at a secure financial retirement as opposed to a broken system that assumes I can hunker down in place my entire career.

Pensions are amazing if you can make the gauntlet, but terrible if you fail. And even if you do make it, what's to say that the rules won't change later? See Central States workers pension plan or the Steel Workers in the east.
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Old 01-05-2017, 07:24 AM   #54
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It took several serious mistakes on my part before I finally realized that I AM responsible for my own retirement. Yes, there are contractual and legal requirements placed on employers and gummint. BUT in the final analysis, if I don't take care of my own retirement, someone else will likely screw it up (either to save money or because THEY are incompetent or even because they are dishonest.)

For me the practical application to the above is that I LBYM, save like crazy, defer gratification, make decisions rather than letting someone else make them for me, diversify (not only AA but vehicles - having a DB does NOT mean you shouldn't also have a DC if it's available), PLAN for retirement, calculate benefits/SWRs, etc. In short, act like this is your second j*b.

This seems pretty sophomoric, but I submit the reason most folks don't have adequate retirement funding is NOT because the various plans (whether DB, DC, IRAs, etc. etc.) are flawed (they certainly are) but because folks don't take the responsibility to make what's available to them work for them.

Space provided below for responsible differing views because YMMV.
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Old 01-05-2017, 07:32 AM   #55
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This seems pretty sophomoric, but I submit the reason most folks don't have adequate retirement funding is NOT because the various plans (whether DB, DC, IRAs, etc. etc.) are flawed (they certainly are) but because folks don't take the responsibility to make what's available to them work for them.

Space provided below for responsible differing views because YMMV.
BINGO! +1000

[making full use of space provided......]

It's only the ones that come to this realization at some point in their lives that "make it". I DON'T believe there is a bunch of luck involved. It is a DECISION and a RESPONSIBILITY. Yes, there is luck for moving one up and (and down) within that "window" of comfort, but LBYM is your JOB, not someone else's (.....like your employer or thier retirement plan). If LBYM is not comfortable enough for you, then raise/improve your "means". This is America - anyone can succeed with enough drive.

One help for this, however, would be a mandatory financial class or two in high-school. Heck, we're preparing out kids for Job #1, why are we not preparing them for Job #2?

JMHO
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Old 01-05-2017, 07:37 AM   #56
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As a 27 year old would I prefer a pension from a mega corp if I knew I could draw at 55 penalty free and was guaranteed to not only have that job for 30 years but also my wages would be kept market rate competitive? Absolutely. But with job hopping much more the norm I'll take a more portable plan that at least gives me a shot at a secure financial retirement as opposed to a broken system that assumes I can hunker down in place my entire career.
Yeah, those are a lot of "ifs". After a 38-year career, I have two corporate pensions, each about $900/month, no COLA, no retiree health insurance. One was from a company where I was downsized and the other was from a company that sold us off- so in both cases there was no option to hang around and accrue a bigger pension.

Still, I believe that the people on this Board are in the minority. It takes discipline and some knowledge to LBYM and invest wisely, including not selling out at the bottom of the market.
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Old 01-05-2017, 08:44 AM   #57
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It took several serious mistakes on my part before I finally realized that I AM responsible for my own retirement. Yes, there are contractual and legal requirements placed on employers and gummint. BUT in the final analysis, if I don't take care of my own retirement, someone else will likely screw it up (either to save money or because THEY are incompetent or even because they are dishonest.)

For me the practical application to the above is that I LBYM, save like crazy, defer gratification, make decisions rather than letting someone else make them for me, diversify (not only AA but vehicles - having a DB does NOT mean you shouldn't also have a DC if it's available), PLAN for retirement, calculate benefits/SWRs, etc. In short, act like this is your second j*b.

This seems pretty sophomoric, but I submit the reason most folks don't have adequate retirement funding is NOT because the various plans (whether DB, DC, IRAs, etc. etc.) are flawed (they certainly are) but because folks don't take the responsibility to make what's available to them work for them.

Space provided below for responsible differing views because YMMV.
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BINGO! +1000

[making full use of space provided......]

It's only the ones that come to this realization at some point in their lives that "make it". I DON'T believe there is a bunch of luck involved. It is a DECISION and a RESPONSIBILITY. Yes, there is luck for moving one up and (and down) within that "window" of comfort, but LBYM is your JOB, not someone else's (.....like your employer or thier retirement plan). If LBYM is not comfortable enough for you, then raise/improve your "means". This is America - anyone can succeed with enough drive.

One help for this, however, would be a mandatory financial class or two in high-school. Heck, we're preparing out kids for Job #1, why are we not preparing them for Job #2?

JMHO
/sarcasm/

But, but, but, but.... what about all those poor people who cannot make a decision for themselves!!! SOMEONE has to take care of them... isn't that what gvmt is for
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Old 01-05-2017, 09:21 AM   #58
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/sarcasm/

But, but, but, but.... what about all those poor people who cannot make a decision for themselves!!! SOMEONE has to take care of them... isn't that what gvmt is for
It is hardly a new problem, as I recall someone referencing "the least of these" quite a while back. As a society, we have to decide how to deal with the unfortunate and the screw ups. To much empathy and you end up bankrupt, too little and out come the guillotines.

As a tiny, self selected group we can say that if we can do it, anyone can also do it. IMHO, Joe Average can't really self direct a long range retirement plan.
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Old 01-05-2017, 09:36 AM   #59
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IMHO, Joe Average can't really self direct a long range retirement plan.
I don't (with all due respect) believe this for a minute.

Now, I do believe that Joe Average may not WANT to learn how to manage a long range retirement plan, but "can't" is reserved for a very small group of people in my mind.

It doesn't have to be as complicated as the folks here enjoy. It need only be as simple as a diet - calories in vs. calories out. Keep up with inflation and LBYM, and that's it (not luxury, but for a situation far better than one sees today). As the man said, "It ain't rocket science." My DM was doing this with (single) dollar bills and multiple envelopes in the dresser drawer when I was growing up.....
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Old 01-05-2017, 09:46 AM   #60
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IMHO, Joe Average can't really self direct a long range retirement plan.
Set the default option on 401k to 10% contribution and put it all in a target date fund. Limit loans and withdrawals other than in retirement. Even Joe should be able to handle that, especially if it's a default part of the plan so no additional action is needed.
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