mangodance
Dryer sheet aficionado
- Joined
- Mar 22, 2005
- Messages
- 26
what state is this? That's much better than Kentucky!
The Fat Pension
- Thread starter newellcr
- Start date
what state is this? That's much better than Kentucky!
haha
Give me a museum and I'll fill it. (Picasso) Give me a forum ...
bigfoot said:
As are most places!
haha
maddythebeagle
Thinks s/he gets paid by the post
- Joined
- Jun 15, 2005
- Messages
- 2,450
Thanks for the explanation on fed. pension. I think it helpful for all of us to understand all the different systems.
"We do have a deffered comp program, but no department match. With the limited investment options for the deffered comp I do not see it as a benefit as an IRA has more options and returns as good."
-I would expect that at least has some index funds. 457k plans are nice because you can access that money after you terminate employement (no age requirement).
"We do have a deffered comp program, but no department match. With the limited investment options for the deffered comp I do not see it as a benefit as an IRA has more options and returns as good."
-I would expect that at least has some index funds. 457k plans are nice because you can access that money after you terminate employement (no age requirement).
T
tozz
Guest
maddythebeagle said:
The CSRS federal pension--grandfathered for those employees who started before 1983--is somewhat simpler than the FERS system described by newellcr. It is also based upon the "high-3" average salary. Add 1.5% percent of the high-3 for years 0-5, 1.75% for years 6-10, and 2% for years over 10.
This translates to 16.25% of your high-3 salary for ten years service; 36.35% for 20 years; 56.25% for 30 years; 76.25% for 40 years; maximum 80% for 43 years.
Re: The Fat Pension Good and Bad
There is major advantage to the Fat Pension. It's a reliable source of a basic "wage" in ER (or sadly just R) forever without having to worry about Markets, Treasury, or CD rates and such. It becomes I fear such a completely uninteresting benefit to most of my co-workers that they pay little or no attention to it. Embracing ER oddly enough is a foreign concept to 90 percent of the people I talk to about the subject.
"BECAUSE" these people's eventual retirement is "in the bank" from day one if they are willing to put in the years, they in essence don't ever plan for its inevitable eventuality. The 457's let you hide money from the Taxman, you literally can save thousands of dollars to spend in retirement and only pay the taxes due later at your reduced income levels. It's a true savings in both the short and long term. Yet most of my co-workers are unaware of the option, or put token amounts in it, some of them the single ones, only donate the remember of their CAFE amount, the amount alloted for health care is enough for a family, so the singles have a bit left over. When I started getting behind the 457 concept you could hide $7k a year, now it's up to double that, with provisions to save even more if you're over 50 or are in "catch up" mode. Again, the vast majority of my co-workers don't bother. I would add here that the plan started out with a reasonable mix of funds to choose, including a fixed percent for the non-gamblers, and as only gotten better in the increased choice of offerings over the last decade.
Occasionally a co-worker will ask me about my impending retirement, "you're really leaving us?", "but you're young!" etc, and I fire back, "When are you going?" They have no idea, never thought about it, aren't planning for it, aren't saving tax-free to make it happen sooner, and get a bit scared even thinking about it. Like its some kind of death or something. They tend to figure they'll just work as long as they can, and take what is offered at the end. Ironically, these folk do pretty well, cause they end up working 30 plus years, and the final benefit ends up being pretty much what they made when the worked.
The sadness for me is that they could have opted to leave years sooner, but never considered it. I ask a couple questions, age, years in, and such, and typically tell them without needing any charts or graphs, how would you like to leave 2 years sooner. Their eyes glass over, they can't believe it, think I'm nuts, and humour the wacko, although a very few come to my office and ask for details. I've had a few successes in getting folk around the ER concept, but truely not as many as I would like.
This board is full of the exceptions to what I encounter in the world at large. People that GET IT and figure out the best way for them to live as free, independent individuals pursuing their varied interests on their own timetable.
Fat Pension Good. People that figure out how to best leverage it are ER winners. The rest just work many more years, and live a comfortable retirement with a decade of freedom missing. Sad. Sad Sad.
There is major advantage to the Fat Pension. It's a reliable source of a basic "wage" in ER (or sadly just R) forever without having to worry about Markets, Treasury, or CD rates and such. It becomes I fear such a completely uninteresting benefit to most of my co-workers that they pay little or no attention to it. Embracing ER oddly enough is a foreign concept to 90 percent of the people I talk to about the subject.
"BECAUSE" these people's eventual retirement is "in the bank" from day one if they are willing to put in the years, they in essence don't ever plan for its inevitable eventuality. The 457's let you hide money from the Taxman, you literally can save thousands of dollars to spend in retirement and only pay the taxes due later at your reduced income levels. It's a true savings in both the short and long term. Yet most of my co-workers are unaware of the option, or put token amounts in it, some of them the single ones, only donate the remember of their CAFE amount, the amount alloted for health care is enough for a family, so the singles have a bit left over. When I started getting behind the 457 concept you could hide $7k a year, now it's up to double that, with provisions to save even more if you're over 50 or are in "catch up" mode. Again, the vast majority of my co-workers don't bother. I would add here that the plan started out with a reasonable mix of funds to choose, including a fixed percent for the non-gamblers, and as only gotten better in the increased choice of offerings over the last decade.
Occasionally a co-worker will ask me about my impending retirement, "you're really leaving us?", "but you're young!" etc, and I fire back, "When are you going?" They have no idea, never thought about it, aren't planning for it, aren't saving tax-free to make it happen sooner, and get a bit scared even thinking about it. Like its some kind of death or something. They tend to figure they'll just work as long as they can, and take what is offered at the end. Ironically, these folk do pretty well, cause they end up working 30 plus years, and the final benefit ends up being pretty much what they made when the worked.
The sadness for me is that they could have opted to leave years sooner, but never considered it. I ask a couple questions, age, years in, and such, and typically tell them without needing any charts or graphs, how would you like to leave 2 years sooner. Their eyes glass over, they can't believe it, think I'm nuts, and humour the wacko, although a very few come to my office and ask for details. I've had a few successes in getting folk around the ER concept, but truely not as many as I would like.
This board is full of the exceptions to what I encounter in the world at large. People that GET IT and figure out the best way for them to live as free, independent individuals pursuing their varied interests on their own timetable.
Fat Pension Good. People that figure out how to best leverage it are ER winners. The rest just work many more years, and live a comfortable retirement with a decade of freedom missing. Sad. Sad Sad.
yakers
Thinks s/he gets paid by the post
Well JohhyM, I don't know about your music but, if you want, you could always be a writer.
A really great presentation on the traditional pension. Mostly in government jobs these days but previously common in companies as well.
"Like its some kind of death or something. " Great way to say it. The deer caught in the head lights look. Its not just sad that people cannot retire early, its sad that they do not enjoy their life before retirement. Now for some folks work really is good. My father was driven by his sense of responsibility and I think he would have lived longer if he kept working. There are folks like that too.
My wife is that way to some degree. She is a teacher. We go on vacation to places like Fiji and Rarotonga and she manages to visit schools and make friends. I have convinced her to stop working; this will be her last year ending June 06. (Actually what convinced her was getting "the class from hell" two years ago.) She will be retiring "early" at 58 in that there is a penalty in her system for retiring before 60 but its one we are able to absorb from my income. But she will still be presenting, tutoring, volunteering and active in education issues. When it dawned on her that she would not have to teach her first response was, "hey, I will finally have time to get my PhD". Basically I had to pitch retirement as "now you can teach the way YOU want to".
Now I really like my job. But it is not my identity. I like NASA and space issues but I can follow these interests without coming into work each day.
Another great line from JohnnyM (should have quoted the whole piece?):" People that GET IT and figure out the best way for them to live as free, independent individuals pursuing their varied interests on their own timetable. "
I think the issue is freedom, but that doesn't mean not working, its choosing to work. And I think there comes a realization that we are interdependent as well as dependent. Retirement isn't done in a vacuum.
But JohnnyM, your lines are lyrical, they set off reflections like from Bob Marley "Emancipate yourself from mental slavery, none but ourselves can free our mind." (A bumper sticker on my 1985 VW camper) or another one, don't remember the source :"A slave is someone who waits for someone else to free them". Keep your postings coming.
A really great presentation on the traditional pension. Mostly in government jobs these days but previously common in companies as well.
"Like its some kind of death or something. " Great way to say it. The deer caught in the head lights look. Its not just sad that people cannot retire early, its sad that they do not enjoy their life before retirement. Now for some folks work really is good. My father was driven by his sense of responsibility and I think he would have lived longer if he kept working. There are folks like that too.
My wife is that way to some degree. She is a teacher. We go on vacation to places like Fiji and Rarotonga and she manages to visit schools and make friends. I have convinced her to stop working; this will be her last year ending June 06. (Actually what convinced her was getting "the class from hell" two years ago.) She will be retiring "early" at 58 in that there is a penalty in her system for retiring before 60 but its one we are able to absorb from my income. But she will still be presenting, tutoring, volunteering and active in education issues. When it dawned on her that she would not have to teach her first response was, "hey, I will finally have time to get my PhD". Basically I had to pitch retirement as "now you can teach the way YOU want to".
Now I really like my job. But it is not my identity. I like NASA and space issues but I can follow these interests without coming into work each day.
Another great line from JohnnyM (should have quoted the whole piece?):" People that GET IT and figure out the best way for them to live as free, independent individuals pursuing their varied interests on their own timetable. "
I think the issue is freedom, but that doesn't mean not working, its choosing to work. And I think there comes a realization that we are interdependent as well as dependent. Retirement isn't done in a vacuum.
But JohnnyM, your lines are lyrical, they set off reflections like from Bob Marley "Emancipate yourself from mental slavery, none but ourselves can free our mind." (A bumper sticker on my 1985 VW camper) or another one, don't remember the source :"A slave is someone who waits for someone else to free them". Keep your postings coming.
You know, when I introduced myself I mentioned I had a pension plan at my current place of employment and someone replied saying I should think about whether or not to participate. I didn't understand it at first but reading this post, I see what they meant.
I was not aware some people had to "pay to play" in the pension game. Where I am, I don't get anywhere near the 3% but mines is calculated 1.5% times years of service times average of last three years of salary. The thing different is I vest in 5 years but there is no payment necessary. Everyone is eligible. I also worked at IBM at my first job and think that it was "free" as well.
I'm saving for retirement as if I don't get this pension (I'm only 4 years into this job and about 25 to 30 years from retiring, 30 years old now) but when it comes, it will be a "fat pension" in my calculations.
Is this not normally the case as I see so many people responding to the payment to qualify for pension?
I was not aware some people had to "pay to play" in the pension game. Where I am, I don't get anywhere near the 3% but mines is calculated 1.5% times years of service times average of last three years of salary. The thing different is I vest in 5 years but there is no payment necessary. Everyone is eligible. I also worked at IBM at my first job and think that it was "free" as well.
I'm saving for retirement as if I don't get this pension (I'm only 4 years into this job and about 25 to 30 years from retiring, 30 years old now) but when it comes, it will be a "fat pension" in my calculations.
Is this not normally the case as I see so many people responding to the payment to qualify for pension?
OP
OP
newellcr
Recycles dryer sheets
- Joined
- Aug 26, 2003
- Messages
- 224
ctech,
There are pensions that folks can opt in/out of. My wife is a teacher and I'm a federal employee. Both of our plans are mandatory and require contributions.
I figured I'd mention that the term "Fat" was tongue in cheek at the time, though I do not mock their value. Racking up 25-30 years at one place, even the government, is no easy task and there are other perils. When I started the topic, there was some discussion about is it worth staying in the Military for the pension because 'I could leave and make $10k more a year.' Which sounds like a lot (and I suppose it is), but my intention was to plant the idea that the pension can be worth a whole lot more than $10k/yr especially when someone already has 10 years invested. It applies to all pensions, not just Military ones. It's about making an informed decision about benefits vs. cash in the hand.
While I'm mentioning things... There have been some great replies, but I'm surprised there has been so little talk of Future Value numbers. I might not have the terminology correct, but I mean - you'd need to invest this much per month for 30 years to equal the annuitized value of Company X's pension plan. Or, I've already got 15 years in and expect to retire in 10 years. Now my pension is actually worth an investment of Y... Anyhow, it's a good thread none-the-less.
Cheers,
Chris
There are pensions that folks can opt in/out of. My wife is a teacher and I'm a federal employee. Both of our plans are mandatory and require contributions.
I figured I'd mention that the term "Fat" was tongue in cheek at the time, though I do not mock their value. Racking up 25-30 years at one place, even the government, is no easy task and there are other perils. When I started the topic, there was some discussion about is it worth staying in the Military for the pension because 'I could leave and make $10k more a year.' Which sounds like a lot (and I suppose it is), but my intention was to plant the idea that the pension can be worth a whole lot more than $10k/yr especially when someone already has 10 years invested. It applies to all pensions, not just Military ones. It's about making an informed decision about benefits vs. cash in the hand.
While I'm mentioning things... There have been some great replies, but I'm surprised there has been so little talk of Future Value numbers. I might not have the terminology correct, but I mean - you'd need to invest this much per month for 30 years to equal the annuitized value of Company X's pension plan. Or, I've already got 15 years in and expect to retire in 10 years. Now my pension is actually worth an investment of Y... Anyhow, it's a good thread none-the-less.
Cheers,
Chris
SteveR
Moderator Emeritus
- Joined
- Jul 1, 2005
- Messages
- 2,811
My former employer has a pension plan; not as good as the Gov. plans I see here. WoW. No wonder my taxes are so high. 
I hope you guys enjoy your nice fat pensions compliments of the tax payers. Just kidding. Everyone deserves all they can get when it comes to work and retirement.
My pension was initially a 2% "donation" to the company plan. After a few years they were so over funded they dropped the "donation" but kept the plan. I have no idea how it was all calculated as the formulas were complicated and I left early and also and a QUADRO on it so basically what I get is less than 20% of my final salary. I was there 24 years and took ER at 50. Had I waited until 55 it would have been another 20% higher. It pays for gas and beer or is that beer and gas? 8)
My late wife had 34 years and retired at 56. Her pension was more like 40% of her final earnings. I get it for a couple more years and then it goes away. (10 year certain and life option.)
The pensions are being saved in a MM account and are used for big ticket stuff like trips and house improvements. My current wife has two more years before she can ER with a pension and health benefits. We would like to pull the plug now but the additional pension 25% of final 3 years, will help us be FIRE at 55. After that, the pensions will make the house and cabin payments and still allow us some spending money while we take a small 72(t) from one of my IRAs. After 62 we will be much better off with the cabin paid off and selling the house. The pensions may be all we will need for most everyday expenses. We will still have a nice IRA to draw on as needed for fun stuff and will have a good time spending it down so the kids don't have to worry about estate taxes.
I hope you guys enjoy your nice fat pensions compliments of the tax payers. Just kidding. Everyone deserves all they can get when it comes to work and retirement.My pension was initially a 2% "donation" to the company plan. After a few years they were so over funded they dropped the "donation" but kept the plan. I have no idea how it was all calculated as the formulas were complicated and I left early and also and a QUADRO on it so basically what I get is less than 20% of my final salary. I was there 24 years and took ER at 50. Had I waited until 55 it would have been another 20% higher. It pays for gas and beer or is that beer and gas? 8)
My late wife had 34 years and retired at 56. Her pension was more like 40% of her final earnings. I get it for a couple more years and then it goes away. (10 year certain and life option.)
The pensions are being saved in a MM account and are used for big ticket stuff like trips and house improvements. My current wife has two more years before she can ER with a pension and health benefits. We would like to pull the plug now but the additional pension 25% of final 3 years, will help us be FIRE at 55. After that, the pensions will make the house and cabin payments and still allow us some spending money while we take a small 72(t) from one of my IRAs. After 62 we will be much better off with the cabin paid off and selling the house. The pensions may be all we will need for most everyday expenses. We will still have a nice IRA to draw on as needed for fun stuff and will have a good time spending it down so the kids don't have to worry about estate taxes.
