DB or DC plan

[Texas Proud]

^ I think the plan formula would be 1% final pay times YOS less 1% PIA times YOS so you would only subtract out 30% of PIA in your example or $300; then you would get $950 a month.

I do not know.... and have no way of checking.... I do remember the example showing what looked like full SS... but that was maybe 20 years ago....

They also closed it down soon after I was in it.... maybe in it two years...

 

[Big_Hitter]

is this how one uses the quote function?

If you're talking to me (use quote function), it didn't do anything for me.



"Don't rule out the return of pensions. The bottom line of the Towers Watson research is this, in Suchsland's words: "For a plan sponsor to provide a certain level of benefit, it is cheaper to finance through the defined-benefit plan." Even though traditional pensions present more accounting challenges(because they are carried on company balance sheets), Suchsland says he believes some employers who switched to defined-contribution plans in the past few decades may switch back because of pension efficiencies and "workforce issues."

 

[Big_Hitter]

I do not know.... and have no way of checking.... I do remember the example showing what looked like full SS... but that was maybe 20 years ago....

They also closed it down soon after I was in it.... maybe in it two years...

understood - i'm pretty sure that 1% fap * yos minus 100% PIA doesn't satisfy the IRS anti-backloading rules

 

[Chuckanut]

If I knew the DB plan would be well funded and managed for the benefit of the retirees with no chance of the "excess" funds being raided to fund other things for the corporation, and not dependent on the corporation surviving beyond my retirement, and had some type of cost of living adjustment (whole or partial), and my contribution a reasonable part of my salary (say no more than 8%), I would go for it.

Other than that, just give me the money (preferably a generous amount) and let me invest it tax differed if not tax exempt for whenever I choose to retire.

 

[mpeirce]

I'm thankful I had DC plans available since I would have never qualified for a DB plan. Too much job hopping.

 

[travelover]

I'd like to have a DB plan from an independent third party - i.e. not tied to one employer. Unlike SS, it would have my name on the account and it would be mine all mine!

 

[Mulligan]

I have a nice pension that is drawn from a trust fund that cannot be raided. 14.5 % mandatory contribution with 14.5% matched from employer. It is a very nice sound system with 2% annual cola. I don't trust myself to be a successful investor, so I am thankful for my pension. I deposit money monthly into the market and consider it gone, and never plan to touch it. I am afraid it I had a DC plan with sizable monies in it and no pension, I would go crazy staring at the daily gains and losses.

 

[pb4uski]

I'd like to have a DB plan from an independent third party - i.e. not tied to one employer. Unlike SS, it would have my name on the account and it would be mine all mine!

Sounds like an annuity to me.

 

[JoeWras]

I'd pick the DB plan, but only if it was COLA'd and from the Federal Government.

Bingo.

After watching what my Megacorp #1 did to their DB plan, I concur. They stripped it bare. It was never COLAd. You had to work there forever, etc. I was in the midst of all those changes and even though I worked there for over 10 years, my benefit will be ridiculous (less than $100/mo if I start at 65), which I why I say I don't have a pension, because in 15 years, I don't even know what that will buy.

Because of that bad experience, I'm in the DC camp. At least I have some control.

But I have to admit, from what I see here, some of the Federal DB plans are really tempting. If I were used to those numbers, and could work somewhere where they were a reality and a promise not to be messed with, I'd be all for it.

 

[traineeinvestor]

DC everytime. I trust the markets and myself to look after my money far more than I will ever trust any employer (including government) to stand by promises made today in forty years time.

 

[Big_Hitter]

Has anyone on this forum actually retired without a DB plan and without an inheritance?

 

[JoeWras]

Has anyone on this forum actually retired without a DB plan and without an inheritance?

I'm pretty sure you'll get some affirmatives.

But you have a good point. I'm FI and should be REing. But I'm in OMY syndrome partly because of that uncertainty. And partly because of no health insurance (that frequently comes along with DBs).

 

[Big_Hitter]

I'm pretty sure you'll get some affirmatives.

But you have a good point. I'm FI and should be REing. But I'm in OMY syndrome partly because of that uncertainty. And partly because of no health insurance (that frequently comes along with DBs).

There may be a few. I'm betting docs or lawyers who have been putting away the 415c limit for years. Next year you should be able to get good medical coverage on the exchanges at a moderate cost.

 

[Katsmeow]

Don't most places that have a DB also have some form of DC?

DH had a traditional DB plan, no COLA. When he retired he took it as a lump sum in a roll over instead of taking a pension. However, in addition, he had a DC and his employer matched 6% of his contributions.

By the time he retired megacorp had stopped the DB for newer employees. They had only a DC but the employer made a larger contribution than they made for DH.

I thought we had the best of both worlds with DH's plan. He had the DB but he had the option to take it as a pension or as a lump sum. I do think the ideal is to be able to split it and take some as pension and some as lump sum, but he didn't have that option. And then, in addition, he had the DC with the contributions by megacorp.

I worked in a field where DCs reign and where the employee typically makes an annual contribution that varies each year but is made regardless of whether the employee contributes.

 

[Calico]

I have a very safe, secure, and generous DB with a private employer. I would take it again in a heartbeat. However, I may be in the minority in that I will shortly reach 25 years with this employer - no job hopping for me. Even though the pension is non cola, between the pension, social security, and my savings I will be fine.

I thank goodness every single day for the pension, and realize how lucky I am. These plans are a thing of the past.

 

[CyclingInvestor]

Not even close - DC plan. I never could have retired at 48 with only a pension, in addition to the afore-mentioned handcuffs.

 

[mpeirce]

Has anyone on this forum actually retired without a DB plan and without an inheritance?

Raises hand

(@49)

 

[Texas Proud]

DC everytime. I trust the markets and myself to look after my money far more than I will ever trust any employer (including government) to stand by promises made today in forty years time.

I have a questions for people.... I have seen a number of people talk about investing their DC money.... are you talking about a 401(k) match or a real DC plan

With my mega, our DC plan put in money... starting at 4%.... you had no way of investing this money.... zip, nada... they assigned an interest rate to it.... IIRC it is the 10 year treasury plus 1%.... reset every year....

So when I think of a DC plan, I am not including a 401(k).... that is a different plan.... even if you get a good match... IOW, if you do not put in money, you do not get any match.... so it is not a DC plan...

 

[Big_Hitter]

With my mega, our DC plan put in money... starting at 4%.... you had no way of investing this money.... zip, nada... they assigned an interest rate to it.... IIRC it is the 10 year treasury plus 1%.... reset every year....

I think that is a cash balance plan, which is really a DB plan made up to look like a DC plan. You make a good point - there is a difference between a matching 401k plan (called a 401m feature) and a profit sharing (i.e. true DC plan). Most companies that froze or terminated their DB plans enhanced the match in the DC plan and/or added in a nondiscretionary match or profit sharing feature as well.

 

[Texas Proud]

Don't most places that have a DB also have some form of DC?

DH had a traditional DB plan, no COLA. When he retired he took it as a lump sum in a roll over instead of taking a pension. However, in addition, he had a DC and his employer matched 6% of his contributions.

By the time he retired megacorp had stopped the DB for newer employees. They had only a DC but the employer made a larger contribution than they made for DH.

I thought we had the best of both worlds with DH's plan. He had the DB but he had the option to take it as a pension or as a lump sum. I do think the ideal is to be able to split it and take some as pension and some as lump sum, but he didn't have that option. And then, in addition, he had the DC with the contributions by megacorp.

I worked in a field where DCs reign and where the employee typically makes an annual contribution that varies each year but is made regardless of whether the employee contributes.

This is an example of where I think there is confusion.... Katsmeow says her DH had a DC plan that matched.... I would say that is a 401(k).... not a DC plan..

But she worked at a place that did have a DC plan... money set aside regardless of contributions... (heck, I do not think you could contribute to a DC plan)....

 

[Big_Hitter]

Don't most places that have a DB also have some form of DC?

Yes, in the beginning many companies put in 401k plans to help employees save (some matched contributions some didn't) - these were added to help with the traditional "third leg" of the stool - Soc Sec, DB plan and individual savings.

 

[Big_Hitter]

(heck, I do not think you could contribute to a DC plan)....

correct - the only way an employee can make a cash or deferred election (CODA) in a tax qualified plan is in a 401k plan

 

[Texas Proud]

I think that is a cash balance plan, which is really a DB plan made up to look like a DC plan. You make a good point - there is a difference between a matching 401k plan (called a 401m feature) and a profit sharing (i.e. true DC plan). Most companies that froze or terminated their DB plans enhanced the match in the DC plan and/or added in a nondiscretionary match or profit sharing feature as well.

Yes... it was a DB plan that they changed to make look like a DC plan...

And we could not contribute anything to it... it is just a cash balance as you said... The good think for me is that I treat it as a bond that I do not have to worry about it losing value if rate increase

 

[fritz]

Has anyone on this forum actually retired without a DB plan and without an inheritance?

Cashed in a DB plan (took me 10 years to vest) when I turned 55. It began offering a lump sum distribution/rollover, only after about the "third" buyout scenario of that corporation. I had to track all this confusion - none of the parent corporations involved over the years ever bothered to acknowledge I even had a DB coming from them. You have to wonder how many DB scenarios are forgotten about this way.... FYI - I signed up for SS this year (62) and the DB from the original company was referenced as a possibility on SS acknowledgement of benefits - go figure.

The monthly vested pension payout was not generous for ER. I invested the rollover lump sum distribution with Vanguard and started taking distributions at 59 1/2 when I retired. It pays out more than the pension paid out and should have the same or more working cash balance (hopefully) to leave to our kids. Was my first and last DB offering from various large corporations (their elimination of offering). Must be nice to be the recipient of a government pension - but I researched the Illinois Municipal Retirement Fund that both my girls were in at one time, and it is a horrible DB program IMO.

We did make more than the median household income, and somewhat did the LBYM to get a nice seven figure nest egg (401K, Roth, and taxable) to retire early on. This was only possible with our 401ks and taxable savings ability - no one has ever left us a big bag of money. It helped significantly to get the employer matching - but lost measurable amounts by not being fully vested when deciding to make career moves (and all had their own vesting schedule until the government stepped in and regulated it).

There are many government employees with great DBs scenarios represented here, but there are more than a few of us living on 401ks and investments w/o any DB plans. There have been threads/polls here on this subject.

 

[Big_Hitter]

I had to track all this confusion - none of the parent corporations involved over the years ever bothered to acknowledge I even had a DB coming from them. You have to wonder how many DB scenarios are forgotten about this way.... FYI - I signed up for SS this year (62) and the DB from the original company was referenced as a possibility on SS acknowledgement of benefits - go figure.

There are many government employees with great DBs scenarios represented here, but there are more than a few of us living on 401ks and investments w/o any DB plans. There have been threads/polls here on this subject.

Yes, first point - the plan participant is generally responsible to keep the plan administrator informed of address changes and once you apply for SS, the SSA will inform you of any DB benefits to which you may be entitled as a deferred vested participant.

Second point - I'll do some searching but I'm betting that those retired without DB income (which includes taking a lump sum from a DB plan) are a small minority on this site.