- Joined
- Jul 18, 2010
- Messages
- 7,965
Wow, utrecht, what a bad situation. Thanks for the reminder that relying on any one source of income for retirement can have dangers. Hope things get straightened out and glad you made a good choice there.
Some of you veterans may remember this thread of mine from 4 years ago. Wow, have things have changed. My wife and I were within a couple years of retiring and considering our retirement funding options based around our pension options. If you are interested in this thread, please reread the OP to refresh what was going on at that point.
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+1Wow, utrecht, what a bad situation. Thanks for the reminder that relying on any one source of income for retirement can have dangers. Hope things get straightened out and glad you made a good choice there.
Isn't it nice to be retired, and to not have to interact with such evil people? I can't possibly imagine someone chastising and mocking a co-worker simply because of their retirement income choices.I was chastised and mocked by many co-workers when we never joined DROP.
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Now I just have to figure out a way to re-run all my numbers with the new significantly lowered COLA that is certainly coming. I havent figured out how to do it in FireCalc so I guess I'll have to do it by hand.
Well, the poll results show that I should take advantage of DROP.
Glad to hear that you guys avoided this huge problem. You were smart to ignore us and the poll results! So much for the "wisdom of crowds" (here, or among your fellow employees).In the past 2 years, serious pension fund mismanagement has been discovered. Now, this pension fund was rated the #1 mid sized pension fund in the country in 2012-2013. The board of directors has been voted out and replaced completely. The CFO was forced to resign and is under investigation by the FBI for fraud. Its a long story but there were all kinds of shenanigans going on and to make a long story short the fund is now 45% funded. . . . As of Oct 2016, the DROP interest rate is slated to go to ZERO due to triggers that were voted in that say it pays no interest if funding levels sink below 55%.
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You have no idea how happy I am that we avoided DROP altogether.
Seeing as not all defined benefit pensions are the same, it is hard to judge in this case. A lot depends on the strength of your pension system. My DW and I are both in DB COLA'd pensions, but they are legislated, run statewide and one of the strongest in the country. They also do not offer a DROP plan. When we hit our points, we both plan on retiring and immediately getting our pension plus cola for life. On the other hand we have been feed money into separate 401k's and 457 fc, for years as well to have just a little extra out there beyond the pensions and add another leg to the stool.
I know your pension system has been tested for strength. On August 11th, the following headline came out: Can Dallas Police and Fire Pension fund be saved? Officials propose changes to head off insolvency? The link to the article is here: Can Dallas Police and Fire Pension fund be saved? Officials propose changes to head off insolvency | Dallas Morning News
The bottom line is you have to protect your financial future against those that may have done damage to your pension protection. This DROP program sounds like it will give you that added protection and after reading that, assuming that I am discussing the same pension system that you are, I would definitely diversify from just your pension, I don't know that I would even take a lump sum payment out as that is generally a very bad idea.
Yes, my pension fund is the one you listed....and it was voted #1 best run mid sized pension fund in the country just a few years ago, so dont be too sure that yours is as strong as they are telling you it is. Apparently its pretty easy to cook the books for years.
As a quick follow up, I am also a very soon to FIRE officer (27 years), who has spent amazing amounts of time making sure I have checked everything twice. Our pension payout is 85% funded, which ranks 8th in the nation, but we also have a lower pension payout of roughly 60% of highest average 42 months of salary. Two things can happen to your pension as they try to climb out of being only 45% funded. First they will increase the level of every active member paying in, then they may look at as a last resort reducing the pension payout, or changing the funding formula.
Dallas is a good agency and I hope you guys get that system fixed. You put your lives on the line for your career expecting that someone else had you back come retirement time.
Hang in there, and I hope they let you invest in the DROP at those rates you have shown!!
LT
I merged the threads to ensure the continuity of the topic.I tried to update a thread but its too old. I started it in 2012 and have given a couple updates. Here is a link
http://www.early-retirement.org/for...t-withdrawal-options-63111-2.html#post1768419
I merged the threads to ensure the continuity of the topic.
You can post to an old thread. Below the reply window the is an "old thread warning", just click that you are aware and it posts like any other.
I think you left out an option (if it is available)....
Delay starting your pension as the drop program freezes your pension...
Now, this might not be an option since you say you are going to retire and you are not getting any more years of credit...
But my friend was talked into a drop program which was a bad decision... when he hit 20 years his pct X years went from something like 2.5 to 3.2... he plans to work another 5 years.... so he has frozen his pension at 20 years or 50% of his 'wage' when he could be at 66% if he had not signed for drop.... and that is for the rest of his life!!!
Sorry, but I only got up to "raised retirement age to 58 from 50" and "4% COLA seems fair" and I couldn't go any further. As a private-sector employee my entire life, who will see a $17K per year NON-cola'd pension when I hit the age of 65, I can't ever seem to find much sympathy for my brethren in the public sector.
(BTW, "4% per year" is not a COLA - it is just gravy. Unless it's set to be equal to the actual inflation rate, then it shouldn't be called a COLA, IMO.)
The point of DROP is when you join, you dont accumulate any more years of service even though you keep working, but you start having your pension check deposited into a savings account. His pension check will be lower than if he hadnt joined DROP but he will have a lump sum in his DROP acct that he wouldnt have if he hadnt joined. Its pretty easy to calculate a break even age depending on the interest rate.
The problem my friends have is that they did the calculations based on an interest rate that they were getting and ow that it had been lowered tremendously the break even age is now much lower than it was and most of them wouldve been better off never joining DROP at all depending on how long they live. Also, there's a chance that they will have to pay back some of the interest making the problem even worse.
Luckily, I anticipated this and didnt join DROP at all.
Its 4% non-compounded. After 15 years, its at 2.5% and it continues to be lower percentage wise every year. The retirement age of 50 may seem low to you, but trust me it wouldnt if you put in 25-30 years of police or fire work. You have no idea how hard on the body it is.
Also, we dont get social security so the pension is not as great as it might sound. I bet if you add your $17K pension to your social security, it adds up to right around where most public pensions are.