Poll: Does a Pension factor into your FIRE Plans?

[Dreamer]

I consider myself lucky to have a government pension but there are some disadvantages compared to working for a large corporation or large government contractor:

• No stock options or profit sharing.
• Salaries usually less.
• Raises and bonuses are smaller.
• No company car (e.g., my brother has one).
• No work issued cell phones, tablets, or laptops except for senior management or during travel with prohibited personal use.
• Programs such as HSA, FSA, Dependent Care Reimbursement Account, Roth 401k came about several years later than for our contractors.
• Dental and vision programs were terrible until recently.
• Very limited wellness program (e.g., small gym with bad equipment).
• No free legal or financial services.
• Encouraged to transfer for career advancement but relocation costs are rarely reimbursed.
• Severance pay limited to $25K.
• Golden handcuffs prevent/discourage early retirement.

A disadvantage for me was the gov never contributed 1 cent to my Thrift Savings Plan (gov 401K).

 

[Texas Proud]

I bet there are a number of people who actually have a 'pension' but are not thinking they do... I am one...

I was about to put down I do not have one, but remembered that I do have a cash balance account with mega... they put a % of my salary (not my money, but theirs) into an account... it is not a real DB plan even though it is listed as one for paperwork...

So, yes, I do have a pension even though I was thinking I did not...


It will be a small 'pension' whenever I do take it, but I plan to roll it over when the time comes... right now it is paying 4.5% fixed with no loss of principal if rates go up... the only thing that will happen is the paid rate will go up the next year (which I am looking forward to next year!!!)

 

[Hermit]

Non-COLA pension pays about 50% of what I call my annual income. I actually spend more while building my house and funding DS in his long college career. The annual income will remain about the same, but the spending will go down, possibly to the level of the pension until I hit 70.5 and start large gifts to cover RMDs. (No bidet for me. They would take away my Hermit card for sure! )

 

[googily]

I work for a major media organization, starting in the 1990s, and got a 401k and a very generous albeit non-COLAed pension, thanks to the union. The pension was frozen as the news industry tanked, replaced with two different cash balance-type accounts (one technically replaced the 401k company match, I think).

My late DH worked there as well, but I am actually starting his pension now (50, still working) having decided when he got ill to have him tell the pension people he was retiring in 6 months so he could make an election more beneficial to me, the 100% joint and survivor. (Handed in the papers four days before he died.) I'm taking his two cash balance accounts as lump sums, but will actually get two pensions from the company for him (union and exempt) and then two more for me when it comes time to collect mine, plus my two cash balance accounts. Glad there's direct deposit.

 

[38Chevy454]

I think a major factor that has been discussed is the change from employer defined benefit plans to defined contribution plans. Those with employers that stuck with the DB plan are the ones with nice pensions. Since DC plans are somewhat newer, it is to see how this works out for those people. Sure some have been doing 401k/403b type savings for many years and have that in addition to DB, and those are the ones that are in the best financial shape. The DC plan should have a lot bigger value due to the employer's input, in addition to what the employee may have been saving.

The real key being that the risk and responsibility has been transferred to the employee with the DC plans. In the DB plans, the employer takes on that risk.

 

[jimnjana]

DW and I have military pensions that provide about 70% of income. Disability, rental and investment income provide the rest.

 

[jazz4cash]

A disadvantage for me was the gov never contributed 1 cent to my Thrift Savings Plan (gov 401K).

So does that mean you are covered by the CSRS plan and not FERS?

 

[Blue Collar Guy]

This is a follow up to a poll that was conducted 5 years ago.

Poll:What are your sources of retirement income?

Pensions (especially private sector ones) are becoming more and more rare - but they do seem to be mentioned fairly frequently on this forum. So the question for everyone is:

Do you have a pension that has any significant impact on your retirement budget?

Thanks to exnavynuke for the suggestion to re-run the poll.

Edit: This should not include Social Security. While that is likely an important factor in most people's retirement calculations, it is available to most (but not all). This is considering a specific defined benefit pension from a private or public entity

do i have a pension? YES
does it have a significant impact? YES You bet it has an impact, its the very reason i have an 80/20 asset allocation, i took a reduced pension because they gave me a lump sum option,i got 172k . taking that lump sum cost me 10844 a year less pension. i rolled that over to a special 401k rollover account. the rduction was the equivalent of 6.305 % the reduction percentage went up with age i pay that 10 grand till the day i die, i took the 172 thousand because my pension dies with me, im not smart, i rolled it over in January 2009 as i retired in october 2008 they cut the checks for the lump sum at the middle and end of december, (2 checks, no check above 100k from NYC), it went into the 80/20 mix i had selected it was just how it worked out. i would have invested it the same way in october 1929 and got crushed it was just luck that day, so i hugely beat the 6.305 % reduction, life time medical ,dental(which is really just free cleanings), when i die the bride has to get medical it dies with the pensioner. i took a huge( 2.5 million) 30 year term to protect her. so if the market tanks , ok , i have my pension which is enough for our life style. i drop dead , ok she gets the insurance policy.

 

[Just_Steve]

Very envious but do think this is a skewed sample. OF COURSE people who can RE have pensions. The rest of us slugs have had to save in our piggy banks to a point we can even 'think' about RE, and it's infinitely harder to do so if you don't have all these wonderful golden benefits to help out..

I paid into my pension just like you pay into your piggy bank.
I worked for 20%-30% less pay then private industry.
Nobody gave me "wonderful golden benefits" I paid my dues and earned everything I get.

 

[Osprey]

Pensions will cover expenses (except for large purchases like new car and travel) while DH and I are both alive. Survivor benefit is 50%. Do not currently factor in pension value when setting AA.

 

[tinlizzy]

Yes, I can start drawing a reduced pension after 25 years (age 52) that will cover 2/3 of my current spending. Full pension after 30 years (age 57) would cover 110% of current spending and full pension+ at age 62 is CRAZY TALK! My plan is retiring at 52.

And I'm very blessed to have healthcare along with the pension until age 65.

 

[Alan]

Really amazed at the number of people here who have pensions. I'm 53, work in high tech and know virtually no-one with a traditional pension (including DW and me).

What do all you people DO for a living? Seriously!! Are you all .GOV? Teachers? Auto workers? Mail delivery?

Very envious but do think this is a skewed sample. OF COURSE people who can RE have pensions. The rest of us slugs have had to save in our piggy banks to a point we can even 'think' about RE, and it's infinitely harder to do so if you don't have all these wonderful golden benefits to help out..

I'm another 62 year old that worked in private industry and squeaked under the barrier before it came down. The year after I retired in 2010 my company ended the DB pension for existing workers, converting them to cash balance schemes (which is what happened to DW's pension a few years earlier).

 

[pacergal]

I paid into my pension just like you pay into your piggy bank.
I worked for 20%-30% less pay then private industry.
Nobody gave me "wonderful golden benefits" I paid my dues and earned everything I get.

Same here, my pension is not free money, I paid into it my whole career. And I definitely earned far less than my private industry counterparts. The pension was changed 10 years ago, and new employees will not get the same benefit that I do. But I enjoyed my job (36 years plus gov't)...until I didn't!

 

[exnavynuke]

Same here, my pension is not free money, I paid into it my whole career. And I definitely earned far less than my private industry counterparts. The pension was changed 10 years ago, and new employees will not get the same benefit that I do. But I enjoyed my job (36 years plus gov't)...until I didn't!

Yeah, my pay in 2007 (last full year in the military) was ~$34k. I also got BAH/BAS on top of that AND then adding in my nuke pay that would add another ~$20,500 per year with today's numbers for BAH/BAS. Since some of that is tax free, let's round that up to an even $60k/year total compensation. In comparison, my average earnings for the first 3 full years after I got out were about $97k/year, about 60% higher compensation. Private employment also gave me matching 401k contributions (that military didn't have when I got out) and employer HSA contributions that cover about 60% of my total possible in-network medical costs (whether I have any medical costs or not) etc. Not to mention staying home 95% of the time, never deploying for months at a time, and I get paid more for working more. No more 100+ hour weeks of work on deployment for the same pay as working 40+ hours a week on shore duty.

 

[TrophyWife]

Pension provides for all our expenses and we are able to save about 25% of it. Retired and pensioned at 50 from a high stress county position. We did pay into retirement like many others. It is COLAd with survivor benefits of 60%. We most likely won't get much from social security.

In some ways, I think it all balances out. We had much lower wages over the years, than our private sector counterpart. We just had a forced "savings" plan. This was hard to stomach then but great to have now. I can't imagine I would have been that disciplined all those years.

DH is at a second career by choice. It works for us because it includes lots of travel and I am able to go with him. Piling up some cash, the 401k and SS credits.

 

[jkern]

I had a small amount in TIAA-CREF that only had one option and that was an annuity. So I get $53.99 per month, no COLA. I'm careful not to spend it all in one place.

 

[Fedup]

My husband and I are lucky. We worked in high tech in our early years. Then after the dot com bursted, we worked at company and organization that gave us some small pensions and retiree's health insurance.
I think we have the best of both worlds.

 

[dunkelblau]

I first hired into a megacorp with a pension plan but a few years in the rules changed and my hire date was among those converted into 'cash balance'. At the time I liked this change because the vested benefit formula strongly skewed toward the back end, and with frequent layoffs that gig didn't look all that long term. Their cash balance contributions later stopped and I rolled it into my 401k.

If my current 401k balance is converted into an SPIA right now the income stream would be almost exactly the same as the benefit from the pension plan I was kicked out of. Granted a big chunk of the 401k was my own contribution but our depressed base salaries started to converge with our neighboring small companies after the pension changes. So it looks like a wash.

 

[JoeWras]

No pension here, and I'm OK with that.

If the govt. ever starts taxing on net worth, I'll be OK with that too as long as they also tax those with pensions by doing a back-annuity net worth calculation of the value of that pension, along with their generous medical plan.

(Running and ducking for cover...)

 

[Amethyst]

Mr. A. and I each paid 7% of our gross salary into the Civil Service pension fund, which paid out in retirement according to a set formula based on the average of one's highest 3 years' salary.

CSRS Annuity Calculations. My "high 3" was affected by a) several years of Federal pay freezes and b) the pay cap on senior GS-15 salaries (I got no step increases during the last seven years I worked).

We also paid into Medicare, along with our Federal health premiums. We did not pay into Social Security, and do not qualify for those benefits. We figured it was our responsibility to put that 7.5%, and as much more as we could manage, into savings/investments, including the Thrift Savings Plan 401K as it gradually opened up to CSRS people. Mr. A. retired long before his TSP could accumulate much in it, though.

 

[Sue J]

Our 32 year old son works in the IT department of a county social service agency and he will have a pension. He already has 11 years of service.

This is the same county social service agency that DH is retired from. DHs pension has a fixed 3% COLA. Since DH retired in 2010 the pension system has already made changes to the retirement age, years of service and COLA so if our son finishes out his career there he will still get a nice pension, just not the same as DHs. It's still a wonderful benefit. His pay is less than he'd make in the private sector (especially IT) but he likes his job, the pay is much more than he spends, his commute is minimal and he expects to stay.

Some changes in his agency are coming from the state. If he needed to make a job change he could leave his pension until age 62, I think, or he could move it to an IRA.

 

[Just_Steve]

No pension here, and I'm OK with that.

If the govt. ever starts taxing on net worth, I'll be OK with that too as long as they also tax those with pensions by doing a back-annuity net worth calculation of the value of that pension, along with their generous medical plan.

(Running and ducking for cover...)

What makes you THINK pensions are tax free?

 

[JoeWras]

What makes you THINK pensions are tax free?

Not what I said. Unless you are talking about Illinois income tax.

I said if the government ever decides to tax based on net worth, they better include pensions and health benefits in the net worth calculation.

This is all a good reason for the government to not tax based on net worth. The trial balloon is occasionally floated and it stinks. Let's hope it doesn't happen for any of us, pensions or not.

 

[Ed B]

No pension here, and I'm OK with that.

If the govt. ever starts taxing on net worth, I'll be OK with that too as long as they also tax those with pensions by doing a back-annuity net worth calculation of the value of that pension, along with their generous medical plan.

(Running and ducking for cover...)

Oh my! Neve type or say that out loud. Please! We know the NSA reads everything we type. Heaven forbid, the IRS may be looking over their shoulders farming ideas on federal revenue generation.

 

[Mulligan]

No pension here, and I'm OK with that.



If the govt. ever starts taxing on net worth, I'll be OK with that too as long as they also tax those with pensions by doing a back-annuity net worth calculation of the value of that pension, along with their generous medical plan.



(Running and ducking for cover...)

They whack me good with income tax state and federal each year I am alive and cashing pension checks. How dare them not allow me to use my pension income to continue funding my Roth, lol...
I must have got screwed somewhere...I have no medical benefits, let alone a generous one. One for two isnt bad, so I wont complain. Provided I live long enough to get my moneys worth.