(It's a long boring essay particularly if you're going to SWR someday) Given: I'm 49, still working.
Defined Benefit Plans (Local Government)
It's an entirely different animal. There really is no SWR (or you could say it just unchangeable in exchange for being totally safe), and it changes peoples perceptions of FIRE because of it. Since there never is that large pot of money to stare at, scrimp and save to achieve, there is no appreciation of what it took to get there. When I present my coworkers with the facts about ER as "I" perceive them, I tend to get suprised looks. Some are scared, some are in rapture, some give me lip service and go about their work till they die business, and some when they actually look at the numbers can't stand the fact that if they work just one more year they'll get a bit "more" dough and be closer to taking home either that 70-80% the banks try to sell us on, or better yet, why don't I work until my take home is 100 percent! And the person who's job I know fill (finally) kept working until she literally makes more now than when she worked here. Go figure. And she's not old enough to collect SS yet!
One of the problems is at least for SWR types, it's about having a goal to achieve a very large nestegg (in terms of absolute dollars) in order to be able to safely live on those bucks forever or thereabouts. One gets to watch this build over a lifetime of work, each year reveling in one's success and knowing one is that much closer to the "goal" whatever it might be, and sure it probably changed over one's lifetime, but the concept is there is a great appreciation that something was sacrificed to achieve a worthy goal, and darn it your going to ER now and enjoy the rest of your life.
For the DBP'ers it's a odd little chart with increments that try very hard to entice one into staying just a bit longer. Compounding this is the fact that the benefit is typically calculated based on highest salary. In a typical career this is going to be achieved at the very end, i.e. next year, not this year, and so on, unless one as literally reached the highest rung of the ladder. Add one more enticement via for those whose job classifications are pay "ranged" there is the issue of the virtually guarrenteed raise. In all the jobs where I work the salary ranges start 20 percent below the top of the range, so if one does a decent job, their are 4 years of 5 percent increases built-in, regardless of what the union is able to negotiate, which lately is of course nada.
So a DBP'er can have the best of ER intentions and then be drawn into the Stay-A-Bit-Longer-Trap. It's purely a math excercise in the end. The actuaries know you're going to die pretty soon anyway, so for every year you stay, they figure it's one more they won't have to pay your pension. Added to that it's another year you (in the background as most DBP'ers don't really notice this deduction) paid into the retirement system so their's more funds on the books for your future benefit. Using yours truely as an example, and I'll just use percentages to take the possibility of promotions and/or step raises out of the equations, my situation looks like this. (Thankyou EngrGal for getting me to think of it in this fashion from the previous "FI and now what?" thread.
50 - 32% 54 - 48% 58 - 68%
51 - 36% 55 - 53% 59 - 73%
52 - 40% 56 - 58% 60 - 78%
53 - 44% 57 - 63%
My coworkers look at the chart and most figure something along the lines of "Way-Cool, I can get out at 59 with nearly three-quarters, and I've heard that should be almost enough if I save some money in my Deffered Comp Account (457) along the way!" My take of the chart was always, "You mean we can actually retire at age 50 and get a inflation adjusted pension? How cool is that?"
When I point to ages a bit earlier on the chart I get shutdown for the most part, with a very few takers. "How could I live on that?" meaning "How could I maintain my lifestyle of conspicous consumption with fewer dollars on that pittance?. OK I understand, but again that's where the trap comes in. In the SWR world, there are practical limits to how much one can expect to accumulate over one's lifetime, and even then there are market forces that may work for or against you in the afterwork life to determine the standard of living you achieve.
For the DBP'er it's just so black and white, too many are tempted to work far too long for the big payoff, and never stop and smell the roses.
Defined Benefit Plans (Local Government)
It's an entirely different animal. There really is no SWR (or you could say it just unchangeable in exchange for being totally safe), and it changes peoples perceptions of FIRE because of it. Since there never is that large pot of money to stare at, scrimp and save to achieve, there is no appreciation of what it took to get there. When I present my coworkers with the facts about ER as "I" perceive them, I tend to get suprised looks. Some are scared, some are in rapture, some give me lip service and go about their work till they die business, and some when they actually look at the numbers can't stand the fact that if they work just one more year they'll get a bit "more" dough and be closer to taking home either that 70-80% the banks try to sell us on, or better yet, why don't I work until my take home is 100 percent! And the person who's job I know fill (finally) kept working until she literally makes more now than when she worked here. Go figure. And she's not old enough to collect SS yet!
One of the problems is at least for SWR types, it's about having a goal to achieve a very large nestegg (in terms of absolute dollars) in order to be able to safely live on those bucks forever or thereabouts. One gets to watch this build over a lifetime of work, each year reveling in one's success and knowing one is that much closer to the "goal" whatever it might be, and sure it probably changed over one's lifetime, but the concept is there is a great appreciation that something was sacrificed to achieve a worthy goal, and darn it your going to ER now and enjoy the rest of your life.
For the DBP'ers it's a odd little chart with increments that try very hard to entice one into staying just a bit longer. Compounding this is the fact that the benefit is typically calculated based on highest salary. In a typical career this is going to be achieved at the very end, i.e. next year, not this year, and so on, unless one as literally reached the highest rung of the ladder. Add one more enticement via for those whose job classifications are pay "ranged" there is the issue of the virtually guarrenteed raise. In all the jobs where I work the salary ranges start 20 percent below the top of the range, so if one does a decent job, their are 4 years of 5 percent increases built-in, regardless of what the union is able to negotiate, which lately is of course nada.
So a DBP'er can have the best of ER intentions and then be drawn into the Stay-A-Bit-Longer-Trap. It's purely a math excercise in the end. The actuaries know you're going to die pretty soon anyway, so for every year you stay, they figure it's one more they won't have to pay your pension. Added to that it's another year you (in the background as most DBP'ers don't really notice this deduction) paid into the retirement system so their's more funds on the books for your future benefit. Using yours truely as an example, and I'll just use percentages to take the possibility of promotions and/or step raises out of the equations, my situation looks like this. (Thankyou EngrGal for getting me to think of it in this fashion from the previous "FI and now what?" thread.
50 - 32% 54 - 48% 58 - 68%
51 - 36% 55 - 53% 59 - 73%
52 - 40% 56 - 58% 60 - 78%
53 - 44% 57 - 63%
My coworkers look at the chart and most figure something along the lines of "Way-Cool, I can get out at 59 with nearly three-quarters, and I've heard that should be almost enough if I save some money in my Deffered Comp Account (457) along the way!" My take of the chart was always, "You mean we can actually retire at age 50 and get a inflation adjusted pension? How cool is that?"
When I point to ages a bit earlier on the chart I get shutdown for the most part, with a very few takers. "How could I live on that?" meaning "How could I maintain my lifestyle of conspicous consumption with fewer dollars on that pittance?. OK I understand, but again that's where the trap comes in. In the SWR world, there are practical limits to how much one can expect to accumulate over one's lifetime, and even then there are market forces that may work for or against you in the afterwork life to determine the standard of living you achieve.
For the DBP'er it's just so black and white, too many are tempted to work far too long for the big payoff, and never stop and smell the roses.
