Work for a Pension or a Portfolio?

[Philliefan33]

As a person with a stay at home spouse who worked hard to raise our kids, I disagree. For a married couple half of the contribution should be credited to each partner. The FICA cap should be double for a couple also.

I agree with this.

A couple with each partner working and contributing to SS over a career will not benefit from the spousal part of SS. For example, my SS benefit on my own record is more than 50% of DH’s benefit. I’ve paid in for my benefits, he’s paid in for his, it’s a 1:1 ratio of contributors to beneficiaries.

On the other hand, if one spouse does not contribute to SS but receives spousal benefits, it’s a 1:1.5 ratio. There’s got to be a way to make the math work so the ratio approaches 1:1 without leaving non-working spouses destitute in old age.

 

[pb4uski]

As a person with a stay at home spouse who worked hard to raise our kids, I disagree. For a married couple half of the contribution should be credited to each partner. The FICA cap should be double for a couple also.

While that sounds simple, but in practice I think it is difficult to implement. So if one spouse works part time because they are the main childcare person, I guess that would that mean that the couple split their combined SS contributions... sounds fair enough. But if they both work but one makes a lot more than than the other then do they split contributions? What if the couple is separated but not divorced? Many couples stay married in name but are separated for long periods of time.

I would leave it as is rather than split it as you propose since that would likely introduce different inequities.

 

[Bigdawg]

I would have needed a little over $800,000 to get an immediate annuity for my military pension amount at retirement. Yes this is a poor comparison because immediate annuities generally don't get COLAs. I went ahead to try to figure out how much I would have to have saved to fund my own pension through a SPIA purchase (level payments).

Using a mortgage calculator to reverse engineer how much I would have to be saving back in the 1990's, I come up with first year savings of about $10,950, assuming a constant 7% interest rate. That glides up to about $38,000 annual savings in the mid 2010's. This is obviously a very rough (back of the envelope) estimate.

For reference the pay for an E-3 private (typical rank for first two years of service) was $12,600 per year in 1995. That's a savings rate of 86%. Even adding in the housing, medical, etc. benefits the savings rate is well over 50% of compensation.

I see it mostly as a trade off in commitment...but there is certainly an element of luck to make it to the 20 year cliff vesting.

It has been covered in other threads years ago (Nords). I believe the % were about 7-8% or Marines made it to 20. Air Force was the highest I believe at like 15%. The military doesn't need a ton of folks at the 15-20 year mark. They do need a bunch at the 0-5 year mark. The good news is that you get some good training is some potentially interesting fields. Also you can use your military time towards a government pension if you decide to go that route. Sorry for the thread drift.

 

[Bigdawg]

I think this would have disastrous implications and I say that as a woman collecting on my own record whose spouses (both deceased) never collected on mine. Yes, women have options and opportunities they never had when SS was built, but they are still disproportionately in lower- paying jobs and a higher % of them leave or dial back their careers to raise children or care for elderly parents. My DDIL home- schools 3 kids. That's priceless.

My DM made more than my DD. That was after she took a few years off until I got into kindergarten. My DW makes more than I do. I had dinner the other night with three military ladies who all make more $ than I. They are all mother's and the kids have done and are doing great. I am so sick of hearing about the glass ceiling and the pay gap when I can anecdotally show hundreds of examples of ladies who are kicking butt. My DD chooses to make less than my DSIL. She does that so she can free up space to coach college volleyball as an extra job. Her primary job pays aprox 80% of what her husband makes. I tease her that she is contributing to the pay gap narrative. My DDIL makes a tad bit more than my DS. She is a 30 yr old VP of a marketing firm. Interesting that you mentioned the taking care of elderly parents. I'm the family member who has taken care of dying sister #1, dying sister #2, dying father and lastly my dying mother just last year. I do my best to empower every lady in my life. One of my sayings is "the most attractive thing in the world to me is a women who doesn't need me". Sorry, rant over. SS has many issues and the spousal is actually such a small % of the outlay. Some tweeks to the system will most likely happen in the next 10 years or so. We'll see.

 

[brett]

I think this would have disastrous implications and I say that as a woman collecting on my own record whose spouses (both deceased) never collected on mine. Yes, women have options and opportunities they never had when SS was built, but they are still disproportionately in lower- paying jobs and a higher % of them leave or dial back their careers to raise children or care for elderly parents. My DDIL home- schools 3 kids. That's priceless.

Agree with you completely. Moreover, a close look at the poverty stats for widowed and/or divorced women who are seniors tells a disturbing picture. Numerous reasons for and some make lots of excuses but the stats are real and they are harsh.

 

[old medic]

My DW now makes more than I did before I retired, and her SS will pass mine in a few more years. She basically only worked PT until the kids started school. Our Daughter is the main bread winner now that she became a supervisor, and has even surpassed Mama in the salary Dept.

 

[MRG]

No pension for me. When I started at Megacorp, they had a profit sharing plan. They contributed ~10% annually, the founder was a value investment guy, and he overrode some investments in the fund and generally beat the market.

I sat in a presentation early on that extrapolated prior years returns and suggested we would have a 7 figure sum after 20 years. Along the way, a 401k was implemented, and we only had a 4% profit sharing contribution, and the 401k would match 6%.

When I left at 56, I had rolled my 401k over and self managed. I left the profit sharing plan so I could use the rule of 55 if needed. Before I transferred that money, the shiny new CEO allowed over 50% of the funds assets to be in one stock that was shut down by the feds. After 6 years of legal battles, Megacorp is paying out 125 million. I won't know exactly what I receive until next month. I do know the clowns who mismanaged the money won't be receiving anything for their losses.

 

[brett]

My spouse worked while I was in university. Good pay...an RN.

We waited 12 years, then had children. She stopped working, started again part time for a while, then stopped for good.

I worked long hours, lots of travel. My last 10 years were very lucrative. They set us up for a financially secure early retirement.

My point is that even though my wife did not work for many years she was a huge enabler to my success. She ran the house, did all those things, made decisions. For a while she called herself a work widow. That 'work' enabled me to become successful and us to become financially secure.

She also had some critical input into a few financial decisions that could have gone either way. They were binary. Her gut feel and common sense easily convinced me that one hunch was right. And it was....in spades.

So...on paper she may not have had the same level of earning but in reality she was a partner. Part of my preparation for retirement was making certain that she would be well taken care of I got hit by a bus. That meant much more than selecting options for my DB pension. It meant arranging our affairs and selecting a financial advisor that she was very comfortable with. Plus ensuring that enough assets were either in her name or in joint/survivor to ensure her financial stability.

 

[tulak]

I think the fairest thing all around, including for single people, is that you only get social security on your own record. No spousal benefit, no survivor benefit. If you didn't personally pay in, you don't get anything.

I would take it one step further and make it true for all public policy. We should all be treated equally as individuals.

 

[Steeler75]

Yes, she does, and it's a good one. But that is irrelevant to the question of whether he and I have been accorded equal treatment under the law. We have not. And lest you think this is hypothetical, it is almost exactly the case with respect to my former neighbor and me. We both hit the Social Security income limit every year and paid the max taxes, but his wife never worked because she didn't need to.

Yes, I know life isn't fair, and we live with it. But comments like Chuckanut's get my dander up.

+1

Everyone should be treated equally, that’s my beef. A spouse should either be able to claim on a SS participant or not, irrespective of the spouse’s participation. Just have a consistent application of the rules.

Most likely not a popular opinion but I want EVERYONE to collect on their own record. No spousal. After higher earner passes? Yes, survivor can collect on deceased spouse's record. I know. Not a popular opinion. Sorry. I'm a "strong women/independent women" kind of guy.

I can live with this decision too, as long as it’s equally applied.

 

[street]

I think the fairest thing all around, including for single people, is that you only get social security on your own record. No spousal benefit, no survivor benefit. If you didn't personally pay in, you don't get anything.

Exactly what it should be and agree 100%. The only problem that is way to simple.

 

[pb4uski]

Actually, after giving it further thought I think that I have changed my mind and would prefer the status quo. Here is my rationale... while I concede that it isn't fair, it does subtly encourage marriage and marriage theoretically results in kids and we need more population growth in this country.

So not because it is fair, but because it subtly encourages needed population growth.

 

[Gumby]

I'm thinking that the prospect of spousal social security plays very little part in the decision of people in their 20s and 30s to have children or not. It certainly didn't play any part in our decision.

 

[brett]

I do not believe that it is a question of 'fair'

I think that it is more a question of how the social security system has been constructed from a financial/actuarial perspective.

The reality is that many Government public pension schemes have have a certain amount of public policy built into them. The premiums and the benefits reflect this. They are managed and subject to financial authority regulation in the fashion of a typical DB plan.

As an example, in our plan mothers (or fathers as the case may be) are given credit for certain number of child rearing years where they make little or no contributions. There are other social components to plan. Very, very similar to other self funding social security type pension plans that exist in other countries in the western world.

Bottom line...what is baked into the scheme from a benefit and a cost perspective. It differs greatly in this way from my DB pension plan.

 

[street]

I'm thinking that the prospect of spousal social security plays very little part in the decision of people in their 20s and 30s to have children or not. It certainly didn't play any part in our decision.

Agree totally young adults would be the last thing on their minds. They see a road that never ends at that age.

 

[aaronc879]

Most companies that offer a pension also offer a solid income so you can still save a good portfolio as well. If you have a public pension then it is far more secure and you can probably not need to save as much. If I could go back in time I would go for the job with the best pension. An $80K/yr salary with a 80% pension after 30 years at age 55 is worth a lot more than $100K/yr with no pension. Focus on the pension, the portfolio is a back up.

 

[brett]

My DB pension was entirely funded by the employer with full payout at age 62.

BUT...it was based on 1 percent per year of the best five consecutive years in the last 10.

Not enough to live on. The second part was ESSP, 401 type savings etc, and regular employee retirement seminars that focused on the need to build up resources outside of the DB plan and the need to plan a retirement lifestyle/budget.

These seminars brought in financial and retirement experts and were, IMHO, excellent. Held during company time at multiple time frames to accommodate all ees.

The challenge, as a senior manager, is that the people who attended were generally the people who were already thinking about and planning for their retirement. The ones that really could have benefited seldom attended...they knew it all.

It is relatively easy to do the numbers for a DB plan. Make a choice....annuity or CV. CV is a prescribe value. The rest is subjective. Health, years of payment guarantee, spoual entitlement on death of ee, etc. A cost to every option on the menu.

 

[street]

My DB pension was entirely funded by the employer with full payout at age 62.

BUT...it was based on 1 percent per year of the best five consecutive years in the last 10.

Not enough to live on. The second part was ESSP, 401 type savings etc, and regular employee retirement seminars that focused on the need to build up resources outside of the DB plan and the need to plan a retirement lifestyle/budget.

These seminars brought in financial and retirement experts and were, IMHO, excellent. Held during company time at multiple time frames to accommodate all ees.

The challenge, as a senior manager, is that the people who attended were generally the people who were already thinking about and planning for their retirement. The ones that really could have benefited seldom attended...they knew it all.

That is so true what happened in my place of work also. The young people that folks with the company should have been going to those retirement planning seminars all along till retirement. The ones that got to go it was to late to take advantage of the things being taught.

 

[latexman]

I think the fairest thing all around, including for single people, is that you only get social security on your own record. No spousal benefit, no survivor benefit. If you didn't personally pay in, you don't get anything.

Compared to current practice, this would affect women mostly, and in a financially very bad way. It would not be fair to women.

 

[aaronc879]

Compared to current practice, this would affect women mostly, and in a financially very bad way. It would not be fair to women.

Most women currently collecting SS benefits grew up in a time when it was customary for the wife to stay home while the husband worked so they rarely had 40 credits to be able to get even minimum benefits so it would not be fair for this suggested policy to include current or soon-to-be eligible women. It is now just as common for the woman to work as it is for the man so that policy would be plenty fair to women who were born in this century.

 

[pb4uski]

^^^ True, there are more couples where both spouses work so their SS benefit based on their own work record exceeds 50% of their spouse's PIA so there is no spousal benefit applicable... so while it is unfair the cost to the system is decaying.

 

[latexman]

Most women currently collecting SS benefits grew up in a time when it was customary for the wife to stay home while the husband worked so they rarely had 40 credits to be able to get even minimum benefits so it would not be fair for this suggested policy to include current or soon-to-be eligible women. It is now just as common for the woman to work as it is for the man so that policy would be plenty fair to women who were born in this century.

Plenty fair? If women were paid equally, yes, but . . .

“On average, women working full time, year round are paid 83.7% of what men are paid.” BOL.gov

“The gender gap in pay has remained relatively stable in the United States over the past 20 years or so. In 2022, women earned an average of 82% of what men earned, according to a new Pew Research Center analysis of median hourly earnings of both full- and part-time workers.”

Try again.

 

[pb4uski]

^^^ What does pay inequality have to do with spousal benefits?

Nothing at all. Pay inequality is not so extreme that most women would have a PIA that is more than 50% of their spouse's PIA.

Left field post. Try again.

 

[latexman]

What does pay inequality have to do with spousal benefits?

Nothing at all. Pay inequality is not so extreme that most women would have a PIA that is more than 50% of their spouse's PIA.

Left field post. Try again.

I think the fairest thing all around, including for single people, is that you only get social security on your own record. No spousal benefit, no survivor benefit. If you didn't personally pay in, you don't get anything.

The premise is "you only get social security on your own record". No spousal or survivor benefits at all.

You try again.

 

[Gumby]

Well, it appears I opened a can of worms. I apologize for that. It's really not something worth fighting about, you guys.