Is a pension all it’s cracked up to be?
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Anonymous
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Geriatric millennial, which means I have student debt, aging parents who don’t have enough for retirement, and a child that we still have many many years to pay for after school care for and then college. I’m planning on working another 20-25 years.
Spouse and I are both in public sector. DH is vested for a small pension, currently making $100k. I’m with an employer that historically had a pension, currently doesn’t offer to new employees, but is considering reopening their plan. I’m on track for $190k this year, can expect 7% annual increases moving forward and a bonus of $5k-$10k a year. Great benefits and the stability of government. My private sector counterparts make $350k plus bonuses. I’m being recruited. Until recently I was considering leaving my current role in 18 months, jump to the private sector for the money. But the possibility of the pension plan reopening…is the value significant enough to stay put? I’d need to stay put 5 years to vest to minimum rate(20% of final salary) 15 years to vest to maximum (50% of final salary). |
Anonymous
| If it wasn’t for his pension my father would be completely destitute. |
Anonymous
| I could have over 100k per year in pension. You need to run the numbers. 50 percent is a lot, but it is also golden handcuffs. |
Anonymous
| Do the pension benefits have a cost of living adjustment? Otherwise a static amount at retirement gets eaten away by inflation and can be pretty puny after a reasonable lifetime |
Anonymous
Yes, reasonable COLA. |
Anonymous
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I worked in a pension department and most people were getting $1600-$3600/month depending on years of service, marital status and salary and age etc. most of them falling in the $22-2600/mo range. Add social security and you won’t starve especially if you have your house paid off.
Pensions are guaranteed by pbgc.gov but there was a time when pensions were failing and a bunch of companies did away with them |
Anonymous
| You can calculate exactly how much they are worth, eg by finding out how much an spia annuity of the same amount would cost. |
Anonymous
| Yes |
Anonymous
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Which job do you prefer? That’s a huge salary difference.
How much do you have saved for retirement? I’d take the higher paying job and keep investing for retirement. |
Anonymous
| There is nothing better than regular checks when you are old |
Anonymous
| Do any (spouses or the two offers) come with health insurance in retirement? That's something else to consider. |
Anonymous
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Considering reopening doesn't mean anything and you also don't know the terms under which it will reopen if it reopens at all. It may require a higher contribution and it may pay out less.
I'd evaluate the other aspects of the other potential job (comp, benefits and equally important workload/hours). |
Anonymous
| When you say your company doesn't offer to new employees, are you grandfathered in or would you be new? Are you sure all your years of service count or would you have to buy back the years you didn't put in? |
Anonymous
True, but you're not guaranteed to get what was promised in the company's pension plan. My FIL was a steelworker at Bethlehem Steel- when their pension plan failed, it was taken over by PBGC and he received much less than what was expected from Bethlehem's plan. |
Anonymous
| My mother's family died in poverty without pensions. On my Dad's side everyone retired and lived long healthy lives--lots of travel and own property. Tlmy Dad's side had pensions. My Dad now has a pension and makes a solid 6 figures in retirement. The pension options have been reduced but it is 100 times better than a 401k |