How do you calculate the value of your federal pension?

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's worth less than people think. I was making a touch over $200k with the government. I ran the numbers and to stay and retire, it would only make an additional $25k per year (over the 55k-ish that I am already going to make). You can earn that much- easily- with 500k investment in the stock market. I was offered a private sector position at 650k per year. Total no brainer, I took the job. People told me I was crazy to miss the gains on my pension but that math isn't mathing.

I guess you are humble bragging. If your private job offers 650k (which I don't even believe), this question isn't really applicable to you.

It depends when they left. The lowest SES level pay is 183k and the highest is 250k as of this year. When I was in the government, my SES was in charge of more than 500 people. I think that could be translated into the private sector for a hefty amount.

I'm the one who wrote about my new job at $650k. It's absolutely true. But my point in saying that is that people are so attached to the concept of a pension that they cant see any circumstances under which they are okay losing it. You can literally make back the value of the pension many times over but psychologically it's not palatable for many feds.

the risk equation isn't quite as simple as you paint it.

pre-election (and thus before employment and economy getting trashed) i interviewed for a position that had a salary range of $300-900k, but for an employer known to cut their losses early if they decided it wasn't working out. to take the job i would have needed to be able to save enough money in a year to carry me through a potential 12-18 month job search if things went south.

while i then only made $250k, i was already over 50. i calculated i'd need to ask for $600k a year, for a job i was not in love with. i elected to stay put. that wasn't a calculation around the pension, just general job security over 50 when i already make decent money.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's worth less than people think. I was making a touch over $200k with the government. I ran the numbers and to stay and retire, it would only make an additional $25k per year (over the 55k-ish that I am already going to make). You can earn that much- easily- with 500k investment in the stock market. I was offered a private sector position at 650k per year. Total no brainer, I took the job. People told me I was crazy to miss the gains on my pension but that math isn't mathing.

I guess you are humble bragging. If your private job offers 650k (which I don't even believe), this question isn't really applicable to you.

It depends when they left. The lowest SES level pay is 183k and the highest is 250k as of this year. When I was in the government, my SES was in charge of more than 500 people. I think that could be translated into the private sector for a hefty amount.

I'm the one who wrote about my new job at $650k. It's absolutely true. But my point in saying that is that people are so attached to the concept of a pension that they cant see any circumstances under which they are okay losing it. You can literally make back the value of the pension many times over but psychologically it's not palatable for many feds.

the risk equation isn't quite as simple as you paint it.

pre-election (and thus before employment and economy getting trashed) i interviewed for a position that had a salary range of $300-900k, but for an employer known to cut their losses early if they decided it wasn't working out. to take the job i would have needed to be able to save enough money in a year to carry me through a potential 12-18 month job search if things went south.

while i then only made $250k, i was already over 50. i calculated i'd need to ask for $600k a year, for a job i was not in love with. i elected to stay put. that wasn't a calculation around the pension, just general job security over 50 when i already make decent money.

You will die working if you are over 50 and thinking about this.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's worth less than people think. I was making a touch over $200k with the government. I ran the numbers and to stay and retire, it would only make an additional $25k per year (over the 55k-ish that I am already going to make). You can earn that much- easily- with 500k investment in the stock market. I was offered a private sector position at 650k per year. Total no brainer, I took the job. People told me I was crazy to miss the gains on my pension but that math isn't mathing.

I guess you are humble bragging. If your private job offers 650k (which I don't even believe), this question isn't really applicable to you.

It depends when they left. The lowest SES level pay is 183k and the highest is 250k as of this year. When I was in the government, my SES was in charge of more than 500 people. I think that could be translated into the private sector for a hefty amount.

I'm the one who wrote about my new job at $650k. It's absolutely true. But my point in saying that is that people are so attached to the concept of a pension that they cant see any circumstances under which they are okay losing it. You can literally make back the value of the pension many times over but psychologically it's not palatable for many feds.

When the AI bubble bursts and the markets crash the people in their mid-fifties with pensions won’t care.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's worth less than people think. I was making a touch over $200k with the government. I ran the numbers and to stay and retire, it would only make an additional $25k per year (over the 55k-ish that I am already going to make). You can earn that much- easily- with 500k investment in the stock market. I was offered a private sector position at 650k per year. Total no brainer, I took the job. People told me I was crazy to miss the gains on my pension but that math isn't mathing.

I guess you are humble bragging. If your private job offers 650k (which I don't even believe), this question isn't really applicable to you.

It depends when they left. The lowest SES level pay is 183k and the highest is 250k as of this year. When I was in the government, my SES was in charge of more than 500 people. I think that could be translated into the private sector for a hefty amount.

The higher you get in your fed job, the less you make. Who would want to be in charge of 500 people and only make $200k? At my agency, the Chief Information Officer (CIO) probably made 250k. Not a bad salary, but for the global IT infrastructure he was responsible for, that's a terrible salary.

Maybe I'm an underachiever, but the sweetspot in the government is the non-mangerial GG13-15 spot. Do your job and go home. No office politics, no HR drama, no endless meetings, no leveraging resources (talking BS gov speak), no metrics....etc. If you want all that, go private sector where at least you will be compensated.

[Anonymous]

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:

Anonymous wrote:It's worth less than people think. I was making a touch over $200k with the government. I ran the numbers and to stay and retire, it would only make an additional $25k per year (over the 55k-ish that I am already going to make). You can earn that much- easily- with 500k investment in the stock market. I was offered a private sector position at 650k per year. Total no brainer, I took the job. People told me I was crazy to miss the gains on my pension but that math isn't mathing.

I guess you are humble bragging. If your private job offers 650k (which I don't even believe), this question isn't really applicable to you.

It depends when they left. The lowest SES level pay is 183k and the highest is 250k as of this year. When I was in the government, my SES was in charge of more than 500 people. I think that could be translated into the private sector for a hefty amount.

The higher you get in your fed job, the less you make. Who would want to be in charge of 500 people and only make $200k? At my agency, the Chief Information Officer (CIO) probably made 250k. Not a bad salary, but for the global IT infrastructure he was responsible for, that's a terrible salary.

Maybe I'm an underachiever, but the sweetspot in the government is the non-mangerial GG13-15 spot. Do your job and go home. No office politics, no HR drama, no endless meetings, no leveraging resources (talking BS gov speak), no metrics....etc. If you want all that, go private sector where at least you will be compensated.

You are WISE my friend. Im not a FED but I get it. No point in working you a@@ off for a few crumbs - yes $250K are crumbs for the CIO job responsibility above and no job security t boot

[Anonymous]

OP, no one here has a calculator.
That's what we need -- an actual monetary figure to count it as part of our assets/net worth. Following

[Anonymous]

Anonymous wrote:Pension is priceless. Doesn’t seem much when you are young but when you retire, there is nothing better than money that comes every month

And increases with the cost of living.

[Anonymous]

There are good threads on this on Bogleheads and Reddit. For example, https://www.reddit.com/r/Bogleheads/comments/1elzb8x/calculating_a_pension/

Very roughly, I’m assuming for my own purposes that approx $40k/year is equivalent to $1M in retiring savings. But with fed pensions, note the additional benefit of COLA adjustments — they strike me as a valuable factor. So the value is actually higher than that very rough 4 percent calculation I think.

[Anonymous]

The gov basically wants you to take your pension starting at age 62.  Let’s say you’re a fed for 20 years.  That’ll give you about $44k/year in pension income, more or less - assuming your high 3 years salary is $200k.  So let’s say you live another 25 years after that.  How much money would you need to give you $44k/year for 25 years?  In other words, what kind of investment do you need to have at retirement in order to match what the pension will give you?  You’d need about $950k.

So now you calculate what you need to save monthly for the next 20 years in order to accumulate $950k.  At a 5% rate of return, I need to save $2300/month (after tax).

Now, depending on when you joined the government, you may be contributing 4.4% of your pre-tax salary to the pension – about $7k/year, or probably something like $4k after taxes you’ll be missing.

So the delta in after-tax savings between pension and non-pension is about $23,600.  And $23,600 after taxes equals probably about $35,000 in salary per year.

That's the general idea. Obviously plug in different numbers for your situation.

[Anonymous]

Anonymous wrote:

Anonymous wrote:Pension is priceless. Doesn’t seem much when you are young but when you retire, there is nothing better than money that comes every month

And increases with the cost of living.

My friends late father was a career Fed, retired off the older legacy pension system. He also did very well with investments but as he became older, those he entrusted (including his own children) to manage his investments (mostly real estate) mismanaged and/or stole from him. Sadly in the end, he had nothing but the Fed pension remaining which sustained him until he died. He had the more more lucrative older pension, but yes a steady check in the bank each month is golden, particularly in advanced age when cognitive capabilities are limited or gone. I'd take much less in investment capital vs a lower monthly payout via a govt pension. Peace of mind.

[Anonymous]

Anonymous wrote:The gov basically wants you to take your pension starting at age 62.  Let’s say you’re a fed for 20 years.  That’ll give you about $44k/year in pension income, more or less - assuming your high 3 years salary is $200k.  So let’s say you live another 25 years after that.  How much money would you need to give you $44k/year for 25 years?  In other words, what kind of investment do you need to have at retirement in order to match what the pension will give you?  You’d need about $950k.

So now you calculate what you need to save monthly for the next 20 years in order to accumulate $950k.  At a 5% rate of return, I need to save $2300/month (after tax).

Now, depending on when you joined the government, you may be contributing 4.4% of your pre-tax salary to the pension – about $7k/year, or probably something like $4k after taxes you’ll be missing.

So the delta in after-tax savings between pension and non-pension is about $23,600.  And $23,600 after taxes equals probably about $35,000 in salary per year.

That's the general idea. Obviously plug in different numbers for your situation.

I posted the very rough 4 percent estimate. This is very helpful!

[Anonymous]

I think trump will cancel fed pensions. Not like it did not happen in other countries.

[Anonymous]

Anonymous wrote:It's worth less than people think. I was making a touch over $200k with the government. I ran the numbers and to stay and retire, it would only make an additional $25k per year (over the 55k-ish that I am already going to make). You can earn that much- easily- with 500k investment in the stock market. I was offered a private sector position at 650k per year. Total no brainer, I took the job. People told me I was crazy to miss the gains on my pension but that math isn't mathing.

Very few Fed employees are in the position to go from the Fed to a 650k job. The real decision making is for those GS 13/14/15 with their low six figures salaries and debating giving up 150k Fed income with the pension promise for a 200k private sector job. If it happens.

I'd agree if over 45 and planning to retire at 65, stick with the Fed for job security and ride it out 20 years and get the guaranteed pension.

[Anonymous]

Anonymous wrote:There are good threads on this on Bogleheads and Reddit. For example, https://www.reddit.com/r/Bogleheads/comments/1elzb8x/calculating_a_pension/

Very roughly, I’m assuming for my own purposes that approx $40k/year is equivalent to $1M in retiring savings. But with fed pensions, note the additional benefit of COLA adjustments — they strike me as a valuable factor. So the value is actually higher than that very rough 4 percent calculation I think.

It’s actually a bit less than that. The 4% rule (25x) is for retirement account balances that are both expected to last 30 yrs and where the remaining principal goes to your heirs if you don’t make it that long. A closer comparison would be pricing an annuity for someone your gender at the age you will retire. For a male at 62 that depends on the current interest rate but likely 12-16x the yearly pension

[Anonymous]

Anonymous wrote:The gov basically wants you to take your pension starting at age 62.  Let’s say you’re a fed for 20 years.  That’ll give you about $44k/year in pension income, more or less - assuming your high 3 years salary is $200k.  So let’s say you live another 25 years after that.  How much money would you need to give you $44k/year for 25 years?  In other words, what kind of investment do you need to have at retirement in order to match what the pension will give you?  You’d need about $950k.

So now you calculate what you need to save monthly for the next 20 years in order to accumulate $950k.  At a 5% rate of return, I need to save $2300/month (after tax).

Now, depending on when you joined the government, you may be contributing 4.4% of your pre-tax salary to the pension – about $7k/year, or probably something like $4k after taxes you’ll be missing.

So the delta in after-tax savings between pension and non-pension is about $23,600.  And $23,600 after taxes equals probably about $35,000 in salary per year.

That's the general idea. Obviously plug in different numbers for your situation.

This is the right calculation! Although the assumptions do tilt towards favoring pensions. Very few feds have a $200K high-three. Even if you’re a capped GS15 retiring now that number will be more like $190K. And to get a 1.1% bump at 20 years of service you have to have Goldilocks timing; most will only be 1%, so the pension is more like $38K, so your savings to create that is around $820K. If you’re investing over 20 years for retirement you’d use a tax-deferred account and assume more like 7% return and so the monthly savings rate to achieve that drops to about $1,600. That’s $19K a year. You pay for this at 4.4% of your present salary of $195K = $8.5K per year. The net value of your pension is therefore only about $10K, not the $35K derived above. So getting a 5% pay rise on leaving the government is probably worthwhile if you have the discipline to save the difference.