Job change and Pension question

[localfed]

I have about 15 years (10 years actual service and 5 years of "air time" purchase) in Public Safety pension plan in California and am switching to a Federal LEO job in a few weeks.  I am trying to decide what to do with my pension that I have earned thus far and am vested in.  When I turn 50 in 17 years, I'd be eligible to earn about $52000 per year with a max COLA of 2% based on my present high 3 years.  I'm debating rolling over the cash value of the pension (my contributions over the years) to the TSP plan that the Feds offer and let the money grow there, thus eliminating any pension payments at 50.  The cash value is about 250K.  I have been very fortunate to work at places that pay well, even for California standards. 

I've played around with a lot of calculators and talked with some people who have deferred there pensions in similar situations as mine and I go back and forth between what option to choose.  I have yet to find one person who has rolled over a pension into something else when they left public service in CA. 

The pros for rolling the money over is it is now in my control (as much as TSP gives you) verses in a Pension Fund and I have concerns about the long term viability of Public Pension plans in California and have been following the Detroit Pension issue that is unfolding now.  I like the idea of passing something to my kids when my wife and I eventually pass away rather than the pension benefits disappearing once we both die.  I also think long term, I'll get more money out of the TSP than the Pension will pay out over the course of the life span of my wife and I.

The big con for me is the unknown and how the market us for the next 20+ years, although I think overall this is really a non-issue based on the history of the stock market.

Does anyone have any input or have gone through a similar experience? 

[Another Reader]

No one does this because you apparently only get your contributions, not your employer's  Figure out the cost of a $52,000 annuity with a 2 percent COLA at age 50.  That's how much your portfolio would have to be to equal the pension. 

In your shoes, I would leave the money in and take the pension.  If your agency's money is invested with CalPERS, look at the interest crediting rate.  If things really start to go south, I would take the money out then with that nice guaranteed return compounded in the interim.

[iamlindoro]

I do think the long term prospects for LEO pensions in California are a legitimate concern.  In the (CA) city where I was formerly a LEO, the mayor has managed to characterize the PD as a bunch of pension abusers, and over the past few years has started to receive nationwide attention and funding from out-of-state organizations willing to fully fund local pension measures, court cases, etc. to the bitter end.  This particular mayor may or may not succeed at gutting the department's pension, but I think it shows that even existing pensions are not as safe as we might have once considered them.

I can't tell you what to do as I haven't been in your particular situation, but at the very least I would probably monitor the health of your pension system closely in the coming years to keep abreast and be ready to make decisions if things start to look grim.

[Another Reader]

Public employee pensions in California were increased in the late 90's when the stock market was going gangbusters and everyone's pensions were well or even over funded.  Some adjustment back to the pre-bubble pensions, especially for new employees, is probably needed. 

I assume you are talking about San Jose's mayor, Chuck Reed.  Who needs police officers?  And if we do need a few, why pay them the market wage and benefits?  So what if property crime is up over 30 percent and some of the people in my subdivision got together and installed license plate snapping cameras at the entrances because of the daytime burglaries and mail theft?  What does it matter if the murder rate approaches that of Oakland?  He can use that money to try once again to get a baseball team to relocate to San Jose.

He might want to make a name for himself chopping public employee pensions, but if he does not fix the problems he created, he will be voted out of office before he can take the credit.

[iamlindoro]

I assume you are talking about San Jose's mayor, Chuck Reed.  Who needs police officers?  And if we do need a few, why pay them the market wage and benefits?  So what if property crime is up over 30 percent and some of the people in my subdivision got together and installed license plate snapping cameras at the entrances because of the daytime burglaries and mail theft?  What does it matter if the murder rate approaches that of Oakland?  He can use that money to try once again to get a baseball team to relocate to San Jose.

He might want to make a name for himself chopping public employee pensions, but if he does not fix the problems he created, he will be voted out of office before he can take the credit.

Yep, that's who I mean.  Talking to the few people still there, it's clear it's going to get worse before it gets any better.  I worry that all the viable Reed successors are more or less his lackeys.

Anyway, I didn't mean to make it about my own (admittedly very local) experience-- just think that if it can happen here, it can happen anywhere and that it bears monitoring.

[localfed]

San Jose PD is a scary example of a Mayor and other city management destroying what was known to be a great place to work (I don't and never have worked there, but know several who do).  When I started in the business, SJPD was the place to be (at least from the perspective that was around me).  Sadly, it's not looked at that way anymore, not the officers, but the city and its leadership team)


Another Reader:  You're right, I don't get my employer contributions on my CALPERS and 1937 act retirement plans that I'm part of if I were to withdraw them.  The annuity amount I came up with was roughly 1.2 million on a 30 year payout. 

Initially when I make the switch, I'm leaning on leaving everything as is, and if things start to unfold in the Pension arena, I may rollover the funds depending on whats going on.  I think though, I will rollover my 457(b) into the TSP once I start with feds. 

Thanks

[Another Reader]

The advantage to the 457 plan is that it is not a qualified retirement plan but simply deferred compensation.  Should you decide to retire early, before you hit the pension age, that money can be accessed without penalty.  You simply pay the taxes.  If your 457 plan has decent choices and is flexible on withdrawals, it could be a better choice, depending on your plans.