Author Topic: bad pensions  (Read 2064 times)

clarkfan1979

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bad pensions
« on: December 31, 2021, 02:39:18 PM »
I was part of the University of Hawaii Pension system from 2015 to 2019. My employer removed 8% of my gross salary every paycheck. You need 10 years to be vested. If I made it 10 years, I would get some sort of a match and then a guaranteed payout at a later date. Because I only lasted 4 years, they simply refunded my money with an additional "eye-popping" 2% annual return.

It's been two years, but I'm still a little disgruntled with my previous pension experience. During this time, the S & P 500 had an average annual return of 11% + 2% for dividends (13%) total. It was mandatory for me to contribute 8% to the pension. The University of Hawaii Pension system made 13% on my money, gave me 2% and kept the 11% spread.

Based on the current system there is a huge incentive to fire people before they reach 10 years. How is this legal?

reeshau

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Re: bad pensions
« Reply #1 on: December 31, 2021, 03:03:21 PM »
Based on the current system there is a huge incentive to fire people before they reach 10 years. How is this legal?

I'm sure the design intent is to get people to stay, not to push them to leave.  10 years does seem like a huge vesting period, but academia is more insulated than industry.  And even if you had left in 2009, and the market had tanked 50%, you would still get your 2%.  The legality is in the process (an agreed payment rate, even if you had not looked at that detail when you signed up) vs. the outcome.  It is the same thing when people here talk about cash-out refi's that they will put in the stock market--if one is made illegal, the other probably is, too.  But really, that is just the risk premium of a a guaranteed outcome vs. accepting market risk.  Get over it.

You say you lasted 4 years.  They fired you?  Or you quit for some reason?

clarkfan1979

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Re: bad pensions
« Reply #2 on: December 31, 2021, 03:53:05 PM »
Based on the current system there is a huge incentive to fire people before they reach 10 years. How is this legal?

I'm sure the design intent is to get people to stay, not to push them to leave.  10 years does seem like a huge vesting period, but academia is more insulated than industry.  And even if you had left in 2009, and the market had tanked 50%, you would still get your 2%.  The legality is in the process (an agreed payment rate, even if you had not looked at that detail when you signed up) vs. the outcome.  It is the same thing when people here talk about cash-out refi's that they will put in the stock market--if one is made illegal, the other probably is, too.  But really, that is just the risk premium of a a guaranteed outcome vs. accepting market risk.  Get over it.

You say you lasted 4 years.  They fired you?  Or you quit for some reason?





I quit because I found a job closer to my wife's parents. Our son was 2 years old at the time and she wanted to move back to Colorado. However, I personally saw many good people get fired or get pushed out just before 10 years. Overall, it was a pretty toxic work environment with pretty high turnover. I still keep in touch with some of my old co-workers and they keep me updated on who has stayed and who has left. Very few people make it to 10 years.

The Hawaii Pension is also an "all or nothing" approach. You either make it to 10 years and get the match or you don't and get nothing. I think it's even worse than nothing because they are using your money to make money and then give you 2%. If the stock market historically does 9%, why are they only obligated to give you 2%. That seems like too big of a spread for me. Why not just give the stock market returns that were achieved in the pension fund? The pension fund provides quarterly reports.

The vesting schedule at my current institution makes more sense to me. You start at 50% vested. Then you are 60% vested after year 1, 70% after year 2, 80% after year 3, 90% vested after year 4 and 100% vested after 5 years of service. I have the 401K type retirement fund, but the same vesting schedule applies to the pension. This is more normal and industry standard. When I was at my first institution about 10 years ago, I was 100% vested on day 1.

Edit: Because of Hawaii's budget problems post COVID-19, there is no way I would have made it to 10 years, even if I stayed. They would have flat out not renewed my contract or made things so difficult on me that I would leave. For tenured faculty, they are offering them similar jobs on different islands, still within the Hawaii system. They are hoping they don't take the job so they can save money. Even if they do take the new job they are hoping that its just short term and the faculty will leave in 1-2 years after landing another job somewhere else.
« Last Edit: December 31, 2021, 03:58:30 PM by clarkfan1979 »

nereo

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Re: bad pensions
« Reply #3 on: December 31, 2021, 04:27:56 PM »
Yet another reason to hate pensions.
I wish they were banned.

Wolfpack Mustachian

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Re: bad pensions
« Reply #4 on: December 31, 2021, 04:39:31 PM »
Yet another reason to hate pensions.
I wish they were banned.

Absolutely. I started at my first job just a couple years after the pension was replaced by a pretty generous 401k match - like 8% for 4% or something like that. I was so glad I dodged the bullet of pension. Before I left, well before pension would have meant anything, they were already screwing over people on pensions who had been there in the 10-20 year range.

Michael in ABQ

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Re: bad pensions
« Reply #5 on: December 31, 2021, 04:44:08 PM »
I worked for the federal government for a couple of years and they took 4.4% of my paycheck to put in a crappy pension (FERS). I just filed the paperwork to get the money returned. I get a whopping 3% interest rate on that money. So I guess my pension was slightly less bad. Had I put in 5 years or more I would have received 1% x years of service - which I could start collecting in my 60s (20+ years from now).

On the plus side, they did provide a 100% match on the first 5% of my paycheck in the TSP (federal version of a 401k). That mostly went into what is essentially an S&P500 Index fund with a bit in international and small cap.

Loren Ver

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Re: bad pensions
« Reply #6 on: December 31, 2021, 06:16:37 PM »
One of DHs school systems must have taken notes from them for their 401b!

He was a middle school teacher and he could put money in but didn't get anything vested from them until he was there 10 years.  It was ridiculous.  The burn out rate for middle school teachers in this system is 5 years.  At this school DH lasted one.  It was also his last years teaching (he lasted 4 total).  He just did taxable accounts, didn't want to have to go through them to access money later in life when we retired early. 

Luckily he moved on to better things after going back to college. 

Car Jack

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Re: bad pensions
« Reply #7 on: December 31, 2021, 08:46:47 PM »
On the other hand....I worked for DEC back in the 80s and 90s.  No money from me and pension vested at 5 years.  My understanding was that there was a federal law change requiring pension vesting to be 5 years minimum.  The change occurred while I was there as it was 10 years before that.  I was there 8 years and will be taking about $71k lump sum into my IRA in February. 

BicycleB

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Re: bad pensions
« Reply #8 on: December 31, 2021, 09:50:17 PM »
I like my pensions.

One time a diligent financial advisor reviewed my finances. They spent two days looking for investments that would reliably beat them and failed. In terms of return per $ of capital contributed from my paycheck, they're pretty healthy. Stability looks ok afaik. Vested for 5 to 7 years' service per employer, they provide about 15% of my expected lifetime income as I calculate it. I can cash them in any time I want for a lump sum but benefit by keeping the pension.

The employers were govts. The stable income promised by the pensions allowed the govts to employ workers at about 15% lower wages than private employers, a savings for the taxpayer. Yet the value was sufficient to keep turnover low and be a legitimate part of the pay package.

PS. Sorry if this is considered off topic. Wanted to balance the scales though. Condolences to those whose experience is more negative!
« Last Edit: December 31, 2021, 09:53:14 PM by BicycleB »

lhamo

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Re: bad pensions
« Reply #9 on: December 31, 2021, 09:54:33 PM »
I was part of the University of Hawaii Pension system from 2015 to 2019. My employer removed 8% of my gross salary every paycheck. You need 10 years to be vested. If I made it 10 years, I would get some sort of a match and then a guaranteed payout at a later date. Because I only lasted 4 years, they simply refunded my money with an additional "eye-popping" 2% annual return.

It's been two years, but I'm still a little disgruntled with my previous pension experience. During this time, the S & P 500 had an average annual return of 11% + 2% for dividends (13%) total. It was mandatory for me to contribute 8% to the pension. The University of Hawaii Pension system made 13% on my money, gave me 2% and kept the 11% spread.

Based on the current system there is a huge incentive to fire people before they reach 10 years. How is this legal?

It's basically set up just like social security, but with higher percentage contributions from both employees and employers.  Your contributions/the growth on them were not really being set aside for you - they were funding current retirees on the plan (many of whom joined it when benefits were better/less costly. Found this little tidbit in the FAQ document:

"Your employer currently contributes 15% of your compensation. Employer
contributions are not credited to your account and are not refundable to you.
Employer contributions along with ERSí investment earnings are used to pay
retirement benefits to retirees and beneficiaries."

slugsworth

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Re: bad pensions
« Reply #10 on: December 31, 2021, 09:57:46 PM »
I would love a pension and would buy one if annuities weren't so expensive. A pension (you trust to be fully funded) can substantially reduce the risk associated with the 4% rule, etc.

I agree that vesting immediately would be great, but I've never heard of anything less than 5 years.

Dicey

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Re: bad pensions
« Reply #11 on: December 31, 2021, 11:38:18 PM »
Following BicycleB, we will begin drawing DH's Defined Benefit Pension this Spring. He had to put in 20 years to get full benefits. It will replace about 65% of his average salary during the last 2 years. We can also stay on the company's healthcare program, at our own expense. We will receive $550/month tax free towards the premium. Once we're eligible for Medicare, the stipend will more than cover our premiums. The DBP includes a COLA and the business is a public utility, so quite likely to stay in business. DH took a huge pay cut twenty years ago when he got this job, but he did it for the pension, which has worked out very well.

DaTrill

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Re: bad pensions
« Reply #12 on: January 01, 2022, 01:41:44 PM »
States/managers/admin know the vesting schedule and adjust work assignments accordingly. 

VOO returns dominate all pensions.  Some endowments outperform, but this is not a state pension. 

People that retired 10 years ago typically had 1%-3% contributions for most of their working life, contributions have increased to over 10% in almost all states with reductions in benefits.  If you have a choice and have the self-discipline, max the 401k/403b/457 and you will be much better off. 

People in my parents' generation had 2% contributions and ridiculous benefits, this is gone but people still lump in "pension" as a ubiquitous description.       

DaMa

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Re: bad pensions
« Reply #13 on: January 01, 2022, 02:39:05 PM »
At least you got 2%.

DH's company ended their pensions in 1999.  What it was worth at 12/31/99 is what they got paid at retirement age.  No interest, no increases. 

Cassie

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Re: bad pensions
« Reply #14 on: January 01, 2022, 03:52:54 PM »
I have worked for 2 states and people were only fired after passing probation if they stole or had sex with our clients.  I also worked for less after graduate school because I wanted a pension. It was a fair trade and I have been collecting for 10 years in April. I get colaís yearly and 200/month in my HRA. I saw how my parents benefited from a pension in addition to their own savings.

Paul der Krake

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Re: bad pensions
« Reply #15 on: January 01, 2022, 05:01:00 PM »
I think pensions (and public-sector unions for that matter) are generally a bad deal for taxpayers and workers alike.

But what you're describing isn't that bad.

Yeah you would have done a lot better being 100% in the stock market or real estate or virtually anything else, but that's not an option available to prudent fund trustees. It's not their job to ensure that leavers recoup their lost opportunity cost.

Silrossi46

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Re: bad pensions
« Reply #16 on: January 02, 2022, 12:42:22 PM »
I chose to remain in a defined benefit pension system and contribute to 457b over the course of 28 years.  (Age 23 to now 51) it will yield me over 60% at age 55.   Not particularly early retirement by standards of this forum however earlier than most I would presume.  The ďbadĒ I believe is in fact the time required to work in order to be vested and in addition the % contributions by newer employees vs ones that have been in the system.  A literal ponzi pyramid the way I see it. 

Had I thought about things differently some years ago and in fact learned sooner the investing principles that I know today I may have been out of the game much sooner in that I likely would have went a different route and reached the numbers required sooner.   I am FI but not retired.  I have OMY syndrome and golden handcuff disease.  My pension also includes premium free medical after 25 years which I have in already.  I also contribute to SS which I will take at 62 Iím think?

Vanguard after tax = 453,000 contributing 3000 a month
457b = 715,000. (Utilizing double catchup for next three years 41,000/ year)
Defined pension at 55 = 8200/m.   If taken now= 6000/m

Paid off home.  = 650,000 value

nereo

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Re: bad pensions
« Reply #17 on: January 02, 2022, 01:14:36 PM »
I think pensions (and public-sector unions for that matter) are generally a bad deal for taxpayers and workers alike.


^This is what I mean when I expressed my opinion that pensions (as an entity) should be banned. For certain they work out great for a select few individuals. But overall they severely limit mobility, transfer an enormous amount of power towards the employer (and away from the employee), can be an unsustainable liability for employers, fosters a disincentive for the employee to retain valuable employees, creates a level of risk for the employee which is difficult to mitigate, and are typically not very adaptable towards 'non-traditional retirement' models (e.g. FIRE or those with shortened life expectancies).

I find it challenging to find other legal financial examples which are (on net) so bad for most people. It's also odd that so many boilerplate financial articles cite the "loss of the pension" in their opening paragraph(s), when the facts are there has never been a time when a majority of US workers actually received a pension in retirement (I'm excluding SS here).


lhamo

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Re: bad pensions
« Reply #18 on: January 02, 2022, 02:07:36 PM »
I chose to remain in a defined benefit pension system and contribute to 457b over the course of 28 years.  (Age 23 to now 51) it will yield me over 60% at age 55.   Not particularly early retirement by standards of this forum however earlier than most I would presume.  The ďbadĒ I believe is in fact the time required to work in order to be vested and in addition the % contributions by newer employees vs ones that have been in the system.  A literal ponzi pyramid the way I see it. 

Had I thought about things differently some years ago and in fact learned sooner the investing principles that I know today I may have been out of the game much sooner in that I likely would have went a different route and reached the numbers required sooner.   I am FI but not retired.  I have OMY syndrome and golden handcuff disease.  My pension also includes premium free medical after 25 years which I have in already.  I also contribute to SS which I will take at 62 Iím think?

Vanguard after tax = 453,000 contributing 3000 a month
457b = 715,000. (Utilizing double catchup for next three years 41,000/ year)
Defined pension at 55 = 8200/m.   If taken now= 6000/m

Paid off home.  = 650,000 value

What are your current and projected expenses?

You could draw from the 457b to cover from now to age 55, start the pension and STILL have tons of money invested.

I would resign tomorrow if I were in that position.

Silrossi46

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Re: bad pensions
« Reply #19 on: January 02, 2022, 04:04:42 PM »
The pension does not allow for deferring to a later year once you have 25 years of service in.  You need to start collecting as soon as you retire from the job.  It would be considered early retirement (with a penalty if under age 55 of 3% per year for each year u see age 55) The pension does not have cola.  I planned to use my investments as my cost of living adjustment throughout the years. 

My expenses are low currently except for property taxes which are high. Total expenses 3100/m

The X factor is I am in a relationship with a much younger person (35) so who knows what that will bring.  No kids planned at all though.   

Chris Pascale

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Re: bad pensions
« Reply #20 on: January 02, 2022, 08:29:52 PM »
I was part of the University of Hawaii Pension system from 2015 to 2019. My employer removed 8% of my gross salary every paycheck. You need 10 years to be vested. If I made it 10 years, I would get some sort of a match and then a guaranteed payout at a later date. Because I only lasted 4 years, they simply refunded my money with an additional "eye-popping" 2% annual return.

It's been two years, but I'm still a little disgruntled with my previous pension experience. During this time, the S & P 500 had an average annual return of 11% + 2% for dividends (13%) total. It was mandatory for me to contribute 8% to the pension. The University of Hawaii Pension system made 13% on my money, gave me 2% and kept the 11% spread.

Based on the current system there is a huge incentive to fire people before they reach 10 years. How is this legal?

I'm sorry this happened to you. Thank you for sharing.

clarkfan1979

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Re: bad pensions
« Reply #21 on: January 03, 2022, 08:01:57 AM »
I think pensions (and public-sector unions for that matter) are generally a bad deal for taxpayers and workers alike.

But what you're describing isn't that bad.

Yeah you would have done a lot better being 100% in the stock market or real estate or virtually anything else, but that's not an option available to prudent fund trustees. It's not their job to ensure that leavers recoup their lost opportunity cost.

I accept your criticism.

My main point is that I see it more as taking advantage of people who don't know any better. I provided my personal example for context. However, I have been able to overcome my bad financial experience with the pension with real estate and stocks. However, the average person doesn't have anything else.

Yes, I left on my own terms. However, I personally saw many people get fired or pushed out. To make matters worse when they leave their employer, their employer has been collecting 9% on their retirement money and they only refund 2%.   

sonofsven

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Re: bad pensions
« Reply #22 on: January 03, 2022, 08:19:48 AM »
I have worked for 2 states and people were only fired after passing probation if they stole or had sex with our clients.  I also worked for less after graduate school because I wanted a pension. It was a fair trade and I have been collecting for 10 years in April. I get colaís yearly and 200/month in my HRA. I saw how my parents benefited from a pension in addition to their own savings.
Well, I'm relieved to hear they (the states) had some standards, lol
My ex worked for the state when we were married and it was obvious to her and her boss that another worker was falsely claiming field  appointments took "x" amount of time out of his afternoon when he was actually going home hours early, but the boss said it was too hard to try to fire him.
Her first day there she was trying to finish up work for the day and at ten to five everyone got up and left, telling her the door was locked at five and she should be on the other side of it.
Being self employed I can't complain about office stuff, but I do know if I'm not working I'm not making money.
She put in five years and got out.

lhamo

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Re: bad pensions
« Reply #23 on: January 03, 2022, 09:11:14 AM »
The pension does not allow for deferring to a later year once you have 25 years of service in.  You need to start collecting as soon as you retire from the job.  It would be considered early retirement (with a penalty if under age 55 of 3% per year for each year u see age 55) The pension does not have cola.  I planned to use my investments as my cost of living adjustment throughout the years. 

My expenses are low currently except for property taxes which are high. Total expenses 3100/m

The X factor is I am in a relationship with a much younger person (35) so who knows what that will bring.  No kids planned at all though.

But if you started the pension now it would be 6k/month and your total current expenses are 3100/month.  What are the current balances on your other accounts (can't tell if what you quoted above included annual estimated growth/appreciation  or just your contributions)?  In any event, 500k+ in additional investments + nearly 3k/month in unused pension would be plenty of wiggle room for most people.  You do you, but I'd be FIREd in your situation. 

Silrossi46

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Re: bad pensions
« Reply #24 on: January 03, 2022, 11:16:28 AM »
That 6000/m pension figure is not taxed. 

Those numbers are the actual balances.  1,167,000 invested. 

The only X factor is where this relationship may go which could increase yearly spend depending on what we do.

Thanks for the pushing thatís what I need.   

Sanitary Engineer

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Re: bad pensions
« Reply #25 on: January 03, 2022, 12:36:59 PM »
@clarkfan1979 The pension fund is not making 9%.  They are more than likely in all kinds of ridiculous investments, paying high fees to so called experts to try to boost up returns from being heavy in bonds.  The pension fund managers get played by their advisors to balance "liquidity" in order to pay yearly pension benefits and to reduce risk they are convinced to invest in more asset classes, but to maintain projected returns they pick untested asset classes.  The pension has probably averaged a yearly return closer to 5% or 6%.

I would love to see pensions disappear, but the idea that they are designed to take advantage of employees, is one I dispute.  The only reason I haven't shouted down my pension in all my keyboard warrior glory is because so many of my co-workers can't be trusted to follow a simple path to wealth and would spend all their savings if they could.  A pension does not allow them to and at least ensures something for the really bad decision makers among them (which seems to be most of them).

I do wish I could opt out of the pension and take an employer match of some kind. My pension is generationally unfair to newer employees (that ponzi scheme quality mentioned by @Silrossi46) and to the tax payer who ends up paying worker salarys at a very inefficient rate to make up for overly rosy return projections.

nereo

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Re: bad pensions
« Reply #26 on: January 03, 2022, 01:51:03 PM »

I would love to see pensions disappear, but the idea that they are designed to take advantage of employees, is one I dispute.  The only reason I haven't shouted down my pension in all my keyboard warrior glory is because so many of my co-workers can't be trusted to follow a simple path to wealth and would spend all their savings if they could.  A pension does not allow them to and at least ensures something for the really bad decision makers among them (which seems to be most of them).


It does, providing:
  • The employer remains solvent
  • The employee does not get fired, laid off or have his/her department "restructured" before his/her planned exit
  • The employee isn't trapped in a toxic environment due to "golden handcuffs"

I've seen too many people with "guaranteed pensions" fall victim to one or more of the above and wind up screwed late in life.

svosavvy

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Re: bad pensions
« Reply #27 on: January 05, 2022, 09:19:54 AM »

I would love to see pensions disappear, but the idea that they are designed to take advantage of employees, is one I dispute.  The only reason I haven't shouted down my pension in all my keyboard warrior glory is because so many of my co-workers can't be trusted to follow a simple path to wealth and would spend all their savings if they could.  A pension does not allow them to and at least ensures something for the really bad decision makers among them (which seems to be most of them).


It does, providing:
  • The employer remains solvent
  • The employee does not get fired, laid off or have his/her department "restructured" before his/her planned exit
  • The employee isn't trapped in a toxic environment due to "golden handcuffs"

I've seen too many people with "guaranteed pensions" fall victim to one or more of the above and wind up screwed late in life.
+1.  Wish employee tied health insurance would be banned as well.  Come up with something reasonable priced for all.  In a capital economy we should trade work for pay.  At my old job union dues were $135/month out of my check mandatory.  They never stood up to illegal forced work through mandations.  That, and they stood up for the employees who really should have been fired.  Working with employees who should be fired was a daily misery.  Wow, and I'm not even a republican, go figure.

simonsez

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Re: bad pensions
« Reply #28 on: January 05, 2022, 12:07:08 PM »
I wish there was a pension database of some type where it would be easy to compare vesting periods, % paid in, how the payout is calculated, ability to defer, COLAs, etc. across the federal and state govts, large school districts, the flagship public uni for each state, etc.  We would have a better idea as prospective employees of the benefits we'd have before hiring as the pension rules are clearly important.

I have a federal govt pension that I pay 0.8% into and (hopefully will) get a payment of 1% for each year of work credited (unused sick leave can add to credited time) based on my 3 highest salaries.  It took 5 years to vest.  E.g. 20 years = 20% of my highest 3 years' salary.  Not great (or is it?) but it's cheap on the front end and cheaper than newer federal employees who either pay 3.1% or 4.4% for the same benefit.

I'm not sure how to compare that to my wife's other than with a simple ratio:  she pays 14.5% into hers and gets 2.5% of her highest salary for each year she works.  So wayyyy more expensive (~18x more) than mine on the front end but it pays out 2.5x as much.  So is mine just 7.25x (18.125/2.5) "better" than hers? Even if I paid the newer 4.4% it would still be better than my wife's (1.32x better) in this simple pay in: pay out ratio.  But I have no idea how that compares across the country.

I have a 401k equivalent and she has a 403b and 457 but that's mostly irrelevant to the pension comparison aside from the fact that it's harder for many educators at the primary and secondary levels to max out their defined contribution plans when their pension is sucking a hefty %.  The 0.8% deduction from my paycheck is hardly noticeable and doesn't really interfere with my ability to save either within or outside of my employee non-pension options.  I don't know if that is the normal or abnormal experience for those that pay into pension systems or if it's not so black and white that pensions are bad but perhaps the level of pension required could be investigated further.  E.g. Would a pension that had a low %  taken out of the paycheck but also had a modest payout during retirement be better than a pension that took a high % out of your paycheck but came with a higher payout - or would no pension existing be best?  Keep in mind we're talking in general for the public and not the typical MMM crowd that is going to be more likely to already be above average when it comes to saving.

My opinion of pensions is colored by the facts that my and my wife's employers are safe in terms of solvency, we actively sought out degree-requiring jobs that had pensions, and we like our careers (and even if we didn't like our exact work circumstances, my wife would still be on same pension system as long as she took another job in the same state and I could easily switch branches/divisions/agencies/departments and find something).  If pensions go away altogether, I won't lose any sleep over it provided I'm compensated for what I've paid in but I don't think pensions are a bad deal overall. YM clearly V

Cassie

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Re: bad pensions
« Reply #29 on: January 05, 2022, 12:21:55 PM »
Simon, my pension is similar to your wifeís but the state doesnít pay into SS. Therefore, I am affected by WEP. For me itís still a good deal because my SS was small anyways and I only had 15 years with the state. You need a masterís to do my job and I could have changed jobs within the state system.

BicycleB

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Re: bad pensions
« Reply #30 on: January 05, 2022, 12:41:22 PM »
One way you could compare pensions is enter the expected payout data into an annuity pricing tool, such as:

https://www.schwab.com/annuities/fixed-income-annuity-calculator

That would give a present dollar value, in this case the price you would pay in the private sector to buy an equivalent annuity. A good comparison would still need to scale that by factoring in the amount you are investing, of course, as you pointed out.

Fwiw I think your returns per dollar on the pension you have are good, though I agree the 1% per year payout is low compared to benchmarks such as current income or the 2-3%/year provided to earlier participants in many pension systems.

You're probably aware that in the past 20 years, most systems reduced the payout per year for new employees in order to preserve the systems' financial viability. New members like OP are receiving worse deals than earlier participants. I think part of the differences of opinion in this thread are people comparing typical deals for new participants today vs deals that people are receiving from earlier employment (such as mine, to be fair).

I still think pensions can be a useful thing, and society would be better off by making sure they exist and work well, but in many systems the value for new employees is closer to breakeven compared to skilled investing and only beats it in limited situations. Sounds like you and your dear one are using it well, investing well, and on track to a fine secure future. 

brandon1827

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Re: bad pensions
« Reply #31 on: January 05, 2022, 01:04:38 PM »
I work for an electric cooperative. We are fully vested in our pension program after 1-year. The pension is managed by a group, so hundreds of coops & municipals have these employer-paid pension monies pooled together and invested. At retirement, we receive a benefit that is calculated based on our top-5 highest earning years x .80. So essentially if I earn $100,000 per year for my 5 highest earning years, at age 62 I would receive a pension of $80,000 per year until death. Employees are allowed to take the pension prior to age 62, but there are penalties in place based on how early you decide to take it. We also are given the option to take the calculated balance in a lump sum, or half lump sum/half annuity, and benefits are paid to the surviving beneficiary in case of early death of the employee.

We also have access to a 401K match of 3%, so combined with the pension, these monies end up providing a healthy retirement fund for most of our people...an overwhelming majority of which are linemen/field workers and other workers who most likely wouldn't have saved anything on their own. I realize this may be the exception to the rule at this point, but I feel like our program seems to work well and most of our employees retire comfortably...although admittedly very few retire early or reach FI prior to retirement. I think for most, this is a byproduct of allowing the company to handle most of the retirement planning for them...and I think they do a good job...but few (such as myself) are even aware of FIRE as a concept much less actively being involved in the management of their finances toward that goal.
« Last Edit: January 05, 2022, 01:17:37 PM by brandon1827 »

simonsez

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Re: bad pensions
« Reply #32 on: January 05, 2022, 01:39:11 PM »
I work for an electric cooperative. We are fully vested in our pension program after 1-year. The pension is managed by a group, so hundreds of coops & municipals have these employer-paid pension monies pooled together and invested. At retirement, we receive a benefit that is calculated based on our top-5 highest earning years x .80. So essentially if I earn $100,000 per year for my 5 highest earning years, at age 62 I would receive a pension of $80,000 per year until death. Employees are allowed to take the pension prior to age 62, but there are penalties in place based on how early you decide to take it.
So hypothetically, if you were hired at this place at age 57, were vested at 58, and retired at age 62 after 5 years and averaged 100k, you'd earn a pension of 80k? There is no years of service multiplier and just the 5 year requirement? That is definitely the best pension deal I've ever heard of! 

brandon1827

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Re: bad pensions
« Reply #33 on: January 05, 2022, 02:58:57 PM »
There is a years of service multiplier component that I failed to mention, but in general, people don't go into the utility industry at 57, lol.