Municipal Public Employee Pensions

[Truckman]

Lately with all the municipalities filing bankruptcy, with Detroit being the latest and largest (that I know of), how much should I fear my pension not being around for me when I'm able to "retire" from my job and start receiving it. Or, how long will it last? I have about 5-10 years before I can retire (originally was a 20 year eligibility, now it's changed to 25. It's being battled over in court because of the arbitrary change by the city).

Anyway, my fear is that it won't be there for me, and I hope to be able to start on the 10-year/65% savings plan. That's going to be quite a stretch though. Hell, even the 17 year/50% plan is going to be difficult with our current spending spree. The dream is to become FI outside of my pension, that way if it isn't there I'm OK, and if it is, well that's just all the better.

I've just recently discovered MMM, and then through this site also JCollinsNH and Mad FIentist. Until then, frankly I was afraid I'd have to work until I was dead, regardless of my pension. I've seen the light, and have a renewed hope of being able to live the life I've dreamed of.  It's going to be tough though, with a wife and two teenager daughters who are as anti-mustachian as I was (and still am, for now), and have not yet come to the realizations I have.

[stevesteve]

My general view is you can probably rely on your account balance (which is your payments and a set, modest interest rate, I assume) and that should be your baseline assumption.  You should expect some sort of defined benefit reduction.  Since there is uncertainty, your best bet is FI outside of your pension as you mention.  There's nothing you can do but go along saving outside of the pension and hope you're pleasantly surprised with the 'windfall' if it actually pays out as promised.

Best of luck in your savings goals.

[Eric]

Even if your city has to declare bankruptcy, it doesn't wipe out your pension completely.  It could be reduced, but it won't just go away.  Do some research and find out what's happened in to pensions in these other cities.  I bet they're getting at least 75%, if not more.

[hybrid]

+1.  Every pension fund is unique.  If you are in a state with real funding issues (like Illinois or New Jersey), you are right to be concerned about its health.  I would check out the health of whatever specific system you are in.  Virginia Retirement System is in what I would call good-not-great shape for example.  I expect my small pension to still be there (seven years of service), but I would not put it out of the realm of possibility that a small haircut might happen.

[Honest Abe]

Not knowing the details about your plan, it's not LIKELY, but hey... never put all your eggs in any basket, no matter how well-built you think it is. Check out your 403b plan for sure.

[Truckman]

Not knowing the details about your plan, it's not LIKELY, but hey... never put all your eggs in any basket, no matter how well-built you think it is. Check out your 403b plan for sure.

I don't think I have a 403b available to me. Nor a 401k.  I do have Deferred Compensation, though. I need to look more deeply into that, but I don't think they're 401k/403b plans.

ETA:  Frankly, I don't know the details about my plan, either. Just that they take 10% of my pre-tax pay, and at 20 years (now 25) I could retire at 50% with 2% for each year after 20.  What details should I be looking for?

[2527]

My vary vague opinion is to plan on it to be reduced some but plan on something.  My dad worked for Chrysler through its near bankruptcy in 1981, took a 10% pay cut and vacation time reduction, retired in 1987, and he or my mother has been collecting his pension ever since.  I think it was reduced some when Chrysler entered bankruptcy in 2008/9.   There have been reductions but not huge ones.  He had a lot of investments and it wouldn't have matter if they never collected anything at all.