Author Topic: Rate my pension plan  (Read 1925 times)

EconDiva

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Rate my pension plan
« on: February 10, 2016, 01:47:41 PM »
My friend was mentioning to me the other day that although she'd like to leave the Federal Reserve Bank to pursue another career, she may not do so due to her pension.

I never had a pension until working at my current company.  I hadn't given it much thought as I don't know how safe private pensions are or how to research the "likelihood" the one at my company would even still be available/in effect/have the same terms at retirement age as now.  FYI I'm 37...been with the company 2 years.  Takes 5 years to fully vest in the pension plan.  Must be 65 to start regular pension payouts.

So the plan benefit is:

1.1% of your final (monthly) average pay times the number of years you've worked at the company

As an example:
If your average salary was 75,000 then your average monthly pay would be 6250
Multiply the 6250 average monthly pay times .011 (1.1%) and you get 68.75
If you worked there 5 years, your monthly pension amount would be 68.75x5=343.75
If you worked there 10 years, your monthly pension amount would be 68.75x10=687.50
...and so on

For a private pension on a scale of 1-10, how would you 'rate' this pension?  Where 1=lowest and 10=highest

Just curious...do you know of anyone with a private pension who is staying at their job longer than they 'desire' in order to keep the pension benefit?  How close are they to retiring? 


nobody123

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Re: Rate my pension plan
« Reply #1 on: February 10, 2016, 02:53:50 PM »
I have a pension at my current employer, but I have little faith it will be around when I actually retire.  They've eliminated it for new hires, so as the folks grandfathered in retire off, I suspect it will eventually reach a point where it's more hassle than it's worth and they'll just give everyone left a buyout. 

The benefits are calculated differently, essentially a percentage of your annual salary is used to accrue your final benefit.  So, as your salary increases over the years, your pension benefit does as well.  You can collect as early as 55 with 5 years of service, but you only get 50% of the earned amount.  The reduction is gradually reduced until you get 100% at age 65.  You get no bonus for working beyond 65, but you aren't penalized by working part time for a lower salary, either.  I know of a lot of folks that are sticking around to avoid the benefits reduction period, but I can't imagine many folks even consider the pension vesting cliff in any sort of career decision.

As far as rating a pension, it's not like you have any control on what it is, so just be happy you still have one.

dcozad999

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Re: Rate my pension plan
« Reply #2 on: February 10, 2016, 03:00:20 PM »
I'm 99.9% sure that Federal Reserve is a federal job.

That annuity is only part of your friend's retirement package (FERS).
https://www.opm.gov/retirement-services/fers-information/computation/

He/she would also be getting a 5% match in their TSP account. I believe that also has a 5 year vesting period.
https://www.tsp.gov/PlanParticipation/AboutTheTSP/index.html




Edit:  Oops sorry. I read your OP wrong and thought you were talking about your friend's annuity. Sounds like yours is pretty similar to the federal.
« Last Edit: February 10, 2016, 03:03:18 PM by dcozad999 »