Author Topic: share your pension details  (Read 38137 times)

clarkfan1979

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share your pension details
« on: April 30, 2016, 10:46:20 AM »
I love my job and location, but I'm not thrilled with my pension.

My employer takes 8% of my income and claims to add 15% of my income to the pension fund.

The current payout is 1.75% for every year of service. I feel like the 1.75% is kind of low. I think 2% is kind of the norm and I've seen it as high as 2.4%.

If I put in 30 years (30 x 1.75%), I get 52.5% of my highest salary (3 year average).

One small advantage is that there is an automatic 2% COLA adjustment increase to your pension for every year once you start collecting and there is no cap. However, I think I would need to live to 90 to capitalize on this small benefit.

SmallTownDA

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Re: share your pension details
« Reply #1 on: April 30, 2016, 01:32:22 PM »
I get 1% per year, with a multiplier based on when I start to draw on it. It starts at 1 at age 52 and maxing out at 2.5 at age 67. My contribution is about 4% of my gross, but it's based on entry age and I entered a lower age than normal for my position. We have a discretionary COLA, based on investment performance. Right now, it's being offered but there's no guarantee that it will be in the future. If I'd started a year earlier, I would have gotten a lot nicer formula (1.3% per year at age 50 to 2.6% per year at age 62), but that's life.

The plan is to self-fund early retirement with my 457 and IRA and treat the pension as bonus money when I start to collect it.

Do you get the same amount regardless of when you start to take it?

Full Beard

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Re: share your pension details
« Reply #2 on: April 30, 2016, 02:31:50 PM »
It sounds like you have a pretty nice pension.  Below is what I copied from the federal government benefits website, OPM.gov

Federal Employees Retirement System (FERS) Basic Annuity Formula

Under Age 62 at Separation for Retirement, OR
Age 62 or Older With Less Than 20 Years of Service    1 percent of your high-3 average salary for each year of service
Age 62 or Older at Separation With 20 or More Years of Service    1.1 percent of your high-3 average salary for each year of service

Your benefit was computed differently, if you retired under one of the provisions below
Special Provision for Air Traffic Controllers, Firefighters, Law Enforcement Officers, Capitol Police, Supreme Court Police, or Nuclear Materials Couriers

    1.7% of your high-3 average salary multiplied by your years of service which do not exceed 20, PLUS
    1% of your high-3 average salary multiplied by your service exceeding 20 years

doggyfizzle

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Re: share your pension details
« Reply #3 on: April 30, 2016, 02:40:34 PM »
I'm on the FERS system as well.  0.8% of my salary is withheld for my pension.  My MRA is 57 (and I'll have 30 years of service at that point, so that should make for a size able monthly annuity payment should I stay that long in Federal Service.  The social security supplement payment from 57-62 is pretty sweet as well.

NV Teacher

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Re: share your pension details
« Reply #4 on: April 30, 2016, 02:42:49 PM »
For each year I work I get 2.5%.  I can retire at 30 years with a full pension that is 75% of my highest three years of salary.  I've been pretty aggressive saving and investing on my own over the last 10 years so I should be pretty well set up.


carloco

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Re: share your pension details
« Reply #5 on: April 30, 2016, 02:46:31 PM »
We receive full benefits (42% of the highest 3 salaries) after 25 years of service as long as we are older than 50 years old and a supplement of $1129 until full social security.

sol

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Re: share your pension details
« Reply #6 on: April 30, 2016, 03:08:31 PM »
As a federal employee, I also get that 1% times high-3.

There are a couple of caveats not yet mentioned, though.  While I only pay a meager 0.8% in exchange for this benefit, all feds hired after 2014 pay 4.4%  Even that sounds like it might be a good deal, until you realize how depressed federal salaries are compared to equivalent private sector jobs, in which case it suddenly looks like I'm paying closer to 25% of my salary for this benefit.

But the biggest problem with my pension, and a concern for any early retiree, is the inflation adjustments.  My pension pays out 1% of my high-3 salary starting at age 62, but the salary it is based on is the number of dollars I earned when I last worked.  If I retire at age 42 and then collect at age 62, I will have 20 years of inflation eating away at that pension.  That typically reduces it's value by at least half, which means in terms of equivalent purchasing power I'm really getting closer to half a percent per year of service.

The military pension is a much better deal, as it pays out age 62 based on the then-current pay grade of your highest rank.  As the rank's pay scale is inflated every year (by more than the civilian wage inflation, I might add) you never lose purchasing power no matter how much time elapses between leaving the military and collecting your pension.  They are equivalent if you retire at age 62, but unlike the military the federal civilian pension penalizes the early retiree.

pbkmaine

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share your pension details
« Reply #7 on: April 30, 2016, 03:14:57 PM »
My husband's (private corporation) pension is 1.1% of average annual compensation for 5 consecutive highest years in past 10 full calendar years. "Compensation" excludes bonus and overtime. Added to this is .5% of average annual compensation above the Social Security Covered Compensation amount. This is multiplied by years of service up to 35 years. No COLA. Medical at 10% of cost to age 65, then acts as secondary to Medicare for $25 per month.
« Last Edit: May 03, 2016, 03:33:17 AM by pbkmaine »

mustachianteacher

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Re: share your pension details
« Reply #8 on: April 30, 2016, 06:00:51 PM »
My benefit calculation depends heavily on the age at which you start collecting benefits. The basic formula is years of service x age factor x salary = percentage of salary you'll receive in retirement. The age factor is 2% at 60. It varies from 1.1 at age 50 to a max of 2.4 at age 63. If you have more than 30 years of service, you can add 0.2% to your age factor. We have to contribute a whopping 10% for this.

In our case, we'll end up getting around 50% of our final compensation as a pension, but since we're used to living well below our means, we will barely need to supplement much to continue living as we are now.
« Last Edit: May 01, 2016, 02:50:51 PM by msjd123 »

chasesfish

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Re: share your pension details
« Reply #9 on: April 30, 2016, 06:54:28 PM »
Flat 1% of salary for each year of service if retiring at 65.

No COLA, significant reductions if drawn at 55.

Rural

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Re: share your pension details
« Reply #10 on: April 30, 2016, 07:23:07 PM »
2% for each year of service, average of the highest three. Vested at ten years, can collect at 60, no penalty but no option to collect earlier. Adjusted by the SS CoL adjustment percentage after starting to collect but not before. Also get medical, self and family, if insured at the time of retirement (not if RE, therefore). I'm grandfathered on the medical - newer hires don't get it,


I pay in 6.75% of salary, but this changes, sometimes yearly. Never seen it go down, of course, only up.

clarkfan1979

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Re: share your pension details
« Reply #11 on: April 30, 2016, 11:33:24 PM »
2% for each year of service, average of the highest three. Vested at ten years, can collect at 60, no penalty but no option to collect earlier. Adjusted by the SS CoL adjustment percentage after starting to collect but not before. Also get medical, self and family, if insured at the time of retirement (not if RE, therefore). I'm grandfathered on the medical - newer hires don't get it,


I pay in 6.75% of salary, but this changes, sometimes yearly. Never seen it go down, of course, only up.

It seems like my pension is average. My 1.75% per year of service seems higher than the standard 1% for federal employees. However, I am contributing 8% of my income and the federal employees are contributing .8%. I guess they seem about the same.

sol

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Re: share your pension details
« Reply #12 on: April 30, 2016, 11:45:35 PM »
It seems like my pension is average. My 1.75% per year of service seems higher than the standard 1% for federal employees. However, I am contributing 8% of my income and the federal employees are contributing .8%. I guess they seem about the same.

When were you hired?  As mentioned above, all federal hires now pay 4.4% to get that 1% per year deal.

sparkytheop

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Re: share your pension details
« Reply #13 on: May 01, 2016, 02:32:30 AM »
On FERS here too.  I'd love to get the early out (I'll have 25 years in at age 46), but my position is never up for that option because of the type of work we do (can't eliminate the position for two years).

I plan to go at 57, right now I really love this job and it's not hard to come to work.  If that changes, I might change my mind, but hopefully it all works out.  My schedule is perfect for travel (I can take two weeks off every ten weeks, using only 16 hours of leave each time, less if one is a holiday), I get to work nights when almost no one else is around, etc.

The social security supplement will be nice, but the loss of COLA for five years kind of sucks.  (That is not something they tell you about in the retirement classes, I did my own digging and found that out).

I've done the math, I'd have to live a long time to have that 1.1% be worth the extra years of working, especially when you include the five years you're getting paid not to work.

clarkfan1979

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Re: share your pension details
« Reply #14 on: May 01, 2016, 02:39:10 AM »
It seems like my pension is average. My 1.75% per year of service seems higher than the standard 1% for federal employees. However, I am contributing 8% of my income and the federal employees are contributing .8%. I guess they seem about the same.

When were you hired?  As mentioned above, all federal hires now pay 4.4% to get that 1% per year deal.

I was hired in 2015. I think people hired in 2012 and earlier get 2%, instead of 1.75% now.


Ricksun

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Re: share your pension details
« Reply #15 on: May 01, 2016, 07:26:57 AM »
As a federal employee, I also get that 1% times high-3.

There are a couple of caveats not yet mentioned, though.  While I only pay a meager 0.8% in exchange for this benefit, all feds hired after 2014 pay 4.4%  Even that sounds like it might be a good deal, until you realize how depressed federal salaries are compared to equivalent private sector jobs, in which case it suddenly looks like I'm paying closer to 25% of my salary for this benefit.

But the biggest problem with my pension, and a concern for any early retiree, is the inflation adjustments.  My pension pays out 1% of my high-3 salary starting at age 62, but the salary it is based on is the number of dollars I earned when I last worked.  If I retire at age 42 and then collect at age 62, I will have 20 years of inflation eating away at that pension.  That typically reduces it's value by at least half, which means in terms of equivalent purchasing power I'm really getting closer to half a percent per year of service.

The military pension is a much better deal, as it pays out age 62 based on the then-current pay grade of your highest rank.  As the rank's pay scale is inflated every year (by more than the civilian wage inflation, I might add) you never lose purchasing power no matter how much time elapses between leaving the military and collecting your pension.  They are equivalent if you retire at age 62, but unlike the military the federal civilian pension penalizes the early retiree.

Sol, don't forget about the TSP, while there are negatives wrt our pensions, we do have a 5% matching contribution.  Many companies offer one or the other, not both (including the military and CRS). Though I believe the military is about to change as well.  Also, there are many many pensions not tied to an inflation index.  While yours doesn't begin until 62, you'll still have 30+ years of inflation protection many people don't have.

Ricksun

doggyfizzle

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Re: share your pension details
« Reply #16 on: May 01, 2016, 06:29:51 PM »
Sol, don't forget about the TSP, while there are negatives wrt our pensions, we do have a 5% matching contribution.  Many companies offer one or the other, not both (including the military and CRS). Though I believe the military is about to change as well.  Also, there are many many pensions not tied to an inflation index.  While yours doesn't begin until 62, you'll still have 30+ years of inflation protection many people don't have.

Ricksun

Plus FERS employees get SS, which the CSRS employees do not.  I think we ended up coming out ahead with the 5% TSP match and enhanced flexibility of drawing retirement benefits.

While salaries might be higher in private industry, at this point in my life, I value the job security of a federal position much more than the higher pay in private industry.  I work in oil/gas, and while I made incredible money right out of college ten years ago, I'm not at all bummed to be sitting out this round of industry layoffs.  2009 was brutal, and while I didn't lose my job, it did require almost 300 days on a boat that year which got really, really old.

Debts_of_Despair

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Re: share your pension details
« Reply #17 on: May 01, 2016, 07:23:13 PM »
Contribute 3% of salary for first 10 years of employment. Retire at 55 with 30 yrs or 62 with 20 yrs of employment.  Get 60% of highest 3 yr average annual salary for remainder of life.  Pretty good IMO.

Physicsteacher

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Re: share your pension details
« Reply #18 on: May 01, 2016, 07:36:31 PM »
State teacher retirement: 0.0215 x years of service x mean of three highest years of salary (with some additional rule about not exceeding the next five highest years of salary by more than a certain percentage). I contribute 6% of salary and my district contributes 14%. Vesting after five years of service, which for me is this year. Eligible for full retirement benefit after 28 years of service or upon reaching age 60 or reduced benefits after 25 years of service. My contributions are refundable if I leave teaching, but not the employer contributions.

fishnfool

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Re: share your pension details
« Reply #19 on: May 01, 2016, 08:32:09 PM »
Currently contribute 9.5% of pay for 2% at age 55 pension. Tops out at 2.4% age 63 with 2% cola. No medical or other benefits after retirement. 

We also do not contribute to SS, so my 10 years of prior SS contributions will be subject to WEP which takes away roughly 2/3's of your SS benefit.

Plan to hang it up at 60 so will get aprox 2.2% x's 33 years if health is still holding up.....knock on wood!


JZinCO

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Re: share your pension details
« Reply #20 on: May 01, 2016, 09:01:03 PM »
My pension system is wonky. For simplicity, at full retirement, you earn 2.5% of hi-5 salary per credited year of service. Full retirement is 5 years of service if taken at age 65, 20 years of service if taken at age 60, 25 years of service if taken at age 55, or 30 years of service if taken at age 50. If you work past full retirement age, given your years of service, each incremental year of service adds 2.5%. The cap for a full career is 87.5% of income replacement.

If you are below full retirement the first few years of service are worth 0.5% and the last few years of service are worth up to 6.8% of income replacement.

The pension is designed as a SS replacement.
Employees put it 8% of salary annually and employers put in ~20%.
---
I was in the pension for a time but opted to a DC plan where the employer contributes 11% of salary and the employee, 8%. I honestly could not figure out how to compare the actuarial difference so I went for a flexible, portable plan.
« Last Edit: May 01, 2016, 09:02:47 PM by JZinCO »

boognish

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Re: share your pension details
« Reply #21 on: May 01, 2016, 10:23:07 PM »
Calif state pension (CalPERS). 2% at 50 Public Safety pension. Required 5 years to vest and able to buy back military time or other government employment time to add addition years to pension. 3% COLA annually BUT if inflation is low (like this year) they won't pay that so don't count on it. I paid 7% toward pension and agency matched that. Calif public employees have all kinds of different plans with varying rules depending on who you work for. Some require more years of service time to vest, older age to get benefit, different %, etc... They have recently changed pensions benefits for new hires though requiring longer working years before collecting.
CalPERS employee as well, but for a public agency. My plan is 2% at 62.

Something I thought was interesting:
If you permanently separate from your CalPERS employer, you can rollover or cash out your contributions. If you leave your contributed funds with CalPERS, the funds will earn a guaranteed 6% compounded interest, which you can withdraw at 59.5 penalty free. I don't thing I'll work long enough to take advantage of the actual pension, but 6% return on my 7% contributions is pretty sweet.

JZinCO

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Re: share your pension details
« Reply #22 on: May 01, 2016, 11:25:39 PM »
6%?! Wow. I'm earning 3% on my cash balance..

albireo13

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Re: share your pension details
« Reply #23 on: May 02, 2016, 06:42:15 AM »
My pension is frozen, after working for a large company for 31 years.
Monthly payout for the annuity is $1859.

The other option is to take a lump sum of ~ $300K

BigRed

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Re: share your pension details
« Reply #24 on: May 02, 2016, 12:44:49 PM »
My pension is weirdly complicated.  It has 2 parts:

  • Roughly 0.4% of each year's salary as a fixed benefit (not .4% of high-3, it accumulates yearly based on current salary) that is inflation adjusted both before and after retirement, with a 2% COLA cap.
  • 0.5% of yearly salary as a benefit indexed to the performance of the pension fund, essentially it is a Deferred Indexed Annuity

Roughly speaking this comes out to about 0.9% of salary (accumulated yearly) as an inflation adjusted payout, with some upside if the 50/50 pension fund outperforms inflation, and some downside if inflation is high and the fund doesn't match it (like, say the 70's and early 80's).  I don't directly contribute anything, and the company also has a 4% automatic 401(a) contribution as well.  So, not bad, I guess.

SimplyMarvie

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Re: share your pension details
« Reply #25 on: May 02, 2016, 01:28:48 PM »
I'm also a fed, but apparently we have our own retirement system (I'm Foreign Service).

I pay 1.4% of my income and get 1.7% of my high-three salary for every year of creditable service up to 20, and then 1.1% per year after that. We also have a hard mandatory retirement age of 65 -- they nearly frog-marched my former office mate out the Friday after his birthday, they are not foolin' around about that. I think the department is about to lose a law suit about that one, so it may change. I don't care all that much, since I'm not planning on working until 65 anyway!

Apparently, if we leave before we have 5 years of creditable service, we do not keep our pension benefits and get a lump sum at discharge. If we quit after 5 years and before 20 years, we only keep 1.1% per year. You have to make it to 20 full years of service to get the full 1.7%, which has a major affect on my life/job planning. We also get a FERS-style annuity supplement between retiring and social security kicking in.

An interesting piece of the puzzle is gaming that high-three, though. It includes not just base salary but differentials and danger pay, so you suddenly have this rush of nearly-retired people volunteering to work in Basrah and Bujambura and other places where their pay will be higher, just to bump their high-three.

RichMoose

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Re: share your pension details
« Reply #26 on: May 02, 2016, 11:23:34 PM »
Canadian so our system is a bit different as your pension payout is clawed back at age 65 for Canada Pension Plan (CPP) adjustment so  your total income stays the same. Once you hit 85 factor (age +years of service) they pay 2% of best 5 years × years of service. We pay around 13% into our plan. Employer contributes around 14%.

For CPP we pay an additional $2500/yr matched by employer.

Yes my paycheck deductions are substantial.

Sailor Sam

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Re: share your pension details
« Reply #27 on: May 03, 2016, 12:00:25 AM »
The military pension is a much better deal, as it pays out age 62 based on the then-current pay grade of your highest rank.  As the rank's pay scale is inflated every year (by more than the civilian wage inflation, I might add) you never lose purchasing power no matter how much time elapses between leaving the military and collecting your pension.  They are equivalent if you retire at age 62, but unlike the military the federal civilian pension penalizes the early retiree.

Sol, I think this is how Reservist get their pension. Active duty get 50% of their high 3, with a 20 year vest. Then an additional 2.5% multiplier for each year past 20. Plus military pensions get periodic COL.

However, it's all changing for newbies in 2018. Adding TSP matching, and lowering the multiplier.

P4J

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Re: share your pension details
« Reply #28 on: May 03, 2016, 12:24:05 AM »
I'm also a fed, but apparently we have our own retirement system (I'm Foreign Service).

I pay 1.4% of my income and get 1.7% of my high-three salary for every year of creditable service up to 20, and then 1.1% per year after that. We also have a hard mandatory retirement age of 65 -- they nearly frog-marched my former office mate out the Friday after his birthday, they are not foolin' around about that. I think the department is about to lose a law suit about that one, so it may change. I don't care all that much, since I'm not planning on working until 65 anyway!

Apparently, if we leave before we have 5 years of creditable service, we do not keep our pension benefits and get a lump sum at discharge. If we quit after 5 years and before 20 years, we only keep 1.1% per year. You have to make it to 20 full years of service to get the full 1.7%, which has a major affect on my life/job planning. We also get a FERS-style annuity supplement between retiring and social security kicking in.

An interesting piece of the puzzle is gaming that high-three, though. It includes not just base salary but differentials and danger pay, so you suddenly have this rush of nearly-retired people volunteering to work in Basrah and Bujambura and other places where their pay will be higher, just to bump their high-three.

Thanks for pointing this out. To this point I had figured that, retiring after 11 years in FSPS with an average final-3 of $100k would net 11*0.017*100K = $18.7K, and in some retirement seminar I'd been told that the amounts were adjusted for inflation.

Now, between your comment and the one earlier up (about how inflation adjustment doesn't kick in until you actually start collecting...), it looks like the correct factor is 1.0% per year (according to RNet), reduced for inflation (say, 2% over the 30 years until 67) and the actual amount I should plan on is 11*0.01*100K / (1.02)^30 = $6K.

What a difference!

notactiveanymore

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Re: share your pension details
« Reply #29 on: May 03, 2016, 08:22:31 AM »
Local government pension with 5 year vesting. I don't contribute anything. We're also social security exempt.

Final 36-month average salary X years of service X 2% = yearly benefit

Silrossi46

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Re: share your pension details
« Reply #30 on: May 04, 2016, 07:49:59 AM »
NJ PERS  Public employee retirement system

years of service /55 x Average of highest 3 years salary = yearly payout for life.   NO COLA .   Medical included after 25 years of service.  3 % penalty for every year under age 55.

Example = highest 3 year average = 100,000   with 25 years of service.  age 55.       25/55x 100,000 = 45,454/ year  medical included.

6% per pay (biweekly) contribution to pension.   


Silrossi46

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Re: share your pension details
« Reply #31 on: May 04, 2016, 07:53:33 AM »
forgot to add that we pay into SS as well and have the ability to contribute to government 457B  (same limits as 401K)

PoutineLover

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Re: share your pension details
« Reply #32 on: May 04, 2016, 07:55:10 AM »
I have a defined contribution plan so I think the amount I get depends on how well the investment does and how long I contribute to it. It's a 5% equally matched contribution except for the first 50,000 they deduct the 1.8% that goes into the public plan, so really only 3.2% since I'm under that level for now. If I had been hired a few years earlier I would have had a defined benefit plan..

tjalexander

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Re: share your pension details
« Reply #33 on: May 04, 2016, 08:07:33 AM »
Total Service Credit * Graded Multiplier * Average Monthly Compensation = Monthly Benefit
2.1% (<20years) to 2.3% (30yrs of service)

So with 30 yrs of service, I will get 69% of salary.

Currently paying 11.35% of salary. Contribution rates are actuarially determined and are adjusted annually to ensure the plan remains fiscally sound and able to meet current and future obligations.

SnackDog

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Re: share your pension details
« Reply #34 on: November 04, 2018, 04:44:35 AM »
My private employer pension sucks, unlike you government fat cats.  No employee contributions, which is the only good part. It only pays about 1.8% of final salary+bonus per year of service MINUS a social security offset which drives it back toward about 1%.    I'm at 22 years so about 22% of pay if I take it now. No COLA.  If I retire now but defer taking the pension distributions until age 65 it would be about 30% of current pay. Who can live on that?  Lump sum option is currently 5X pay, so I like prefer that to the pension annuity.

Hapless employees are left with no option but to co-invest in the 401K and make personal tax-advantaged and after-tax savings.

sol

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Re: share your pension details
« Reply #35 on: November 04, 2018, 08:54:59 AM »
My private employer pension sucks, unlike you government fat cats.  No employee contributions, which is the only good part. It only pays about 1.8% of final salary+bonus per year of service MINUS a social security offset which drives it back toward about 1%.   

That is a significantly better pension than federal employees get, so don't be too sad about it.  Feds pay more for a pension that is worth less.
« Last Edit: November 04, 2018, 08:57:57 AM by sol »

Rural

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Re: share your pension details
« Reply #36 on: November 04, 2018, 07:46:47 PM »
Yes, my government pension (state) now requires 7% of my salary for almost the same return as yours for no contribution, so it's 7% off the top to pensions and then save in my own retirement vehicles.
« Last Edit: November 04, 2018, 07:50:33 PM by Rural »

JZinCO

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Re: share your pension details
« Reply #37 on: January 18, 2019, 12:39:44 PM »
[Pension details]
The pension is designed as a SS replacement.
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I was in the pension for a time but opted to a DC plan where the employer contributes 11% of salary and the employee, 8%. I honestly could not figure out how to compare the actuarial difference so I went for a flexible, portable plan.
The legislature keeps watering benefits down in order to keep the fund afloat (high 7 instead of high 5, the schedule of years service versus % income replacement is a lower curve).
Meanwhile the DC plan I opted for continues to increase the % employer contribution. I think I made a good decision..

FIRE@50

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Re: share your pension details
« Reply #38 on: January 18, 2019, 12:47:01 PM »
My pension = null

mm1970

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Re: share your pension details
« Reply #39 on: January 18, 2019, 01:15:48 PM »
My pension = null
nothing.  I get nothing.

A year or two ago, an old guy at the gym tried to convince me to go back into the Navy (as a reservist) to get my 20 by aged 65.  Pension!  (He has 2 pensions from military and I think post office and 3 different medical insurances.)

I said "I'm in my late 40's with a 4 year old and a 10 year old and a full time job.  I think I'm gonna have to pass."

Michael in ABQ

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Re: share your pension details
« Reply #40 on: January 18, 2019, 02:33:09 PM »
As a federal employee, I also get that 1% times high-3.

There are a couple of caveats not yet mentioned, though.  While I only pay a meager 0.8% in exchange for this benefit, all feds hired after 2014 pay 4.4%  Even that sounds like it might be a good deal, until you realize how depressed federal salaries are compared to equivalent private sector jobs, in which case it suddenly looks like I'm paying closer to 25% of my salary for this benefit.

But the biggest problem with my pension, and a concern for any early retiree, is the inflation adjustments.  My pension pays out 1% of my high-3 salary starting at age 62, but the salary it is based on is the number of dollars I earned when I last worked.  If I retire at age 42 and then collect at age 62, I will have 20 years of inflation eating away at that pension.  That typically reduces it's value by at least half, which means in terms of equivalent purchasing power I'm really getting closer to half a percent per year of service.

The military pension is a much better deal, as it pays out age 62 based on the then-current pay grade of your highest rank.  As the rank's pay scale is inflated every year (by more than the civilian wage inflation, I might add) you never lose purchasing power no matter how much time elapses between leaving the military and collecting your pension.  They are equivalent if you retire at age 62, but unlike the military the federal civilian pension penalizes the early retiree.

Yep. 4.4% of my pay now for the possibility of ~30% if I work until my 60s is not a good deal in my case. Whenever I leave federal service I will definitely be taking my contributions as a lump sum to reinvest elsewhere. Even though you are eligible for a pension with only 5 years worked, 5% of say $75,000 that I can't collect for 25-30 years is going to be a pittance. When adjusted for inflation it might be $200 in todays dollars per month.


My pension through the National Guard is a bit different than active duty military. For one thing I switched over to the new system which reduced my multiplier from 2.5% per year to just 2.0%. The benefit is now I get a 5% match in my Thrift Savings Plan (federal government 401k) which will grow for the next 25-30 years until I hit 60 and can start collecting my pension. Even though I will probably end up serving something like 25-30 years in the National Guard it will only be the equivalent of maybe 7-8 years of active duty so I'll get round 15% of my base pay. That base pay will be adjusted for inflation until I start collecting at 60. So if I retired at 45 and base pay for my rank is $70,000 per year, my pension will be based on the current rate for that pay grade which would probably have increased to something like $100,000 per year. Active duty pensions are very nice because they pay out immediately. You could start collecting in your late 30s if you joined at 17/18. I estimate my pension will end up being about the same as my monthly drill pay after adjusting for inflation, so averaging probably $700 - $1,000 per month in current dollars.

aceyou

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Re: share your pension details
« Reply #41 on: January 18, 2019, 06:06:24 PM »
Michigan teachers have multiple plans depending on what date teachers were hired in. 

Here's my plan:
  • 1.5 is my multiplier
  • I can retire with 30 years of service
  • After my first year of teaching I was offered by the state to purchase 5 years of service for about $20,000...I had a bad teaching experience in year one and jumped and immediately jumped at the opportunity.
  • About 4 years ago, my wife bought 5 years of service for $45,000
  • buying the years means my wife and I can both start receiving a pension after 25 years of teaching, when we turn 48.  For me this will be in June 2031 and for my wife this will be June 2032.
  • At that time, we'll take years of service (30) and multiply that by our 1.5 multiplier, which is 45%.
  • I then take the average of my 3 highest earning years.  My pension in year one of retirement will be 45% of that amount.  Same for my wife a year later
  • in year 2 of retirement, I'll get 3% more than whatever that number is.  Suppose that ends up being an extra $1500.
  • Whatever that number ends up being, that's the raise I'll get to my pension every year till I die, so every year the percent raise will be a little bit less.
  • Our pensions will get taxed as income.
  • I pay 7% of my paycheck towards my pension.  My wife pays 10% towards hers, because hers will come with health insurance in retirement.  This is in addition to what we pay for FICA, but we will be eligible for Social Security benefits at age 62 as well as a result.

In 2008 and then in 2012 many changes were made in Michigan and the pension is significantly worse for new hires...by a lot.  But my wife and I were fortunate to get hired a before those changes.  No new hires get a pension until 60, no one may buy years, the pension multiplier has been reduced, and there's no health insurance in retirement for new hires. 

Heinz

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Re: share your pension details
« Reply #42 on: January 18, 2019, 06:51:39 PM »
I am a federal employee, so the same as others - but I do get prior military service credited.  And if you take before 62, you basically take a 10% reduction to claim at age 60.  My wife has a private sector pension, and retiree medical, that will pay her 50% of base salary at age 58 (28 years of service).  However, the biggest benefit to federal service is that if you have federal healthcare for five years prior to retirement, you can continue that at the same rates until Medicare.  For me, with a family plan, it is $178 every two weeks for an excellent plan. 

sol

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Re: share your pension details
« Reply #43 on: January 18, 2019, 09:19:44 PM »
the biggest benefit to federal service is that if you have federal healthcare for five years prior to retirement, you can continue that at the same rates until Medicare.

Unfortunately, that doesn't apply to early retirees.  You have to reach MRA for that to be an option.

Much like the pension itself, many of the supposed benefits of federal service are wasted on the early retiree.

frugaldrummer

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Re: share your pension details
« Reply #44 on: January 18, 2019, 11:19:27 PM »
My ex, MD in a large HMO:2% of highest salary per year for 20 years then 1% a year for ten years, no further increase after 30 years. No pension until age 65 BUT the medical group would pay your pension for a few years before age 65 based on a formula of age and years of service (for my ex, he could take full early retirement at age 59 1/2. NO COL increases though, which really  reduces  its value over time if you expect longevity like I do.

wenchsenior

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Re: share your pension details
« Reply #45 on: January 19, 2019, 08:03:32 AM »
I'm curious to know if anyone here knows the details of John Deere Co.'s pension. 

I've been rather astonished that someone I know who is the same age as my husband, has just RE'd from there.  This person is good with money AFAIK, but owns two properties (home condo and vacation condo in a high-prop-tax state), at least one of which they just purchased and must still be under mortgage for many years to come.  And I know enough of their situation and history to know there isn't a hidden income stream supplementing their cash flow.  So even given a decent sized 401k, I assume the John Deere retirement benefits must be astonishingly good.

sol

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Re: share your pension details
« Reply #46 on: January 19, 2019, 09:46:28 AM »
I'm curious to know if anyone here knows the details of John Deere Co.'s pension. 

I do not, but is it possible this individual was just rich?  One of my former climbing partners used to work at John Deere as some sort of vice president of something or other.  They're a huge multinational corporation, so she was rolling in money.

wenchsenior

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Re: share your pension details
« Reply #47 on: January 19, 2019, 12:21:53 PM »
I'm curious to know if anyone here knows the details of John Deere Co.'s pension. 

I do not, but is it possible this individual was just rich?  One of my former climbing partners used to work at John Deere as some sort of vice president of something or other.  They're a huge multinational corporation, so she was rolling in money.

No, it's not. This is someone I know VERY well.  Not specific salary well, but I know how much the two houses cost, the amount of inheritance received about 4 years ago, purchasing habits, etc.  That's why I asked. I am having trouble getting the numbers to add up unless the JD pension is something really substantial. ETA: I fully plan on asking directly when I next see this person in the flesh, but we sometimes go years between visits and I'm very curious. And it seems weird to just email and ask.
« Last Edit: January 19, 2019, 12:23:34 PM by wenchsenior »

doggyfizzle

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Re: share your pension details
« Reply #48 on: January 19, 2019, 12:26:05 PM »
I'm curious to know if anyone here knows the details of John Deere Co.'s pension. 

I do not, but is it possible this individual was just rich?  One of my former climbing partners used to work at John Deere as some sort of vice president of something or other.  They're a huge multinational corporation, so she was rolling in money.

It might be similar to other industrial corporations that still offer pensions (Raytheon, Cummins, etc) in that it is a “cash balance” pension with a lump-sum cash-out option.  The cash balance option gained steam in the early 2000s as a way to still keep good workers around for the long term while dramatically lowering a corporations pension liability.

No, it's not. This is someone I know VERY well.  Not specific salary well, but I know how much the two houses cost, the amount of inheritance received about 4 years ago, purchasing habits, etc.  That's why I asked. I am having trouble getting the numbers to add up unless the JD pension is something really substantial. ETA: I fully plan on asking directly when I next see this person in the flesh, but we sometimes go years between visits and I'm very curious. And it seems weird to just email and ask.

Adam Zapple

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Re: share your pension details
« Reply #49 on: January 20, 2019, 05:46:17 AM »
2.5% multiplier, vested at 15 years.  Due to contract language some can't collect until age 55, some can collect right away.  Depends how old you were when hired. Most stay beyond 55 anyway.  No cola.  Awesome cheap medical if you stay past 55.