share your pension details

[bryan995]

I have 8 years of service with Massachusetts (long story but it was during my PhD).  Left following graduation and now work in industry.  The plan has always been to return to the state to hit the required 10 years of service.  Not so much for the pension $, but more-so for the health insurance. 

At 10 years, I will receive 15% of my 3 highest annual salaries (and I believe free/subsidized health insurance!) from age 55 on-wards.  Was making ~$80K with the state, and should be able to return at >200K, which will pay out ~30K per year from age 55-death.  My plan is to make enough to retire elsewhere (current work), then move back to MA to hit the 10 years and HOPEFULLY find an interesting job that is worth staying at for a few more years, maybe even long term.    Every year over 10 years of service, I gain 1.5% of salary back in my pension.  And it seems as if I also gain an extra ~1% of pension every year of age > 55.  At 10 years of service and age 65 I would be making 25% of annual salary (50K payout).  It also looks like as long as I do not withdraw the money I have in the system thus far, I would keep my status and be able to return at any time and continue my accruement.

[Cassie]

We have small pensions from a state that doesn’t pay into SS. People with 30 years do well but we only had 15 years. Due to WEP we will be losing most of our SS.  We do get COL raises.

[chasesfish]

Random question since this thread is full of pensioners:

My pension has no COLA adjustment.

I can get 50% of the pension payout if I take it at 55, 100% if I take it at 65.   I keep doing the math and I have to live until 75 to break even under a no inflation scenario.   With inflation of taking into account the opportunity cost of drawing down investments vs. spending pension dollars, that break even probably goes up to age 76/77.

That seems like a huge gamble to wait until 65, especially if I already have FU money.  a 21-22 year breakeven seems crazy.   What do you think?

[aceyou]

Random question since this thread is full of pensioners:

My pension has no COLA adjustment.

I can get 50% of the pension payout if I take it at 55, 100% if I take it at 65.   I keep doing the math and I have to live until 75 to break even under a no inflation scenario.   With inflation of taking into account the opportunity cost of drawing down investments vs. spending pension dollars, that break even probably goes up to age 76/77.

That seems like a huge gamble to wait until 65, especially if I already have FU money.  a 21-22 year breakeven seems crazy.   What do you think?

I agree with you.

Seems like it'd take even longer to break even, if ever.  Suppose you didn't want to spend the money till 65 anyway.  You could at age 55, funnel all of the pension payments into index funds.  Then at age 65, you could draw from that account to make up for the 50% lower payouts. And in that case, if you die early, say at age 62, you have 7 years of pension payments plus any gains to pass to someone else.  I'd take it at 55 whether I planned to spend it at 55 or not.   

[Cassie]

I would take it at 55.

[chasesfish]

I appreciate it.  Megacorp is going through a ton of forced retirements, performance based "run outs" ect.  I was helping a 57 year old employee with a situation and she kept arguing about the value of taking the pension at 65, but all estimates were based on her continuing to work at the company.

She's been run out of her job and it made me dig harder at the math.  She really needs to go take a comparable job elsewhere and draw her pension.   I was able to key her into the 1000 rule, which was you get a year of service if you work 1000 hours in a calendar year, so I encouraged her to look for ways to hang on until June while putting plans together.

Fortunately the pension was only a small part of an otherwise much better conversation of me giving her encouragement and advice she asked for help with.

[MrSal]

My wifes pension seems to be pretty good then according to what I read from these comments.

Her employee discounts 7.5% of her paycheck as contribution to the account. Contributions grow at guaranteed rate of 5%/year.

Once retired, which can happen after 35 years of service without penalty or 30 years of service if above 58 years old - in my wife's case it will be at 57 years old since she was hired at 22, she will get 2.5% x years of service of the average 3 best years.

Currently making 75k, however most teachers in their upper years make around 80-85k ... at that point, thats an annual pension of 71,000 give or take + your account which at that point has grown to 300k or so.

I believe health insurance is also guaranteed by the school district to retirees as well. She was lucky to enter into the system in the last year before they made some changes - market risk and shared risk.

I on the other hand have no pension. It's all funded by myself :D IRAs and 401ks and taxable accounts.

[Adam Zapple]

How many extra years would you all hang around for full medical coverage, assuming you already had the funds for a comfortable, yet lean retirement?

[sol]

How many extra years would you all hang around for full medical coverage, assuming you already had the funds for a comfortable, yet lean retirement?

What does full medical cost if you pay full freight? 

If you're too rich to qualify for ACA subsidies, then it might be $15k/year to buy comprehensive health insurance.  That's the value of what you're working for.

These corporate plans typically truncate when you hit medicare age anyway, so we might use age 62 as the cutoff point.  If you're currently 50 and considering retiring this year, you're looking at needing 12 years of coverage at 15k/year, or $180k in total value.  Which is worth more like $160k in today's dollars if you can invest the money at ~7% per year, because your average ROI offsets part of the premiums.  So, I'd need to earn an extra $160k to pay for 12 years of medical care, and if I were earning $80k/year then I should be willing to work up to two extra years to earn that $160k.  Of course, by then you only need 10 more years, not 12, so you'e already stayed too long.  If you work any longer than that, then you've earned more money by postponing your retirement than the value of the corporate medical coverage you would receive by staying longer.

You can replace the numbers in this example with your own situation, of course, but in general for high earners who are most likely to ER, the value of your annual income is always going to rapidly outstrip the value of the medical coverage you might someday earn by staying at work.  If your retirement budget is below the ACA limits and you can get subsidies, then this is a no-brainer because the corporate medical coverage you might earn is almost worthless to you.

My advice:  just work a little longer to pad your investments, and let go of the idea of corporate-sponsored medical care.  It's another ruse they use to keep you chained to your desk.

[Cassie]

You can’t get Medicare until you are 65.

[Rural]

The question of whether to stay for the medical is one of the central questions of my life right now. It's about to become more salient after I vest in the fall.


I don't think Sol's calculations affect me much, as my take- home isn't nearly that high and the coverage on offer from my employer is family coverage. I will likely qualify for subsidies as long as subsidies exist, but I don't have any confidence in either subsidies or the ACA in its current form being around for even a few more years. That's the real reason to be tempted by the employer coverage on offer, the certainty that we could have some kind of healthcare coverage. I went too many years without any not to  have some trauma around the issue.

[kendallf]

The question of whether to stay for the medical is one of the central questions of my life right now. It's about to become more salient after I vest in the fall.


I don't think Sol's calculations affect me much, as my take- home isn't nearly that high and the coverage on offer from my employer is family coverage. I will likely qualify for subsidies as long as subsidies exist, but I don't have any confidence in either subsidies or the ACA in its current form being around for even a few more years. That's the real reason to be tempted by the employer coverage on offer, the certainty that we could have some kind of healthcare coverage. I went too many years without any not to  have some trauma around the issue.

I'm a federal employee and that's what's keeping me working until 56 (Minimum retirement age).  I figure the uncertainty in the health care market right now makes that gov't coverage and 75% premium payment worth a bunch in uncertainty reduction, never mind the cash value as Sol attempts to calculate above.  Plus in my case that 4 years results in a pension that starts immediately without reduction, a supplemental pension until I reach 62, and 4 more years to pad my TSP account. 

We've just hired a ton of young engineers, I'm running some development teams and trying to build up some knowledge base, and I don't really mind what I'm doing in general right now. 

[Cassie]

Richard, so you started the job st 17?

[Henrysmom1]

Retired federal FERS employee here. Started to work in govt late, only put in 14 years. Had to retire age 58 due to family issues, but wouldn’t have ever gotten much because there is no way I would have worked 30 years. I honestly only stayed with the govt job because I wanted the health insurance benefit as I have a disabled son and health insurance is vitally important to us. I get a big $650 a month after insurance deductions plus the reduction due to retiring early. Of course when I am old enough I will get SS and did get the TsP match, but it honestly isn’t the financial bonanza people think it is. When I retired a year ago I was easily making $30k a year less than I would have in private sector. That said, the little bit each month is nice along with the insurance security.

[sol]

Of course when I am old enough I will get SS and did get the TsP match, but it honestly isn’t the financial bonanza people think it is.

I've been saying this for years, and recently proved it to myself.  I retired from federal service, and then a few months later was offered a job doing virtually the exact same thing I did as a fed, for a 35% raise.  If anything, the private sector version of the job was a bit of demotion, because it was only the technical side of the job and not the public or legal side of it.

There are definitely advantages to federal service.  Pay is not one of them.  These days, job security isn't one of them either.

[Cassie]

That’s awesome Richard!

[The Fake Cheap]

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.

The way I look at this is is you get a bonus until age 65, so if you retire at 55, you get 10 years of those bonus payments, which you otherwise woudln't get.  The 13% payments are the high rate amount once you hit the CPP max, until then you pay about 9.8%.   There are also a lot of options for payouts with the fed system, you can take a lump sum under 50, or take a reduced pension starting as early as 50, penalties depend on age and/or years of service.

But yeah, those contributions are prety darn high, you definately pay for that benefit.