Author Topic: Pension Advice Please  (Read 1564 times)

Aunt Petunia

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Pension Advice Please
« on: January 29, 2017, 07:54:16 AM »
Hi, this is my first post. i need some mustachian advice for a problem that I am lucky to have. I have a side gig as adjunct faculty at a state college, and evidently I qualify for a pension. I have 2 options.

Option A: Defer 7.5% of salary in exchange for a real, old fashioned, defined benefit pension. This would be a no brainer if I were full time, but it takes 3 FTE years to become vested, which would be 12 actual years for me.  Since I am adjunct, I essentially have to be rehired every year, and also I may drop this job if I have a second child and / or get promoted at my main job. If I leave before vesting, they pay me back my contributions +4% interest.

Option B: A 403b with a generous match (4.5% employee contribution, 6% employer contribution), and immediate vesting.

I have one year to decide, but the decision can only be made once.


MustacheAndaHalf

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Re: Pension Advice Please
« Reply #1 on: January 29, 2017, 08:05:32 AM »
Does the mention of children imply a spouse?  If so, does this pension have survivor benefits - or does it only last for your lifetime?  It can be a consideration.  Also, the overall health of the company / chance of bankrupting your pension could be a consideration.

The 403(b) option sounds generous, with you 4.5% contribution becoming 10.5% immediately thanks to the 6% employer contribution.

Aunt Petunia

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Re: Pension Advice Please
« Reply #2 on: January 29, 2017, 08:13:39 AM »
Thanks for the reply. The pension has several withdrawal options, and I think one of them is to get slightly less in exchange for survivor benefits. My spouse would get the full pension if I were to die before retirement. I work for the state so it would be up to the legislature to bankrupt my pension.

Metric Mouse

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Re: Pension Advice Please
« Reply #3 on: January 29, 2017, 11:27:15 PM »
I'd take the 403B - you're getting an instant 150% return on your money, and no worry about vesting.

MDM

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Re: Pension Advice Please
« Reply #4 on: January 30, 2017, 12:54:11 AM »
No idea without putting in some numbers.  E.g., how much would that pension pay and when?

In either case it appears you have good options.  Take some time and put some "what if...?" scenarios into a spreadsheet.  Might be an "obvious" answer or it might be a coin flip.

Proud Foot

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Re: Pension Advice Please
« Reply #5 on: January 30, 2017, 10:39:48 AM »
Do you have a 401k/403b at your primary job?  If so, is there a match and how much? Probably wouldn't make much of a difference in my recommendation of the 403b but would be helpful. A 133% immediate return is hard to pass up especially with the possibility of you dropping the job or not being rehired.

Aunt Petunia

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Re: Pension Advice Please
« Reply #6 on: January 30, 2017, 02:49:32 PM »
Thanks for all the great advice. I am leaning towards the 403b but here is some more information.

 I do have a 403b at my primary job that I am currently maxing out, but I would not have to reduce my contribution very much because I only make about 14k/ year at the side job. This only gives a 2% match.

The pension calculation is (average of top 5 years' salary) * (1.9 * years of FTE) - 3%(66- age in years).

PizzaSteve

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Re: Pension Advice Please
« Reply #7 on: February 01, 2017, 08:38:10 AM »
If you think you might ever work for the state full time the extra pension years could be very valuable.  I would not cash out if you chose it and stop working.  A friend was appointed to a hjgh post by the governor of my state and topped up his avg salary considerably at 60.  His younger years vested  became quite valuable.

Good luck deciding.