So, a reduced pension (if you even have one these days) is something to consider when planning for retirement. Another thing to consider is that life expectancies continue to improve so even using your life expectancy in a current actuarial table may be non-conservative.
This idea sucks. I mean a pension costs about 9% of gross income. Honestly, I don't even know that many people who 401k 9%. Leaves me thinking I really would be better off investing it myself if they would match it like they do a pension. As I see it, 9% is taken without choice and I will not see interest or a match for the first five years then not seeing full interest or match until 10 years. Then add in social security taking away 6% of my pay. Put the two together and thats 15% of my gross-- would it really do better than me investing 15% the entire time myself-- I have serious doubts. With my pension in the same pool with other peoples pension (and the same with social security) people-who-know-how-to-game-the-system and take more then they should be able to--it leads to a possibility of giving my money to someone else and them saying "oops we didn't fund it right; instead of, we took your money and gave it to them."
I mean, people do understand that pensions come at a really high cost to the employee as well right. The way the public talks about it you would think that they just give us money. Nope. If I quit at 4 years they would give me exactly what I put in and not a dime more. 9% of my pay the whole time and not a single dime more. I hope people understand that when they talk about pensions as if it was a gift of some kind
Interesting info. Your pension works a lot different than mine. I have private (company) pension which initially was structured in the "traditional" sense - your pension benefit accrued slowly at first and then its value increased faster the closer you got to retirement. There was a second component that you could contribute to and you would get an additional amount if you did that.
Well, a while back, that pension was frozen at its current vested value and continued with a pension where the benefits increased in straight line fashion. So, for people that were close to retirement, instead of getting the original rapid benefit increase they now had a slower constant rate of benefit increase. A lot of companies did this conversion, IBM being one of the first. You can read more here -
Retirement Heist Someone, not at IBM, who did actuarial science as a hobby!!! discovered the gory details of how it worked.
Then, the straight line pension plan was frozen as well a few years later. So, now I have the frozen value of those two pensions. If I start collecting at 62 or later the amount is the same; if I start collecting earlier then the amount is reduced by some age factor. I don't know the exact numbers but from initial plan at time of hire to final result it is probably at least a 50% decrease. So, my experience, in addition to what the article mentions, led to my comment about planning for possible reductions. Luckily, I have both DB and DC (401k) and my 401k is a very good plan - no admin fees, low ER, and good fund choices.
DB plans are basically on their way out; DC plans place the risk on the employee rather than the company/government. In another thread, I saw someone post that new teachers in Michigan no longer have a pension, only a 403b. Most private companies only have 401k now.