What's so great about pensions anyway?

[Villanelle]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

I think the affection for pensions among young people online has more to do with a desire for certainty and security in an increasingly uncertain world than an educated opinion on their pros and cons (especially how secure it actually is for a main tent pole of your retirement to be tied to the health and longevity of a stodgy old legacy company competing with younger companies with balance sheets uncluttered by uncertain pension liabilities).

And not just a stodgy old legacy company.  DH's pension is from the federal government.  But we are still overstating by most standards.  If you took our desired annual income and subtracted the pension payments, we will be over 4% saved for generating for the remainder.  If DH's pension goes away entirely, we are in black swan territory.  So I don't worry much about that.  But a haircut?  I'm not counting it out so I'm shoring up our non-pension tent pole in case the pension one is weakened.

Of course, DH is still happily working (SWAMI).  If he were miserable, we might be reconsidering that.  But wanting to account for the possibility of his pension decreasing is a concern we've discussed as just sound precaution. 

[nereo]

My Ex was in the same boat.  His attitude was he could spend basically all his/our take-home income because we would have our pensions.  People with his approach really need a pension or some other automatic work-related pension saving plan.

… or a good kick in the keester

[Villanelle]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

DH's pension is presumably funded by the tax payers. Nothing comes out of his pay; there is no contribution on his part and no specific reduction in his pay. (There's a vague "you make less than comparable jobs because you have a pension" notion, but that's it.) I guess I just assumed that's how most work (with the tax payers replaced by corporate contributions, I suppose). So it's more like having a gym in the building or getting paid vacation time.  You don't make direct contributions to get those parts of the compensation and benefits.  You just potentially make less because those things make your job more desirable.

My dad has a pension from a government (not federal) job and now I wonder if he made direct contributions, or it is more like DH's where the employer funds the pension as a perk for employees, and a recruiting and retention tool.  Or is this a Candian/US thing?  Or a private sector vs. public thing?  Huh. 

[nereo]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

DH's pension is presumably funded by the tax payers. Nothing comes out of his pay; there is no contribution on his part and no specific reduction in his pay. (There's a vague "you make less than comparable jobs because you have a pension" notion, but that's it.) I guess I just assumed that's how most work (with the tax payers replaced by corporate contributions, I suppose). So it's more like having a gym in the building or getting paid vacation time.  You don't make direct contributions to get those parts of the compensation and benefits.  You just potentially make less because those things make your job more desirable.

My dad has a pension from a government (not federal) job and now I wonder if he made direct contributions, or it is more like DH's where the employer funds the pension as a perk for employees, and a recruiting and retention tool.  Or is this a Candian/US thing?  Or a private sector vs. public thing?  Huh.

Are you talking about FERS ( the federal employee retirement system) ?  If so he pays into it, though it’s all done automatically so he might not even be aware of it.

See here:
https://plan-your-federal-retirement.com/fers-contributions/#:~:text=10.6%25%20of%20Base%20Pay%20is,6.2%25%20to%20Social%20Security

[Metalcat]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

DH's pension is presumably funded by the tax payers. Nothing comes out of his pay; there is no contribution on his part and no specific reduction in his pay. (There's a vague "you make less than comparable jobs because you have a pension" notion, but that's it.) I guess I just assumed that's how most work (with the tax payers replaced by corporate contributions, I suppose). So it's more like having a gym in the building or getting paid vacation time.  You don't make direct contributions to get those parts of the compensation and benefits.  You just potentially make less because those things make your job more desirable.

My dad has a pension from a government (not federal) job and now I wonder if he made direct contributions, or it is more like DH's where the employer funds the pension as a perk for employees, and a recruiting and retention tool.  Or is this a Candian/US thing?  Or a private sector vs. public thing?  Huh.

My DH is federal government and he absolutely contributes to his pension fund. I've never heard of a public sector pension being funded by taxpayers, so I don't think it's a public vs private thing. Again, I'm not an expert, but I've seen at least a dozen different pensions from government, academia, manufacturing, and private sector and every pension I've seen has been funded by employee contributions. But again, not an expert, it's not like I've had exposure to an expensive sampling of pension plans, just a few in a few different sectors.

[Villanelle]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

DH's pension is presumably funded by the tax payers. Nothing comes out of his pay; there is no contribution on his part and no specific reduction in his pay. (There's a vague "you make less than comparable jobs because you have a pension" notion, but that's it.) I guess I just assumed that's how most work (with the tax payers replaced by corporate contributions, I suppose). So it's more like having a gym in the building or getting paid vacation time.  You don't make direct contributions to get those parts of the compensation and benefits.  You just potentially make less because those things make your job more desirable.

My dad has a pension from a government (not federal) job and now I wonder if he made direct contributions, or it is more like DH's where the employer funds the pension as a perk for employees, and a recruiting and retention tool.  Or is this a Candian/US thing?  Or a private sector vs. public thing?  Huh.

Are you talking about FERS ( the federal employee retirement system) ?  If so he pays into it, though it’s all done automatically so he might not even be aware of it.

See here:
https://plan-your-federal-retirement.com/fers-contributions/#:~:text=10.6%25%20of%20Base%20Pay%20is,6.2%25%20to%20Social%20Security

No, I'm talking about the military pension (DH is pre-BRS). 

[Metalcat]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

DH's pension is presumably funded by the tax payers. Nothing comes out of his pay; there is no contribution on his part and no specific reduction in his pay. (There's a vague "you make less than comparable jobs because you have a pension" notion, but that's it.) I guess I just assumed that's how most work (with the tax payers replaced by corporate contributions, I suppose). So it's more like having a gym in the building or getting paid vacation time.  You don't make direct contributions to get those parts of the compensation and benefits.  You just potentially make less because those things make your job more desirable.

My dad has a pension from a government (not federal) job and now I wonder if he made direct contributions, or it is more like DH's where the employer funds the pension as a perk for employees, and a recruiting and retention tool.  Or is this a Candian/US thing?  Or a private sector vs. public thing?  Huh.

Are you talking about FERS ( the federal employee retirement system) ?  If so he pays into it, though it’s all done automatically so he might not even be aware of it.

See here:
https://plan-your-federal-retirement.com/fers-contributions/#:~:text=10.6%25%20of%20Base%20Pay%20is,6.2%25%20to%20Social%20Security

No, I'm talking about the military pension (DH is pre-BRS).

Ahhhh, yes, military is definitely different. I have seen military pensions not funded by employee contributions, I forgot. But from what I understand, they are the exception, not the rule. But I could be wrong.

[Villanelle]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

DH's pension is presumably funded by the tax payers. Nothing comes out of his pay; there is no contribution on his part and no specific reduction in his pay. (There's a vague "you make less than comparable jobs because you have a pension" notion, but that's it.) I guess I just assumed that's how most work (with the tax payers replaced by corporate contributions, I suppose). So it's more like having a gym in the building or getting paid vacation time.  You don't make direct contributions to get those parts of the compensation and benefits.  You just potentially make less because those things make your job more desirable.

My dad has a pension from a government (not federal) job and now I wonder if he made direct contributions, or it is more like DH's where the employer funds the pension as a perk for employees, and a recruiting and retention tool.  Or is this a Candian/US thing?  Or a private sector vs. public thing?  Huh.

Are you talking about FERS ( the federal employee retirement system) ?  If so he pays into it, though it’s all done automatically so he might not even be aware of it.

See here:
https://plan-your-federal-retirement.com/fers-contributions/#:~:text=10.6%25%20of%20Base%20Pay%20is,6.2%25%20to%20Social%20Security

No, I'm talking about the military pension (DH is pre-BRS).

Ahhhh, yes, military is definitely different. I have seen military pensions not funded by employee contributions, I forgot. But from what I understand, they are the exception, not the rule. But I could be wrong.

It's probably my mistake.  I guess I just assumed all pensions work more or less like DH's does.  I learned a thing today!

[Metalcat]

It's probably my mistake.  I guess I just assumed all pensions work more or less like DH's does.  I learned a thing today!

I can certainly understand your previous opinions about pensions though. If they were universally or predominantly employer funded, then their loss would be pretty tragic.

[reeshau]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

I had a pension in the auto industry, that was frozen during the GFC.  There were two parts to the pension: part A was paid in by the company, was not discretionary, and paid you on (traditional) retirement based on your final 3 years' salary and your seniority.  Part B was discretionary, and you contributed to it.  This part boosted the payout, but was still based on the same criteria.  If you left the company and either weren't yet vested or opted to, you could withdraw this part, or roll it over into a Trad IRA.

To get the fabled gold-plated pension required participating in both parts.  But there was a basic pension, even for people that did not contribute.

[simonsez]

I pay 0.8% into my FERS pension for a pension of 1% (or 1.1 at age 62 with 20y) for each year I work × highest 3 years of salary with a COLA.  I have just about 13 years in.

My wife pays 14.3% of her paycheck for her teacher pension.  IIRC she receives 2.5% (or 2.55% if > 32 years) of her highest salary for each year worked with a COLA. Can access via Rule of 80 (age + experience or age 60 with > 5y). She has 7 years in. Yes, her pension will pay out more but ratio-wise, I'm getting a better bang for my buck.

@Villanelle that's interesting about the military pension not having an employee contribution component!

[GilesMM]

When I started work at megacorp in the 90s it was sort of late in the golden years for retirement because the company, like most, still had a generous pension plan that was 100% company funded, despite competitive salary and other benefits. In addition, they were starting the slow transition to 401ks so these were offered as well, with 6% company match. So, employees typically had a nice pension plus 401k plus, in most cases stock awards and personal savings.  A typical 25 year retiree could expect a pension lump sum 8-10 times their base salary, a 401k perhaps 6 times their salary and stock maybe 4x salary, depending on their investing style and company stock behavior. Non-tech megacorp stocks don’t appreciate too fast.


The complaints are from all the Gen YZ who are getting, in the same companies, almost no pension value at all. They see Gen X and Boomer retirees cashing pension checks for $2 million and want theirs too.


A strange twist in my case was an overseas assignment during which megacorp was forced to generously fund a foreign social security equivalent. After I left that country, I could cash it out in a lump sum which was six figures after only working a few years.


I also have some sort of pension from one year teaching community college. It will pay like $7 per month once I get really old. I guess that will be enough for a donut and cup of brewed coffee, if I’m lucky.

[Michael in ABQ]

I pay 0.8% into my FERS pension for a pension of 1% (or 1.1 at age 62 with 20y) for each year I work × highest 3 years of salary with a COLA.  I have just about 13 years in.

My wife pays 14.3% of her paycheck for her teacher pension.  IIRC she receives 2.5% (or 2.55% if > 32 years) of her highest salary for each year worked with a COLA. Can access via Rule of 80 (age + experience or age 60 with > 5y). She has 7 years in. Yes, her pension will pay out more but ratio-wise, I'm getting a better bang for my buck.

@Villanelle that's interesting about the military pension not having an employee contribution component!

The military recently changed from 2.5% per year (of which less than 20% of people actually stayed in at least 20 years to collect even a penny) to 2.0% per year but with up to a 5% 401k Match. The latter is way better for the National Guard/Reserves as you don't start collecting your military pension until age 60 - even if you retire at 38 with 20 years of service. I had the option to choose and that 5% match is going to grow far more over the next 25ish years until I hit 60 than an extra 0.5% annual multiplier. For new service members they can do 4-6 years and get out with some money in a 401k instead of nothing like under the old system.

[wenchsenior]

Ironically, I find that having my husband's federal pension is a reinforcer for having a lot more wealth flexibility. Essentially, it's going to function like a 'bond' portion of an investment portfolio, which means we have more freedom to keep our other investments very stock heavy in retirement, which is not a luxury as available to people without a pension.

[Metalcat]

Ironically, I find that having my husband's federal pension is a reinforcer for having a lot more wealth flexibility. Essentially, it's going to function like a 'bond' portion of an investment portfolio, which means we have more freedom to keep our other investments very stock heavy in retirement, which is not a luxury as available to people without a pension.

This is how I conceptualize it as well. It's literally an annuity, so we can factor that in to the risk profile of our other investments. Because of the annuity, our SORR risk is very different because the annuity covers so much of our spending that even if we do have to sell equities during down times, just a tiny bit of austerity or a tiny bit of income radically reduces our WR.

There are a ton of benefits to a really good pension, my position all along has just been that we don't necessarily come out ahead compared to a situation where we are able to invest those contributions ourselves along with a good match into whatever investments and AA we think is best.

The security this massive annuity provides is a benefit, but fuuuuck is it overkill.

Plus it comes at a MASSIVE cost. I'm a decade younger than DH and come from a family with more longevity. If he dies before me, the annuity is cut in half. So there's a massive risk that we actually come out way, way behind unless he outlives me. If he dies young, which isn't terribly improbable since he does extreme sports and has a strong family history of early death, then his pension value is garbage compared to what he paid into it, which REALLY pisses me off.

[deborah]

For a number of pensions I know of, you can elect to get a lower pension and have a higher reversion rate to dependents, when you actually start to receive the pension. For instance, I know of one pension where the recipient can either get 100% and the dependents will get 67% when the recipient dies, or the other option is that the recipient gets 93% and the dependents get 85% when the recipient dies. This might be worth looking into in your situation metalcat.

[Morning Glory]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

I had one that was part of total comp but I didn't actually see the money that went into it until I left employment and took a prorated lump sum.

[iris lily]

Ironically, I find that having my husband's federal pension is a reinforcer for having a lot more wealth flexibility. Essentially, it's going to function like a 'bond' portion of an investment portfolio, which means we have more freedom to keep our other investments very stock heavy in retirement, which is not a luxury as available to people without a pension.

This is how I conceptualize it as well. It's literally an annuity, so we can factor that in to the risk profile of our other investments. Because of the annuity, our SORR risk is very different because the annuity covers so much of our spending that even if we do have to sell equities during down times, just a tiny bit of austerity or a tiny bit of income radically reduces our WR.

There are a ton of benefits to a really good pension, my position all along has just been that we don't necessarily come out ahead compared to a situation where we are able to invest those contributions ourselves along with a good match into whatever investments and AA we think is best.

The security this massive annuity provides is a benefit, but fuuuuck is it overkill.

Plus it comes at a MASSIVE cost. I'm a decade younger than DH and come from a family with more longevity. If he dies before me, the annuity is cut in half. So there's a massive risk that we actually come out way, way behind unless he outlives me. If he dies young, which isn't terribly improbable since he does extreme sports and has a strong family history of early death, then his pension value is garbage compared to what he paid into it, which REALLY pisses me off.

At my workplace we had an odd thing happen, an error, that resulted in me potentially getting a lump sum of all monies paid into the United States Society Security system back.

Everyone in my workplace had to vote to keep the money in, or get it out. The end result was a resounding vote to keep it in the Soc Sec system. I voted yes, keep money in the system but I was surprised to see administrative leadership make a few (what I considered to be) ignorant comment about employees who were lobbying ro take the money out.

Those lobbying to leave the Social Security System tended to be young tech employees. I did not think their position was wrong but boy howdy did they get side eye from …some upper echelon folks.

If anyone is interested  in this scenario and how it came about let me know and I’ll elaborate, but basically it was a 50 year old error that caused my workplace to reconsider joining the SS system.

[Metalcat]

For a number of pensions I know of, you can elect to get a lower pension and have a higher reversion rate to dependents, when you actually start to receive the pension. For instance, I know of one pension where the recipient can either get 100% and the dependents will get 67% when the recipient dies, or the other option is that the recipient gets 93% and the dependents get 85% when the recipient dies. This might be worth looking into in your situation metalcat.

Not an option for his, it's pretty set in stone. It why having my own 'stache is so important to me that even if it seems like massive overkill. Because I'm disabled, of DH dies, my support care expenses shoot up. If this happens much later in life, we're fine because even a relatively small excess of money will grow to be a substantial extra and the years left at a reduced pension income would be no big deal.

But say he dies in his 60s and I have to offset 50% of his reduced pension value for decades while losing an enormous amount of physical support, all while having to mourn the loss of my partner. It's seriously suboptimal. That's why I insist on getting into a financial position by my 50s where that financial loss and increase in expenses wouldn't be a big deal.

So assuming DH lives a good long time, we'll have several times the savings we need, but if God forbid he dies young, I'll be fine.

But man that frickin' pension complicates things.

[farmecologist]

Pensions are a psychological tool that work out well for most people. ie those that are bad at managing their money. Mathematically 401ks are probably a better deal and certainly better for this wacky ER crowd.

When I look at all my in-laws, there are a bunch of retirement train wrecks. (ie the plan is to use the money from the sale of a parents house... expect that parent's plan is to do the same.) 

The one couple who have a good retirement are not good savers or budgets. He's in a building trades union so they will have that pension and thats about it.

I'm not so sure about that.  What I like about DH's pension is that it is diversified.  In a shit market, we still have the pension.  And it is COL-adjusted (I know not all are) so that will help tremendously with SORR concerns, and just general unknowns. 

Sure if he'd been paid a lot more, we could have saved a lot more.  But that would all by in either mutural funds or perhaps real estate.  The pension gives of additional diversification.  For me, that's worse slightly lower overall returns than I might have gotten if he'd been paid more from the beginning and we'd invested that. 

So I'm not sure a 401k--especially one with limited, expensive options as so many seem to have--would be better.

For what it's worth, my spouse has a pension non-government pension plan via a major medical institution.  I should also add that she has a 403b that also has a modest match...which we max out each year.  So  best of both worlds!

We have been retirement planning recently, have "done the math" many times over, and will likely take a lump sum vs. the annuity option.  I feel we can manage it better on our own, and "the math" seems to agree.   I do agree that the annuity option is likely better for those that are less financially savvy.

To answer the OP's question though as to "what's great about pensions", well...the answer is simple.   A pension is extra cash you wouldn't have otherwise.  And I think that is pretty great!

Is this true though? Pensions are built on contributions, so it's not free money, it's more like forced savings.

DH's take home pay is substantially smaller because of his pension and his tax-deferred account space is proportionally reduced. I'm not at all convinced that an equivalent paying job in the private sector with a good matching incentive wouldn't result in him coming out ahead.

This is part of the rub.  I don't believe for a second that as companies did away with pensions, they raised salaries by anything approaching the amount needed to cover the same amount as the pension, no matter how that was calculated.  If the choice was "$20k more per year in salary, or the equivalent in pension" I think then answer for most people here would be "give me the money and let me management".  But that doesn't seem to be how it worked, and I think that's part of why young workers today bemoan the lack of pensions.  They were taken away, but little was added back in.  So they look at it as "$45k salary today vs. $45k salary and a pension; which would I rather have". 

It's like saying, "hey, the US health insurance situation is fucked up.  Insurance shouldn't be tied to employment."  A vast number of people would agree with that.  Until you continued, "so, all employers are going to stop offering insurance. Okay,good luck and goodbye!" 

People would bemoan employer health insurance, even if it was a crappy option not available to many and not working well for those who had it. I think that's similar to young people today complaining that pensions aren't available to them.  They went away and don't seem to have been replaced by anything.  A flawed, crappy option is better than nothing at all. 

If an individual employer ditched pensions (or healthcare, at least in the US), they probably would have to raise salaries at least somewhat, or have a retention and recruitment problem.  But if everyone did it, no one would really need to compensate.  And/or those who did could cut their costs by 10% and offer employees 5% more, meaning that employees are seeing decreased value (on average, they person who dies at 40 is going to be different than the one who lives to 110). 

I guess when I hear the yearning for the gold old days of pensions, it feels like an "and" thing--remember when people were paid and they have pensions?  The underlying assumption is that pay would be about the same, but with the pension as additional compensation.

I'm sure there's data, but I'm not go to dig for them.  Maybe as pensions phased out, pay increased accordingly.  But I'm skeptical.

I'm still confused.

DH's pension is an annuity that he contributes to, it's not free money. Contributions are deducted from his pay biweekly the exact same way a 401K contribution might be, but with no choice on his part and no control over what it's invested in.

Also, those contributions reduce his tax-deferred account space each year. At the end of it, instead of having a bunch of investments, he has an annuity that he contributed into for 30 years. Had he not had a pension he would have tax deferred retirement accounts that he had contributed to for 30 years.

Considering in Canada we can invest our tax-deferred accounts as we please, if he had the *exact same* salary and no pension, he could very feasibly come out ahead with the exact same salary and no pension, especially with a good employer match.

No pension means more take home pay, it's not free money, it's forced savings with the only option being an annuity.

ETA: that said, I'm very happy with his pension. It's solid, well invested, well managed, and he was never good with money, so forced savings has been a fantastic option for him. I'm not saying pensions aren't good, I'm just saying that for anyone investment savvy, they aren't superior to the exact same salary and no pension.

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

Uhh..say what, @Metalcat ?  Every single pension I have ever heard of is completely funded by the employer.  Hence, why I said "free" money.  And yes, I'd much rather have a pension than no pension...lol.

Are you sure you are not thinking of a 401k?

I forget...is @Metalcat in a country other than the USA?  If so, I'm sure there are vastly different rules in other countries.

[Morning Glory]

Pensions are a psychological tool that work out well for most people. ie those that are bad at managing their money. Mathematically 401ks are probably a better deal and certainly better for this wacky ER crowd.

When I look at all my in-laws, there are a bunch of retirement train wrecks. (ie the plan is to use the money from the sale of a parents house... expect that parent's plan is to do the same.) 

The one couple who have a good retirement are not good savers or budgets. He's in a building trades union so they will have that pension and thats about it.

I'm not so sure about that.  What I like about DH's pension is that it is diversified.  In a shit market, we still have the pension.  And it is COL-adjusted (I know not all are) so that will help tremendously with SORR concerns, and just general unknowns. 

Sure if he'd been paid a lot more, we could have saved a lot more.  But that would all by in either mutural funds or perhaps real estate.  The pension gives of additional diversification.  For me, that's worse slightly lower overall returns than I might have gotten if he'd been paid more from the beginning and we'd invested that. 

So I'm not sure a 401k--especially one with limited, expensive options as so many seem to have--would be better.

For what it's worth, my spouse has a pension non-government pension plan via a major medical institution.  I should also add that she has a 403b that also has a modest match...which we max out each year.  So  best of both worlds!

We have been retirement planning recently, have "done the math" many times over, and will likely take a lump sum vs. the annuity option.  I feel we can manage it better on our own, and "the math" seems to agree.   I do agree that the annuity option is likely better for those that are less financially savvy.

To answer the OP's question though as to "what's great about pensions", well...the answer is simple.   A pension is extra cash you wouldn't have otherwise.  And I think that is pretty great!

Is this true though? Pensions are built on contributions, so it's not free money, it's more like forced savings.

DH's take home pay is substantially smaller because of his pension and his tax-deferred account space is proportionally reduced. I'm not at all convinced that an equivalent paying job in the private sector with a good matching incentive wouldn't result in him coming out ahead.

This is part of the rub.  I don't believe for a second that as companies did away with pensions, they raised salaries by anything approaching the amount needed to cover the same amount as the pension, no matter how that was calculated.  If the choice was "$20k more per year in salary, or the equivalent in pension" I think then answer for most people here would be "give me the money and let me management".  But that doesn't seem to be how it worked, and I think that's part of why young workers today bemoan the lack of pensions.  They were taken away, but little was added back in.  So they look at it as "$45k salary today vs. $45k salary and a pension; which would I rather have". 

It's like saying, "hey, the US health insurance situation is fucked up.  Insurance shouldn't be tied to employment."  A vast number of people would agree with that.  Until you continued, "so, all employers are going to stop offering insurance. Okay,good luck and goodbye!" 

People would bemoan employer health insurance, even if it was a crappy option not available to many and not working well for those who had it. I think that's similar to young people today complaining that pensions aren't available to them.  They went away and don't seem to have been replaced by anything.  A flawed, crappy option is better than nothing at all. 

If an individual employer ditched pensions (or healthcare, at least in the US), they probably would have to raise salaries at least somewhat, or have a retention and recruitment problem.  But if everyone did it, no one would really need to compensate.  And/or those who did could cut their costs by 10% and offer employees 5% more, meaning that employees are seeing decreased value (on average, they person who dies at 40 is going to be different than the one who lives to 110). 

I guess when I hear the yearning for the gold old days of pensions, it feels like an "and" thing--remember when people were paid and they have pensions?  The underlying assumption is that pay would be about the same, but with the pension as additional compensation.

I'm sure there's data, but I'm not go to dig for them.  Maybe as pensions phased out, pay increased accordingly.  But I'm skeptical.

I'm still confused.

DH's pension is an annuity that he contributes to, it's not free money. Contributions are deducted from his pay biweekly the exact same way a 401K contribution might be, but with no choice on his part and no control over what it's invested in.

Also, those contributions reduce his tax-deferred account space each year. At the end of it, instead of having a bunch of investments, he has an annuity that he contributed into for 30 years. Had he not had a pension he would have tax deferred retirement accounts that he had contributed to for 30 years.

Considering in Canada we can invest our tax-deferred accounts as we please, if he had the *exact same* salary and no pension, he could very feasibly come out ahead with the exact same salary and no pension, especially with a good employer match.

No pension means more take home pay, it's not free money, it's forced savings with the only option being an annuity.

ETA: that said, I'm very happy with his pension. It's solid, well invested, well managed, and he was never good with money, so forced savings has been a fantastic option for him. I'm not saying pensions aren't good, I'm just saying that for anyone investment savvy, they aren't superior to the exact same salary and no pension.

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

Uhh..say what, @Metalcat ?  Every single pension I have ever heard of is completely funded by the employer.  Hence, why I said "free" money.  And yes, I'd much rather have a pension than no pension...lol.

Are you sure you are not thinking of a 401k?

I forget...is @Metalcat in a country other than the USA?  If so, I'm sure there are vastly different rules in other countries.

There are some in the US where you pay in a percentage of your salary. Most state ones are this way, for example my dad has a state pension scheme that he paid into in place of social security.

The private one I had (also a hospital) was completely employer funded but I still "earned" it with my years of service and don't see it as free money, they just didn't go through the exercise of paying it to me in my paycheck and having me put it back in the pension fund.

[nereo]

I can speak definitively that several of the US’s largest pensions (FERS for civilian federal employees), CalPERS (California state government) and NY State Retirement all have employee contributions. Smaller, but so does the two entities I’ve most recently been involved with.

Besides the US military, I struggle to find a large pension system that doesn’t have worker contributions.

[farmecologist]

I can speak definitively that several of the US’s largest pensions (FERS for civilian federal employees), CalPERS (California state government) and NY State Retirement all have employee contributions. Smaller, but so does the two entities I’ve most recently been involved with.

Besides the US military, I struggle to find a large pension system that doesn’t have worker contributions.

Interesting...my bad then!   I don't have much experience with "government" pension plans ( federal or state ).

My experience with pension plans is from the private sector, where all of them that I know of have been funded by the employer.   Perhaps this is why employer sponsored pension plans are becoming an endangered species.  However,  they are still out there, although MUCH more rare these days than they used to be.

 

[iris lily]

I can speak definitively that several of the US’s largest pensions (FERS for civilian federal employees), CalPERS (California state government) and NY State Retirement all have employee contributions. Smaller, but so does the two entities I’ve most recently been involved with.

Besides the US military, I struggle to find a large pension system that doesn’t have worker contributions.

I know you said “large” but my city pension was entirely employer funded.

[RetiredAt63]

Metalcat is not in the US.

[Metalcat]

Metalcat is not in the US.

Nope, and it occurs to me that although I've seen info on a lot of pensions, they've all been in the same city where the federal government is by far the largest employer. So it would make sense that employers competing with the federal government here would offer the same kind of pension, the same way they tend to offer a very similar health benefits package.

So other than military, which is it's own creature, it makes perfect sense that every pension I've ever seen or heard of here mimics the GIANT pension program in the city.

[sixwings]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

I'm equally confused.  I have a pension because I was a para-public servant.  For every sector-wide contract negotiation part of the negotiation was the pension, how much we would be contributing, how much the government would be contributing, how much would it be indexed.  And of course all that reduced my RRSP room. 

My Ex was in the same boat.  His attitude was he could spend basically all his/our take-home income because we would have our pensions.  People with his approach really need a pension or some other automatic work-related pension saving plan.

The key here to remember is that your ex is the vast majority of the population. Most will not save unless they are forced to. That’s what’s great about pensions, it is forced savings, that they can’t use, until they retire and as a result they can actually have a decent retirement when they are older. Enabling people to retire has many benefits.

Pensions themselves may not be the most efficient savings vehicle for wel l educated affluent people like this forum who can invest and manage money themselves in a disciplined way. But most people are not capable of that, and that’s where pensions really are very beneficial.

[spartana]

I have a CALPERS Public Safety Pension and contributed 14% each pay period toward the pension - my agency covered half of that and I contributed the other half. If I quit before vesting (5 years to vest and could get pension at age 50) I'd get the 7 % share I contributed into the system plus the tax deferred interest it earned.   This was in lieu of paying Soc. Sec. I was also able to "buy back" 4 years of my military service to add those years towards my state pension. That was also tax deferred but was fairly expensive. I only worked for the state 10 years and quit about a decade or more before I would be old enough to start collecting once age 50. I chose to leave it in the pension rather than take the lump sum. I wasn't highly paid so didn't expect to get much at 50 but it's around $900/month and has an annual COLA.

I also did 12 years in the military and, being on the old plan, left with no pension since I didn't do 20 years. Still kicking myself that I didn't stay and do the full 20 years as I would have had a pension and life long low cost medical a 38.

ETA: The CalPers pension rules changed several years ago for new hires (there are many different pension plans within the CalPERS system) and now require later age to fully benefits and longer vesting as well as higher contributions. 

My sister had/has a private sector pension with a big defense contractor and they funded it. However about mid-way thru her 20 years of service they ended that and switched to 401Ks. Those on the old pension plans could still get the pension once old enough (55) but there were no longer any new contributions to it.

[jim555]

I'm turning into an old grumpy codger, and as such, I'm getting annoyed at all the young'uns that keep talking about "the good old days of pensions, etc" and how boomers had it so easy.  My mom has a small pension, and I'm so darn glad about it because it really is a life-saver, and yeah, I definitely wish I had another income stream coming in.  But realistically...

1.  I had a lot of different jobs...I likely wouldn't have qualified for an employer-sponsored plan because I job-hopped.
2.  Why should a pension be tied to having to stay with a particular company for many years?
3.  Companies today go out of business.  A lot.  Or merge with other companies who raid them for assets.  And leave employees effed.  Even back in the day, McDonnell Douglas was an extremely successful company that left it's employees with very little. 
4.  There's so little oversight these days, that I wouldn't trust any company to actually pay out what it promised.  Why are people so willing to trust business leaders, but unwilling to trust government officials who are legally required to fulfill promises? 

Just venting.  But am I wrong?

I have a frozen pension that will pay $22K at 65.  Worked 28 years at the same company.  It is a AAA company, but pension do have a government backstop in the US (Pension Benefit Guaranty Corporation).  I didn't pay anything into it, it is a classic defined benefit pension.  New hires no longer get a pension.  It is one reason why I didn't job hop.

[reeshau]

I can speak definitively that several of the US’s largest pensions (FERS for civilian federal employees), CalPERS (California state government) and NY State Retirement all have employee contributions. Smaller, but so does the two entities I’ve most recently been involved with.

Besides the US military, I struggle to find a large pension system that doesn’t have worker contributions.

Interesting...my bad then!   I don't have much experience with "government" pension plans ( federal or state ).

My experience with pension plans is from the private sector, where all of them that I know of have been funded by the employer.   Perhaps this is why employer sponsored pension plans are becoming an endangered species.  However,  they are still out there, although MUCH more rare these days than they used to be.

As I detailed uptrend, my former employer was a Fortune 50 auto company, once part of a Fortune 10 auto manufacturer.  Pensions definitely had employee contributions, and always had, in addition to employer contributions.

[rocketpj]

I fell bass ackwards into the BC Municipal pension plan a bunch of years and another job ago.  At the time I was fine with it - my investments might go awry, and it has survivor benefits so if I have a jammer my spouse will have something to rely on.

When I changed jobs I had no idea the new job was on the same pension plan, but it switched over seamlessly so that's fine with me.

That said I joined the pension ecosystem late so the pension alone won't be enough to cover our costs of living through a long FIRE.  If I retired today I'd get a few hundred a month.  If I retired today but wait until I'm 60 I'd get about $1300/mo.  Helpful but not enough.  Luckily our non-pension assets are doing just fine.

I treat my pension as a future bonus.  I plan for FIRE assuming no or minimal pension, and when I do collect it will help reduce my drawdown on our savings.

[BlueHouse]

My mom had a private company pension that she never paid a dime into.  After 20 years, she could take a lump sum or a lifetime monthly payout.  We advised her to take the monthly pension because she's so bad with money.  It was a good choice.  BUT -- that amount plus social security exceeds the limits for medicaid.  So despite her having a pretty low income (about $54K annually), she'll never be able to qualify for medicaid.  That made choices for assisted living (now running over $13K/ month) pretty slim.   We lucked out getting her in before she needed assisted...but it's something to consider when choosing lump sum or annuity. 

My brother had a public pension after 10 years with the city of boston.  He gets about $1200/month (started when he was 55), which he considers free money.  He made contributions and even additional contributions to give each of his children a portion of that pension after his death (they'll receive a couple hundred dollars/month) FOR THEIR LIFETIMES.  I wrote about it here before when the details were fresh in my mind.  That's one benefit that is definitely worth it, but I think that's pretty rare. 

[spartana]

^^^My public pension also can go to a spouse (or other beneficiary if unmarried) if I die. There are several different options and each cost a different amount. Since I'm single (divorced) I chose the cheapest option. It reduces my monthly pension by $10/month and will leave my beneficiary a lump sum of any of my contributions left. If I had a dependent I would have chosen a higher cost option that would have left them with a percentage of my pension for life.

[wenchsenior]

My mom had a private company pension that she never paid a dime into.  After 20 years, she could take a lump sum or a lifetime monthly payout.  We advised her to take the monthly pension because she's so bad with money.  It was a good choice.  BUT -- that amount plus social security exceeds the limits for medicaid.  So despite her having a pretty low income (about $54K annually), she'll never be able to qualify for medicaid.  That made choices for assisted living (now running over $13K/ month) pretty slim.   We lucked out getting her in before she needed assisted...but it's something to consider when choosing lump sum or annuity. 

My brother had a public pension after 10 years with the city of boston.  He gets about $1200/month (started when he was 55), which he considers free money.  He made contributions and even additional contributions to give each of his children a portion of that pension after his death (they'll receive a couple hundred dollars/month) FOR THEIR LIFETIMES.  I wrote about it here before when the details were fresh in my mind.  That's one benefit that is definitely worth it, but I think that's pretty rare.

Income limits for Medicaid qualification are staggeringly low. Particularly to qualify for the Medicaid medical care... it's a bit easier to qualify for Medicaid nursing home care.

[jim555]

My mom had a private company pension that she never paid a dime into.  After 20 years, she could take a lump sum or a lifetime monthly payout.  We advised her to take the monthly pension because she's so bad with money.  It was a good choice.  BUT -- that amount plus social security exceeds the limits for medicaid.  So despite her having a pretty low income (about $54K annually), she'll never be able to qualify for medicaid.  That made choices for assisted living (now running over $13K/ month) pretty slim.   We lucked out getting her in before she needed assisted...but it's something to consider when choosing lump sum or annuity. 

The way people qualify for a nursing home with high income is the cost of home reduces the income amount.  A nursing home can cost $8K to $14K a month so that will easily reduce the income to under the line.  Also in 49 states elderly Medicaid has an asset limit before Medicaid will start.

The income sources get signed over to the home, less a small amount, like $50 a month for personal needs.

[ATtiny85]

I can speak definitively that several of the US’s largest pensions (FERS for civilian federal employees), CalPERS (California state government) and NY State Retirement all have employee contributions. Smaller, but so does the two entities I’ve most recently been involved with.

Besides the US military, I struggle to find a large pension system that doesn’t have worker contributions.

Interesting...my bad then!   I don't have much experience with "government" pension plans ( federal or state ).

My experience with pension plans is from the private sector, where all of them that I know of have been funded by the employer.   Perhaps this is why employer sponsored pension plans are becoming an endangered species.  However,  they are still out there, although MUCH more rare these days than they used to be.

As I detailed uptrend, my former employer was a Fortune 50 auto company, once part of a Fortune 10 auto manufacturer.  Pensions definitely had employee contributions, and always had, in addition to employer contributions.

This year, for the first time, my megacorp (Forrtune 100) sent us a mailing with a pamphlet of propaganda. They decided to list out the entire dollar amount of our benefits. One line item was "pension".

I assume they are trying to stave off additional losses after getting the feedback "you are not competitive".

[BlueHouse]

The way people qualify for a nursing home with high income is the cost of home reduces the income amount.  A nursing home can cost $8K to $14K a month so that will easily reduce the income to under the line.  Also in 49 states elderly Medicaid has an asset limit before Medicaid will start.

The income sources get signed over to the home, less a small amount, like $50 a month for personal needs.

I need to look into this some more.  The social workers have told us that she cannot qualify, but all of her assets are held by the home in escrow (she's spending it down monthly now and will deplete it in about 2 years), but her monthly income cannot be signed over. I didn't know though about reducing the amount for under the line.  If she's able to get some additional help, I'd love to find out. 

[Fomerly known as something]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

I think the affection for pensions among young people online has more to do with a desire for certainty and security in an increasingly uncertain world than an educated opinion on their pros and cons (especially how secure it actually is for a main tent pole of your retirement to be tied to the health and longevity of a stodgy old legacy company competing with younger companies with balance sheets uncluttered by uncertain pension liabilities).

And not just a stodgy old legacy company.  DH's pension is from the federal government.  But we are still overstating by most standards.  If you took our desired annual income and subtracted the pension payments, we will be over 4% saved for generating for the remainder.  If DH's pension goes away entirely, we are in black swan territory.  So I don't worry much about that.  But a haircut?  I'm not counting it out so I'm shoring up our non-pension tent pole in case the pension one is weakened.

Of course, DH is still happily working (SWAMI).  If he were miserable, we might be reconsidering that.  But wanting to account for the possibility of his pension decreasing is a concern we've discussed as just sound precaution.

And your DH does contribute to said pension although in the US it doesn’t reduce other space like our norther neighbors.

Now if he’s cough, an older employee, our contribution isn’t that much .8%, but those hired now have an automatic 4.4% deducted to pay their share.  So a younger coworker that I effectively will earn 3% less then I have over my career.

[Sibley]

Since governmental pensions are adjacent to my job....

There is a HUGE variety in government pensions in the US. Eligibility, benefits, contributions, and funding status run the full spectrum of possibilities. There are gov pensions which are 100% taxpayer funded, and others which are 100% employer funded, and everything in between. As a result, it's pretty much impossible to make blanket statements about governmental pensions. If someone is saying that the pension is terrible and that doesn't make sense when you compare that against the pension you know, either you're talking about different pensions or you're not using the same standards to evaluate.

And yes, there's a lot of very unrealistic pension plans out there, for one reason or another. If you have a pension, or are considering taking a job somewhere that offers a pension, then you should get the pension documents and look at them to see if its at all reasonable, and what the funding status is.

[Fomerly known as something]

Since governmental pensions are adjacent to my job....

There is a HUGE variety in government pensions in the US. Eligibility, benefits, contributions, and funding status run the full spectrum of possibilities. There are gov pensions which are 100% taxpayer funded, and others which are 100% employer funded, and everything in between. As a result, it's pretty much impossible to make blanket statements about governmental pensions. If someone is saying that the pension is terrible and that doesn't make sense when you compare that against the pension you know, either you're talking about different pensions or you're not using the same standards to evaluate.

And yes, there's a lot of very unrealistic pension plans out there, for one reason or another. If you have a pension, or are considering taking a job somewhere that offers a pension, then you should get the pension documents and look at them to see if its at all reasonable, and what the funding status is.

+1

I’ve often heard that FERS is not a good pension as compared to some state/local.  But seeing as my pay is in general higher than if I’d been a local my 40% of base pay pension is better than many of their 80% of pay pensions.  Aka it’s not a bad pension people.

[Villanelle]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

I think the affection for pensions among young people online has more to do with a desire for certainty and security in an increasingly uncertain world than an educated opinion on their pros and cons (especially how secure it actually is for a main tent pole of your retirement to be tied to the health and longevity of a stodgy old legacy company competing with younger companies with balance sheets uncluttered by uncertain pension liabilities).

And not just a stodgy old legacy company.  DH's pension is from the federal government.  But we are still overstating by most standards.  If you took our desired annual income and subtracted the pension payments, we will be over 4% saved for generating for the remainder.  If DH's pension goes away entirely, we are in black swan territory.  So I don't worry much about that.  But a haircut?  I'm not counting it out so I'm shoring up our non-pension tent pole in case the pension one is weakened.

Of course, DH is still happily working (SWAMI).  If he were miserable, we might be reconsidering that.  But wanting to account for the possibility of his pension decreasing is a concern we've discussed as just sound precaution.

And your DH does contribute to said pension although in the US it doesn’t reduce other space like our norther neighbors.

Now if he’s cough, an older employee, our contribution isn’t that much .8%, but those hired now have an automatic 4.4% deducted to pay their share.  So a younger coworker that I effectively will earn 3% less then I have over my career.

Are you saying my DH contributes to his pension?  He does not.  Or were you referring to someone else?  DH most definitely does not contribute to his pension.  Perhaps you are assuming military pensions are the same as non-military federal pensions.  But they aren't.  There is no contribution from the service member. (DH is under the old system, so I can't speak definitely about the new one.  I know it includes an investment match that DH doesn't get, but there's also a pension component.  My impression is there's still no contribution toward the pension though, but I wouldn't swear to that.)

[spartana]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

I think the affection for pensions among young people online has more to do with a desire for certainty and security in an increasingly uncertain world than an educated opinion on their pros and cons (especially how secure it actually is for a main tent pole of your retirement to be tied to the health and longevity of a stodgy old legacy company competing with younger companies with balance sheets uncluttered by uncertain pension liabilities).

And not just a stodgy old legacy company.  DH's pension is from the federal government.  But we are still overstating by most standards.  If you took our desired annual income and subtracted the pension payments, we will be over 4% saved for generating for the remainder.  If DH's pension goes away entirely, we are in black swan territory.  So I don't worry much about that.  But a haircut?  I'm not counting it out so I'm shoring up our non-pension tent pole in case the pension one is weakened.

Of course, DH is still happily working (SWAMI).  If he were miserable, we might be reconsidering that.  But wanting to account for the possibility of his pension decreasing is a concern we've discussed as just sound precaution.

And your DH does contribute to said pension although in the US it doesn’t reduce other space like our norther neighbors.

Now if he’s cough, an older employee, our contribution isn’t that much .8%, but those hired now have an automatic 4.4% deducted to pay their share.  So a younger coworker that I effectively will earn 3% less then I have over my career.

Are you saying my DH contributes to his pension?  He does not.  Or were you referring to someone else?  DH most definitely does not contribute to his pension.  Perhaps you are assuming military pensions are the same as non-military federal pensions.  But they aren't.  There is no contribution from the service member. (DH is under the old system, so I can't speak definitely about the new one.  I know it includes an investment match that DH doesn't get, but there's also a pension component.  My impression is there's still no contribution toward the pension though, but I wouldn't swear to that.)

I think you need to say that your DH has a military pension rather than a federal Gov pension. When people read that they assume he's on FERs and they are 2 different beasts!

[Fomerly known as something]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

I think the affection for pensions among young people online has more to do with a desire for certainty and security in an increasingly uncertain world than an educated opinion on their pros and cons (especially how secure it actually is for a main tent pole of your retirement to be tied to the health and longevity of a stodgy old legacy company competing with younger companies with balance sheets uncluttered by uncertain pension liabilities).

And not just a stodgy old legacy company.  DH's pension is from the federal government.  But we are still overstating by most standards.  If you took our desired annual income and subtracted the pension payments, we will be over 4% saved for generating for the remainder.  If DH's pension goes away entirely, we are in black swan territory.  So I don't worry much about that.  But a haircut?  I'm not counting it out so I'm shoring up our non-pension tent pole in case the pension one is weakened.

Of course, DH is still happily working (SWAMI).  If he were miserable, we might be reconsidering that.  But wanting to account for the possibility of his pension decreasing is a concern we've discussed as just sound precaution.

And your DH does contribute to said pension although in the US it doesn’t reduce other space like our norther neighbors.

Now if he’s cough, an older employee, our contribution isn’t that much .8%, but those hired now have an automatic 4.4% deducted to pay their share.  So a younger coworker that I effectively will earn 3% less then I have over my career.

Are you saying my DH contributes to his pension?  He does not.  Or were you referring to someone else?  DH most definitely does not contribute to his pension.  Perhaps you are assuming military pensions are the same as non-military federal pensions.  But they aren't.  There is no contribution from the service member. (DH is under the old system, so I can't speak definitely about the new one.  I know it includes an investment match that DH doesn't get, but there's also a pension component.  My impression is there's still no contribution toward the pension though, but I wouldn't swear to that.)

I think you need to say that your DH has a military pension rather than a federal Gov pension. When people read that they assume he's on FERs and they are 2 different beasts!

Yup.  I assumed he was a federal government employee based on your post.

[nereo]

Ah, that's very different than what I typically think of when I think of a pension.  The ones I'm familiar with are more like, "yeah, we will pay you less, but when you retire, you'll have a pension."  There are no direct contributions, just a lower salary that the company justifies by saying they will give you a pension.  Like health insurance in the US--you don't directly contribute to account for the costs (though you may pay a premium), but it is considered part of the overall compensation package.

I'm not at all a pension expert, but I've never heard of a pension that the employee doesn't contribute to. How is the pension funded then??

I think the affection for pensions among young people online has more to do with a desire for certainty and security in an increasingly uncertain world than an educated opinion on their pros and cons (especially how secure it actually is for a main tent pole of your retirement to be tied to the health and longevity of a stodgy old legacy company competing with younger companies with balance sheets uncluttered by uncertain pension liabilities).

And not just a stodgy old legacy company.  DH's pension is from the federal government.  But we are still overstating by most standards.  If you took our desired annual income and subtracted the pension payments, we will be over 4% saved for generating for the remainder.  If DH's pension goes away entirely, we are in black swan territory.  So I don't worry much about that.  But a haircut?  I'm not counting it out so I'm shoring up our non-pension tent pole in case the pension one is weakened.

Of course, DH is still happily working (SWAMI).  If he were miserable, we might be reconsidering that.  But wanting to account for the possibility of his pension decreasing is a concern we've discussed as just sound precaution.

And your DH does contribute to said pension although in the US it doesn’t reduce other space like our norther neighbors.

Now if he’s cough, an older employee, our contribution isn’t that much .8%, but those hired now have an automatic 4.4% deducted to pay their share.  So a younger coworker that I effectively will earn 3% less then I have over my career.

Are you saying my DH contributes to his pension?  He does not.  Or were you referring to someone else?  DH most definitely does not contribute to his pension.  Perhaps you are assuming military pensions are the same as non-military federal pensions.  But they aren't.  There is no contribution from the service member. (DH is under the old system, so I can't speak definitely about the new one.  I know it includes an investment match that DH doesn't get, but there's also a pension component.  My impression is there's still no contribution toward the pension though, but I wouldn't swear to that.)

I think you need to say that your DH has a military pension rather than a federal Gov pension. When people read that they assume he's on FERs and they are 2 different beasts!

The military is so different from all other US occupations it has to be viewed separately. No other job I can think of can send you knowingly into grave peril and incarcerate you if you refuse. You can be deployed oversees for years and be blocked from contacting or visiting your loved ones. The whole ethos behind military service is: you dedicate your entire life to serving and we will take care of you when you are done.

[farmecologist]

Since governmental pensions are adjacent to my job....

There is a HUGE variety in government pensions in the US. Eligibility, benefits, contributions, and funding status run the full spectrum of possibilities. There are gov pensions which are 100% taxpayer funded, and others which are 100% employer funded, and everything in between. As a result, it's pretty much impossible to make blanket statements about governmental pensions. If someone is saying that the pension is terrible and that doesn't make sense when you compare that against the pension you know, either you're talking about different pensions or you're not using the same standards to evaluate.

And yes, there's a lot of very unrealistic pension plans out there, for one reason or another. If you have a pension, or are considering taking a job somewhere that offers a pension, then you should get the pension documents and look at them to see if its at all reasonable, and what the funding status is.

Thanks for the education on this topic.  I had no idea pensions are so varied.  Likely because my spouse and I both have pensions with the private sector and neither are employee funded.  At any rate, we are both glad to have them, that's for sure!

[Psychstache]

Since governmental pensions are adjacent to my job....

There is a HUGE variety in government pensions in the US. Eligibility, benefits, contributions, and funding status run the full spectrum of possibilities. There are gov pensions which are 100% taxpayer funded, and others which are 100% employer funded, and everything in between. As a result, it's pretty much impossible to make blanket statements about governmental pensions. If someone is saying that the pension is terrible and that doesn't make sense when you compare that against the pension you know, either you're talking about different pensions or you're not using the same standards to evaluate.

And yes, there's a lot of very unrealistic pension plans out there, for one reason or another. If you have a pension, or are considering taking a job somewhere that offers a pension, then you should get the pension documents and look at them to see if its at all reasonable, and what the funding status is.

Thanks for the education on this topic.  I had no idea pensions are so varied.  Likely because my spouse and I both have pensions with the private sector and neither are employee funded.  At any rate, we are both glad to have them, that's for sure!

I think considering the existence of variation is just a good rule of thumb whenever you are talking lots of things in America (and probably other places). For example, the one that always grinds my gears (since it is my field) is when people want to talk about the "US public education system". There isn't one. There are, at a minimum, 52 public ed systems (50 states, DC, and DoD) that have some similarities and a few federal requirements, but there is a TON of variation.

The other one that comes to mind is people offering divorce advice without knowing which state a person is in, since that's another good example of this "there is no one system" principle.

[Villanelle]

Sorry, I clarified later on that it was military, so I assumed that was part of the conversation. 

[deborah]

Yes, it’s the same for other places where federation occurred too. Australia and Canada both have systems where these things (schooling, family law) vary by state. As defined benefit pensions (which is what we’re talking about) were initially introduced by each employer, they vary even more. As each country has started defined contribution schemes (like 401k), the employer commitments to those do vary, but the actual structure is defined by country legislation.

[fuzzy math]

I'm getting my crappy underfunded pension buyout after the new year. I stayed at that miserable job for way too long to qualify for it, and then inflation seriously hurt the value of it.

The "enhanced buyout offer" does not compare to the value of the money I alone contributed if it had been in a simple savings or conservative account. It also doesn't account for the $17k each year that they put in the "employer paid" section of my paycheck as far as what they wrote off as contributions to the plan under my name. I have almost enough hatred leftover for them still to inquire about where that annual $17k tax writeoff actually went. 

[Sandi_k]

Since governmental pensions are adjacent to my job....

There is a HUGE variety in government pensions in the US. Eligibility, benefits, contributions, and funding status run the full spectrum of possibilities. There are gov pensions which are 100% taxpayer funded, and others which are 100% employer funded, and everything in between. As a result, it's pretty much impossible to make blanket statements about governmental pensions. If someone is saying that the pension is terrible and that doesn't make sense when you compare that against the pension you know, either you're talking about different pensions or you're not using the same standards to evaluate.

And yes, there's a lot of very unrealistic pension plans out there, for one reason or another. If you have a pension, or are considering taking a job somewhere that offers a pension, then you should get the pension documents and look at them to see if its at all reasonable, and what the funding status is.

One way to get the scoop on a pension system is to check out the stats at Boston College. Their Retirement Research Center does the most complete assessment of pensions in the country:

https://crr.bc.edu/