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crjack
04-18-2006, 05:16 PM
I have enjoyed reading many of the threads on retirement planning and have noticed that many people refer to pensions as part of their overall plan. DH and I work in different fields from one another but neither one of us has ever worked for a company that offers a pension. It never seemed unusual to me since I typically thought most private sector businesses were fading them out but they seem so popular on many of the threads I have read I wondered if it is our particular professions or age or other factors??

For those of you without, do you try and plan accordingly with more money invested into 401K and other options?

Just wondering if our plan varies much from others who don't have pensions. DH is 41 and I am 40 so we know we have many more years of work and investing ahead of us but it's nice to get ideas and thoughts from others in similar situations.

Chickysmom
04-18-2006, 05:29 PM
No pensions here but hubby does contribute quite a bit to 401K. I think the pension thing goes along with more state/coutny/city jobs and such than in the private sectors. Too bad really....

indylaw99
04-18-2006, 05:30 PM
I'll have a small pension from working as an attorney for LexisNexis. They have great benefits--pension, 401K, employee stock plan, etc. I'll only be there 6.5 years before I leave, but it will draw interest for 20+ (hopefully!) years before I need it.

I'm not really counting on it as part of our retirement fund, however, because we have seen so many company pension plans go belly-up over the last decade. I fear that is just going to continue to happen.

dvcgirl
04-18-2006, 05:37 PM
I have enjoyed reading many of the threads on retirement planning and have noticed that many people refer to pensions as part of their overall plan. DH and I work in different fields from one another but neither one of us has ever worked for a company that offers a pension. It never seemed unusual to me since I typically thought most private sector businesses were fading them out but they seem so popular on many of the threads I have read I wondered if it is our particular professions or age or other factors??

For those of you without, do you try and plan accordingly with more money invested into 401K and other options?

Just wondering if our plan varies much from others who don't have pensions. DH is 41 and I am 40 so we know we have many more years of work and investing ahead of us but it's nice to get ideas and thoughts from others in similar situations.

We have no pensions and so yes, we are saving accordingly. It changes the amount of retirement savings that we have to come up with...bigtime. A $40,000 per year pension is the equivalent of having saved one million dollars, and so we'll need quite a big amount if we'd like to maintain our currently lifestyle.

We are 38 and 37. We have been actively investing in our 401Ks since we were in our early 20s, both maxing them out by our mid to late 20s. My DH's current 401k is with his employer. I have a self-employed 401K which allows me to do 15K this year plus 25% of my profits....which is an awesome perk. We maxed out two Roths for as long as we qualified, but no longer do. Now everything beyond the 401Ks is in taxable accounts. We're just about to switch to a high deductible health plan so we can open up a health savings account. We'll treat that as a 401K for medical expenses down the road in retirement. Once in our 50s, we'll do the catch-up in our 401ks as well.

I think the key is to get as much as you can into those 401ks and Roths....anything that has a tax advantage. That's really the mega problem in starting to save for retirement later in life. It's not just the dollars catch-up that you have to play, but the loss in opportunity by not taking advantage of maxing out those 401ks and Roths when you could. Beyond that, if you can save more, make sure that you are in funds that are adequately managed from a tax standpoint so you see a nice return.

crzy4dsny
04-18-2006, 05:42 PM
The one good thing about my job, NYPD, is the pension. 20 years and out. Half pay plus a $12,000 variable supplement. Your pension is based on your last few years of service. So if you can knock out a ton of overtime you can do ok. I'll be 42 years old when I "retire".

crisi
04-18-2006, 05:42 PM
I had a pension in an early job. They cashed it out after I left and sent me a check which I was instructed to roll over into an IRA or pay tax consequences. I haven't had a pension since.

spiceycat
04-18-2006, 05:42 PM
so far work has kept our pension plan. we also have 401-k too.... I don't contribute anything to the pension. I contribute at least 7% (work matches 4%) - would like to contribute around 10 to 20% - but I got to get out of debit first....

Alots of similar companies have done away with the pension plan. but so far my company is kepting it....I hope they continue to do it.

I am hoping to live off my pension and SS and not even touch my 401-K - that would be my emergency fund.

very happy with the return on 401-K it averages out to be around 12%. low for some but high for most....

Kramer
04-18-2006, 05:42 PM
I have a pension plan at my job thanks to the State of NJ...

If I work:

30 years I can retire with a pension of 70% of my final years salary.
25 years I can retire with a pension of 65% of my final years salary.
20 years I can retire with a pension of 50% of my final years salary.

There is also currently a state law on the books that would bump each of those numbers up 5% if the pension plan reaches 104% funded anytime in the future.

Right now I am pretty much certain that I will pack it in after 25 years (12 years from now). I will be 47 years old and I like the idea of taking a couple years off to stay at home with my kids. Then I plan to go back to work and do something productive. My goal right now would be to get a job, any job, at the local University because after a year of employment I can send my kids to college there for free. So I will do just about anything there but clean toilets to foot the college bill.

I also contribute to a 457 plan at work and kick more money into 529 plans for the kids in case the aforementioned second career doesn't pan out. Oh.. I also put money into a Roth IRA every quarter as well.

Julia M
04-18-2006, 05:50 PM
Both dh and I have pensions, which sets us apart from many of our friends. We live in Silicon Valley, where most companies do not have pensions.

Dh works for an aerospace company. They recently announced that they would not be adding new employees to their pension, although at this time, nothing has changed for those currently in the system.

I work for a school district, so have the teachers state retirement. I have only worked part time since my kids were born, so I accrue pretty slowly. I will probbaly put in a few years at fullt ime before I retire, since the pay out is based on your last few years of pay.

Julia

franco
04-18-2006, 05:57 PM
No pension, 10% of salary goes into 401K. Wife and I both contribute max to Roth IRA's

EthansMom
04-18-2006, 06:34 PM
At DH's current company, there has been a pension and the company has also matched 401k contributions 50% of the first 6% the employee contributes. However, the company is changing over and encouraging employees to give up future pension contributions and instead take a 100% match of the employee's first 8% put into the 401k. DH is definitely taking the increased 401k match -- heck 8% in the 401k now beats a pension in the far future.

azgal81
04-18-2006, 06:42 PM
I have a pension I work through a local university. I have not invested in another 401K/Ira plan yet I am only 25. Right now putting in 7% of my income in my retirement fund through them and having them match it 100% is enough for me. Plus it's gaining quite a bit of interest. Once I am around 30 I will probably open another plan maybe a few years sooner then that.

Jon99
04-18-2006, 07:01 PM
My wife has a pension thru the State of Illinois, if she puts in 35 years she gets 75% of her highest years salary. With accumulated unused sick days, she will be done after 33 years at this pace.

Lyn5
04-18-2006, 07:12 PM
DH and I both have pensions (or should have pensions) at retirement. We both are also both entitled to medical benefits, although my benefit will likely be better than his. Hawaii is an expensive place to live, but after reading a lot of the post here recently, I am thankful we have a more regulated health care system. I do not know a single person around me (work, friends, family, neighbors, etc.) that does not have some kind of basic health insurance.

DVC Sadie
04-18-2006, 07:15 PM
I have a pension from the Air Force. We also socked away almost half of our income so we could retire early. We withdraw 5% a year but still keep putting money back into our retirement accounts since we don't know how long we will live. I am 51 and my dh is 44 so we could conceivably live another 40, 45 or more years.

PrincessKitty1
04-18-2006, 07:20 PM
I will have a miniscule pension from the state of Florida (about $500/month after 14 years employment) but hope to get in at least 6 more years with the state (eventually--I'm currently working for a private employer) to up my pension to $1000/month. 16 more years would bump it up to about $2000/month but it's very unlikely I would want to work that long (I'm 49 and plan to retire at 63).And we're socking away money into my 403B. DH is self-employed and does have an IRA but we are mainly contributing to my 403b.

A nice part of being retired from the state is if we do retire at 63 as we are planning, we are eligible to purchase excellent group medical insurance at the group rate for state employees.

DisneyPhD
04-18-2006, 07:25 PM
Ok, fess up. Who else miss read this title at 1st and thought it was an entirely different topic? :rotfl2: :rotfl:

I know I am not alone. :teeth:

DH gets a pension from work, but not sure of the details. It is pretty good since he teachs college and education unions are pretty good. I know your reitrement is based on who much you were making (total class load) in your last 2 years so many professors take on extra classes for the last 2 years before they retire.

rlduvall
04-18-2006, 08:17 PM
Ok, fess up. Who else miss read this title at 1st and thought it was an entirely different topic? :rotfl2: :rotfl:

I know I am not alone. :teeth:

I didn't notice it until you mentioned it. I almost spit out my water. :blush:

I must say my current job is incredible for the benefits. But, before I mention them, for many years I worked where there were no benefits, except for health insurance, etc. . . . and I didn't appreciate it because I was still a kid. :rolleyes: Anyway, my employer has a fully funded pension plan that is the type of plan that cannot be eliminated because of Federal regulations. I never can remember what that's called. I should receive about $2,000. a month at age 62, I am now 41 :furious: BUT, besides that, they put the maximum 15% contribution every year, on March 31st, into each employees' 401(k), which is actually called a 401(a) because the employee cannot contribute any due to it being the max. Aren't I so lucky??? :thumbsup2 Of course, we are expected to work at all times and not be :surfweb: on the disboards during work. ;)

blanq
04-18-2006, 08:35 PM
I work in county government and have a pension through our state of Minnesota PERA (Public Employee Retirement Association). I also have a deferred compensation plan (like a 401K), but my employer does not contribute to it. My public pension is not as near as good as some of those who have posted on this thread. I will be working until I am 62 and will not be able to retire with any decent income level until then. I don't know how long our pension plans will exist, as I know there is movement throughout the country to get rid of traditional public employee pensions. They are costing the tax payers a lot of money, and California, Illinois and Colorado are states that are in big trouble with their public employee pensions and have severely underfunded them. Our legislature is in session and there was a bill introduced to do away with our traditional pensions, but I heard it is dead for this session. Many public employees trade good salaries in the private sector for lesser salaries in government work with the understanding that they get some good benefits, including a pension.

My DH works in a power plant, for a utility and he does have a traditional pension as well, and his employer contributes a minimal amount to his 401K (around $1K per year) and to his ESOP (Employee Stock Ownership Plan). A few years ago they gave employees the option of keeping their traditional pension, or of going to a portable pension option and all new employees no longer have the option of the traditional pension. DH stuck with his traditional pension, as he has the rule of 90 and almost 20 years inwith his company. Many private companies are going the route of portable pensions as they don't want long term liability to their retirees and so many newer employees do not believe they will stick with one company their entire career.

j's m
04-18-2006, 09:31 PM
DH and I own a small business, just us and one full timer and one part timer. We don't have a pension since if we did for ourselves, we would also have to contribute for our employees. Also no 401's.

Our only tax deferred savings are IRA's, which really doesn't allow us to put much away each year. Our retirement savings is really just our regular savings, after tax and we pay tax on the interest every year.

jillyjoey
04-19-2006, 08:57 AM
Both dh and I have pensions. (Both in public sector -- so pension makes up for lack of salary compared to private sector counterparts) We also have 401K. But will it still really be enough if prices keep going up? Who knows.

BethR
04-19-2006, 09:11 AM
Well, we do have a pension, but I have no idea about the details of it. Dumb, huh. :blush:

mickeyfan2
04-19-2006, 09:14 AM
We have no pension and really don't want one. I prefer to control my destiny not a company. They can cut your pension since they are in charge. We will be funding our retirement with 401K, IRA and extra savings.

jedijill
04-19-2006, 09:21 AM
I work for Sprint and after the merger with Nextel, the company decided to end the pension program. I am vested in what I had earned up until the plan closing. I never counted on it for my retirement but it will be a few dollars extra someday.

Jill in KC

takemetoo
04-19-2006, 11:01 AM
Dh has a pension (I'm a SAHM). He's a Catholic school teacher, so he doesn't make a lot of $ but has killer benefits. He can retire at 55 with 70% of his salary, plus $750/month for medical until age 63 or 65. We save to the match in his 403b, and are funding Roth IRAs this year, though if ss still exists, some on-line calculators tell me we don't need to save anything for retirement. Better safe than sorry, I figure.

nowellsl
04-19-2006, 11:09 AM
I have 26 years in the FL retirement plan. I 've always hoped I could retire with 30 years (I'll be 50) but I doubt it now. I'll probably have to wait until I can collect Social Security as well (if there is any left).

stemikger
04-19-2006, 11:20 AM
I never had a pension. I max out my 401k and when I turn 50 I will do the catch-up provision. I started late, so whatever will be there when I retire I will have to make due with.

This year I will start putting money into my small IRA as well. The company I currently work for puts in 4% of my salary into my 401K so I guess that is a small pension.

I didn't start saving until I was 30, I turn 42 this year but didn't max it out until recently. I'm hoping when it's my time to retire, social security will still be there for me. By then I will have no mortgage so I will get by. I don't see myself as a world traveler, so if I could take a couple of nice trips a year, I will be happy.

Kramer
04-19-2006, 11:20 AM
We have no pension and really don't want one. I prefer to control my destiny not a company.

That might be true in the private sector, but I have a state pension and only contribute 8.5% of my salary to it each year and after 25 years I will retire with a pension equal to 65% of my salary. I would have to be saving WAY more than 8.5% to equal that return in a 401k. I'll happily settle for a pension.

ducklite
04-19-2006, 11:30 AM
DH and I both worked for the same company for a bit over five years. (He was there before me and is still there.) They ahve a pension plan, and we are both in it. I stayed long enough to be eligible--which was about four years longer than I wanted to. :rotfl2: :rotfl2:

I can either leave my pension money with them and get a set amount monthly for my entire life afte a certain age, or I can withdraw it's current now, and provided it's rolled into an IRA not pay any penalties. I'm actually going to do that for a number of reasons. I did some math, and think in the long run it will be worth more monthly if it grows in an IRA rather than sits in the pension fund. Additionally the IRA has a right of survivorship, the pension doesn't.

DH has about double the time in that I do, and is hoping to retire from that company, so his pension should be fairly good when it comes. But we aren't planning on any pension or Social Security money, and we both have 401K's and IRA's that we fund and plan on using for our retirement needs. Anything else will be the gravy.

Anne

mickeyfan2
04-19-2006, 11:31 AM
That might be true in the private sector, but I have a state pension and only contribute 8.5% of my salary to it each year and after 25 years I will retire with a pension equal to 65% of my salary. I would have to be saving WAY more than 8.5% to equal that return in a 401k. I'll happily settle for a pension.
Very true in the private sector and will be an issue soon in the public sector. My Aunt, who is a retired teacher in Il, told me the state just merged (not sure of all the details) the teachers pension plan (the the teachers funded) with the general state pension fund (which was underfunded) and they are now worried about the future. I know other states are looking at the state pensions as being too expensive, so they may start cutting them too. Only time will tell. I hope that all who have a pension will have it when they retire and for their entire retirement. I tend to like to control my destiny, so I chose a different path.

shades
04-19-2006, 11:35 AM
I'm retired at 41 - with an Air Force pension. Smartest thing I ever did was to spend 20 years in the military and retire with 1/2 of my base pay. Dh works and probably will work for another 20yrs. He likes working, though :thumbsup2

ameraumi
04-19-2006, 11:58 AM
I will not have one as I am self employed. But DH will have one from the Army Reserves as well as from a auto parts plant he worked for. However, we just found out this plant has filed for Chapter 13 so I think he is going to look into getting it out now and rolling it over into an IRA.

candykisses
04-19-2006, 11:59 AM
I have a defined pension plan and could retire now with full benefits, but with a 12 yr old, I don't think that will be happening any time soon. :rotfl2: Another nice benefit I have is our health insurance will continue to be paid until I reach social security age.

I also have a Roth IRA and an unmatched 401K.

pearlieq
04-19-2006, 12:25 PM
DH works for local government, and therefore gets a pension. However, I don't know if he'll stay there the full 8 years for vesting. He's been there 3 years already and that's the longest he's ever been at any job (he's in IT). We'll see. The stinker is that if he does leave before he's vested, all we get back are his contributions. I'm not even sure if we get some kind of interest rate on those.

We're mostly counting on Roth IRAs for our retirement funding. We fully fund one for each of us, and I put 15% into my company's 401k, for as long as I'll continue to work there.

BethR
04-19-2006, 01:16 PM
Well, we do have a pension, but I have no idea about the details of it. Dumb, huh. :blush:


Well, at least this thread forced me to look into the details of our pension and here are the particulars as I understand them:

We contribute 1.5% of DH's pay to his pension. We have done this for 25 years that DH has worked there and will continue until he retires.
When DH retires, every month we will be paid (OK - take this slow) 1/12 of 2% of the total that he contributed while working - until his death or for a minimum of 60 payments if he should die before that.

I have no idea whether it is good or bad unless I would go back and see what 1.5% of his income has been each years and estimate what it will be until he retires, add everything up and then see what 1/2 of 2% of that will be. :confused3

YachtClubWoman
04-19-2006, 01:22 PM
My husband and I both have pensions and 401Ks. We both work for pharmaceutical companies.

The pensions are fully funded by the companies and we cannot contribute. The 401Ks match up to 6%

barbeml
04-19-2006, 01:38 PM
DH and I have no pensions.

I accept that and we are working hard to save for retirement, but I'm getting mighty sick of watching my taxes zoom up to pay for all those public employee pensions.

mickeyfan2
04-19-2006, 01:55 PM
I accept that and we are working hard to save for retirement, but I'm getting mighty sick of watching my taxes zoom up to pay for all those public employee pensions.
And this is happening all over the US. The public pensions will be an issue in the future.

texasthree
04-19-2006, 02:00 PM
DH has a pension through the Navy. The pension and health insurance is what keeps us from thinking about getting out. He can retire at 42 and have a whole 2nd career before retiring. The only other retirement we have right now is an ira. I am hoping by 30 we can open an educational ira and another account for us.

tikilyn
04-19-2006, 02:46 PM
my dh will get a decent pension when he retires. He works for DHS (Department of Homeland Security). Theres a weird calculation on how they figure it. Something like he'll receive 1.7% for every year that hes worked. Plus he is buying back his Military time to add to the years worked. Then they take his three highest paid years and devide it by three and thats what well get. Its usually about 35 to 45000.00 a year. And if SS is still around he'll get that too.

Then we also have a TSP account. It's like a 401k. We are investing only 7% right now but the gov matches us 100% up to 4%. We will also get to keep our health care insurance and get it at a reduce amount.

I think we'll be ok hopefully.

carlamouse
04-19-2006, 03:02 PM
DH and I have no pensions.

I accept that and we are working hard to save for retirement, but I'm getting mighty sick of watching my taxes zoom up to pay for all those public employee pensions.

Public Employees pay taxes too! At least in the state of Georgia. ;) That's what I miss about living in FL...no state taxes. The tourists helped fund the government. Now that I'm back in my home state (GA), I get to file two tax returns in April. :rolleyes: At least I'll get some of it back when I retire with that public employee pension. ;)

tbelfonti
04-19-2006, 03:07 PM
I'm an engineer for a private company. They do not offer pensions so I put away money in my 401k.

Feralpeg
04-19-2006, 03:10 PM
I have no pension. I have savings and a 401k plan.

PaulaSue
04-19-2006, 04:21 PM
Nope, none of Dh's jobs had a pension. Stocks and 401k in Sears but nothing else in the other companies he worked/works for. :guilty:

We really have to get started saving soon.

pearlieq
04-19-2006, 04:37 PM
but I'm getting mighty sick of watching my taxes zoom up to pay for all those public employee pensions.

The contribution by DH's work (public employee) is 4%. How is that any different than a private sector company matching a 401k plan?

Providing a retirement benefit is just one expense of employing a person to do a job. I think you, as a taxpayer, probably come out ahead seeing as how your kids can go to school (taught by an underpaid teacher), you can call the police if someone robs your house (because everyone knows patrol officers really clean up :rolleyes: ), there's a State's attorney to prosecute the bad guys (an attorney making WAY less than market wage), and you have roads to use (created by an engineer who could double her salary doing private consulting).

Oh yeah--and all those people pay taxes! I've never heard of anyone who went into a government job for the money. I'm sorry you feel that providing a basic retirement benefit to employees is overspending. :guilty:

WeLoveThePoly
04-19-2006, 05:19 PM
My company doesn't and DH's current company doesn't either. However, he is starting a new job and they do have a pension plan. Hopefully, he'll retire from there!

We both have 401(K) accounts too.

Debbie

Kramer
04-19-2006, 08:58 PM
Very true in the private sector and will be an issue soon in the public sector. My Aunt, who is a retired teacher in Il, told me the state just merged (not sure of all the details) the teachers pension plan (the the teachers funded) with the general state pension fund (which was underfunded) and they are now worried about the future. I know other states are looking at the state pensions as being too expensive, so they may start cutting them too. Only time will tell. I hope that all who have a pension will have it when they retire and for their entire retirement. I tend to like to control my destiny, so I chose a different path.

I guess we could "what if" this to death, but it wouldn't get us anywhere. We could make the same suppositions about the stock market and what would happen to your 401k if it crashed.

My pension fund is extremely stable and well funded. I'm not losing any sleep and I very lucky to be in the situation that I am.

Kramer
04-19-2006, 09:04 PM
DH and I have no pensions.

I accept that and we are working hard to save for retirement, but I'm getting mighty sick of watching my taxes zoom up to pay for all those public employee pensions.


Since you live in NJ I can comment on this directly. Any increase in your state taxes has little to do with public pensions. The public pension system that I belong to is so stable and well funded that the State has allowed most towns in New Jersey to defer indefinitely their contributions to the State Pension sytem. This has been going on for at least the last 10 years... so, at least in the case of my pension system, the employees are funding it, not the taxpayers.

If your taxes are "zooming" up its likely due to increase costs in other areas and mismanaged spending by your elected officials.

blanq
04-19-2006, 09:18 PM
The contribution by DH's work (public employee) is 4%. How is that any different than a private sector company matching a 401k plan?

Providing a retirement benefit is just one expense of employing a person to do a job. I think you, as a taxpayer, probably come out ahead seeing as how your kids can go to school (taught by an underpaid teacher), you can call the police if someone robs your house (because everyone knows patrol officers really clean up :rolleyes: ), there's a State's attorney to prosecute the bad guys (an attorney making WAY less than market wage), and you have roads to use (created by an engineer who could double her salary doing private consulting).

Oh yeah--and all those people pay taxes! I've never heard of anyone who went into a government job for the money. I'm sorry you feel that providing a basic retirement benefit to employees is overspending. :guilty:

Amen!

brando5111
04-19-2006, 09:21 PM
Ugh, looking at all these posts makes me feel a bit "sick". My husband and I have both been "laid off" from our jobs that we always thought would be long-term. Anywho, even with all our contributions, unless one of us dies to leave the other the life insurance, we are screwed!

It's so sad; I feel bad for all of us that are in this situation (more than we think I'm sure) and even with our best efforts, are so far from our retirement goals. I was always taught an education would guarantee your future, well I guess that doesn't include a bachelor degree anymore, if it's not a masters or greater, your might as well have been a high school drop out! At least from where I sit….

I guess you'll see us handing you a shopping cart at Walmart when we're 70-80! (Hmm maybe considering what’s happening to the country with the Bush administration suicide can be given a free pass by the new Pope!?).....

georgina
04-19-2006, 09:50 PM
We have no pension and really don't want one. I prefer to control my destiny not a company. They can cut your pension since they are in charge. We will be funding our retirement with 401K, IRA and extra savings.
I don't understand why you wouldn't want a pension. The pension is fully funded by the employer in our case. I don't see it as controlling our destiny at all. We contribute to 401k and IRA's and have savings. The extra dollars from a pension will be gravy on top of that, provided it is still there when DH retires. Plus he may have good retiree health care; he's been there 26 years so we're hoping that doesn't go away, they did cut it for new hires.

Stein
04-19-2006, 11:14 PM
I was given the option of keeping the traditional pension (defined benefit) plan, or having an additional 4% deposited into my 401k (in addition to the match).

I chose the 401k route for a number of reasons.

1. I do not think there is a good chance I will retire from my current employer the way things are these days.

2. The 401k is guaranteed and cannot be revoked.

3. The pension can be scrapped, reduced, reworked, or go bankrupt at any time if you read the fine print.

I think for younger people, many believe pensions are just too risky. They don't pay well unless you have 20 or more years with an employer. Many things can happen.

Also, many government and private pensions have gone belly up. Even if they are strong now, a new raider CEO can fix that within months of being hired.

Personally, I couldn't sleep with a majority of my nest egg in a pension. The 401k option gives me an easy way to gauge my savings and predict what I have and what I need.

But, on the flip side, they do offer a sweet benefit if you get one that pays off for life. It really depends on your situation and employer.

mickeyfan2
04-20-2006, 06:08 AM
I was given the option of keeping the traditional pension (defined benefit) plan, or having an additional 4% deposited into my 401k (in addition to the match).

I chose the 401k route for a number of reasons.

1. I do not think there is a good chance I will retire from my current employer the way things are these days.

2. The 401k is guaranteed and cannot be revoked.

3. The pension can be scrapped, reduced, reworked, or go bankrupt at any time if you read the fine print.

I think for younger people, many believe pensions are just too risky. They don't pay well unless you have 20 or more years with an employer. Many things can happen.

Also, many government and private pensions have gone belly up. Even if they are strong now, a new raider CEO can fix that within months of being hired.

Personally, I couldn't sleep with a majority of my nest egg in a pension. The 401k option gives me an easy way to gauge my savings and predict what I have and what I need.

But, on the flip side, they do offer a sweet benefit if you get one that pays off for life. It really depends on your situation and employer.
All the above is why I am glad not to have a pension that I could have reduced or eliminated. I know how much I have.

dcfromva
04-20-2006, 06:54 AM
I was given the option of keeping the traditional pension (defined benefit) plan, or having an additional 4% deposited into my 401k (in addition to the match).

I chose the 401k route for a number of reasons.

1. I do not think there is a good chance I will retire from my current employer the way things are these days.

2. The 401k is guaranteed and cannot be revoked.

3. The pension can be scrapped, reduced, reworked, or go bankrupt at any time if you read the fine print.

I think for younger people, many believe pensions are just too risky. They don't pay well unless you have 20 or more years with an employer. Many things can happen.

Also, many government and private pensions have gone belly up. Even if they are strong now, a new raider CEO can fix that within months of being hired.

Personally, I couldn't sleep with a majority of my nest egg in a pension. The 401k option gives me an easy way to gauge my savings and predict what I have and what I need.

But, on the flip side, they do offer a sweet benefit if you get one that pays off for life. It really depends on your situation and employer.

Considering what has happened to some major pensions in the last few years, you make very good points. Those company pensions are not as secure as they were once thought to be....

But, even with a 401K account, the companies' 401K rules may prevent the employee from fully managing their 401K account. I'm thinking of Enron rank and file employees who had Enron stock in their 401k accounts and did not have a clue as to what was going on at the top. Enron put a lockdown on the 401K accounts and did not permit rank and file employees to sell Enron stock while the company executives were allowed to sell. The rank and file employees could only watch as their account values plummeted. link to Enron story (http://dir.salon.com/story/tech/feature/2002/01/17/401k/index.html)

There are a lot of companies which use company stock to pay the match on their 401K. The match can add up to some healthy amounts over time. The rules vary from company to company, but it is not unusal to have rules in place which prevents an employee from selling the company holdings while still employed with them. So, if the company goes bankrupt and the company stock becomes worthless you could be at risk for losing some of the 401K savings, too....

-DC :earsboy:

Local_Girl
04-20-2006, 09:30 AM
My DH retired from the Air Force after 20 yrs. at 38 yrs. old, and has had a monthly pension check since and will continue to until he dies (which better be after me, LOL!). We also contribute to a 401K through his second career job...unfortunately, other than these retirement preparations, we are poster children for stupid financial moves! :sad2: But we're trying to do better--thanks Budget Boarders for all the interesting and informative financial info and advice here! :goodvibes

crisi
04-20-2006, 10:58 AM
401ks are safer than pensions, but they are not completely safe from being raided by the corporation. Its happened, and it can be a huge legal hassle to get your money, sometimes unsuccessful. You need the cooperation of your employer to have the money released to you (or at least, you often do, it may not be always). Also, Enron employees can tell how how corporate malfesence can affect your retirement, even in a 401k!

However, pensions don't belong to the individual. They are an asset of the corporation or the state, until they actually cut you a check. Hence, they are not safe from corporate malfesence or misfesence at all. In the case of Northwest Airlines employees, my understanding is that their pensions are gone - they've been turned over to the federal governments guarentee program. The government (assuming they maintain their committment) will pay those pensions, but at a reduced rate (my understanding is that people will get about 30% of what they thought they'd get). One of my accounting professors highly recommended that you treat the probablilty a pension sort of like you treat social security - it may be there, but it may not be. State and Federal pensions are seen as more secure, but one of my other professors was the lobbyist for our state's teachers pension fund, and they are needing to get the legislature to fund the teachers pension system, in Minneapolis it is bankrupt - and you can't get money from a bankrupt system. The legislature, he said, was not obligated to rescue the Minneapolis teacher's pension system (I believe they did for the next few years).

The safest option is to bury your money in your backyard during the dead of night, but unlike daylilies, unfortuantely, it doesn't grow back there and has no tax advantages.

What we do (with no pensions involved and at the advice of the Accounting prof's recommendation - his real job is as a CPA) is have 401ks through our companies, but when we switch employers, we don't roll to the new company- we roll to an IRA. This spreads our risk among a couple different retirement accounts and limits the exposure we have to the risk that our companies don't release the money.

Scary, isn't it.

Sarah'sMomfrom PA
04-20-2006, 11:05 AM
My husband worked at the same company for 33 years...went into work at 6:00 a.m. one day and by 9:00 a.m., he was out of a job. Two weeks later, the company declared bankruptcy. DH was supposed to received a pension of around $1700.00 a month and filed for it immediately since he was over 55 and had over 30 years in the plan. We thought that we had it made.

We soon found out that the company had underfunded the pension by $145 million and since they went bankrupt, no more contributions would be going in. Fast forward, the pension was turned over to the PBGC (Pension Benefit Guaranty Company) and his benefit was reduced by 50% and there is no guarantee as to how long the pension will last since the PBGC is constantly getting company's pension plans (especially the airlines) so we could get the pension for 1 year or 5 years and that could be it.

Luckily, we had a 401(K) and I have a 403(B) plus Roth IRA's and regular IRA's to cushion the blow but it is just a shame what these companies are allowed to do to their employees. His plan was a defined benefit plan not a cash balance plan so there was no way that we could take a lump sum. My plan at work is a cash balance so I'll take my money and run and invest it myself.

dvcgirl
04-20-2006, 11:26 AM
I don't understand why you wouldn't want a pension. The pension is fully funded by the employer in our case. I don't see it as controlling our destiny at all. We contribute to 401k and IRA's and have savings. The extra dollars from a pension will be gravy on top of that, provided it is still there when DH retires. Plus he may have good retiree health care; he's been there 26 years so we're hoping that doesn't go away, they did cut it for new hires.

Well, I guess that the only thing about a pension is the fear that it may not be there. Many employers deduct a certain amount of your paycheck each week and apply that to your pension down the road. That, I would not like. I like to control my own destiny as much as I possibly can and not rely on others to make my investment choices for me.

And it's not just private pensions folding these days, there are also some public pension funds in trouble, and this is the first year that they need to report whether they are underfunded. That's not to say that all pension funds are in trouble, they aren't, but the problem is growing. I always think of the United airline pilots, who were supposed to get a little over 100K per year in retirement and ended up with about 30K a year.

Of course we all have to worry about big market dips with respect to our 401k, IRA and taxable retirement accounts, but at least I *know* that the money I originally put in there at least made it to the account. For years, corporations were able to play all kinds of games with pension funds, and they still do to a major degree. One of those games was to report that the funds were fully funded when in some cases they were underfunded by as much as 70%.

crisi
04-20-2006, 11:47 AM
... but it is just a shame what these companies are allowed to do to their employees.

I agree, but having done some studying on this, I think that pensions folding is the predictable result from an ill thought out system.

1) Funding pensions is a highly complicated thing, you need to take into account how long you expect your employees to live, what your expected rate of return is. Pension fund managers weren't the only ones to fall for "the new economy" and say days of 12%+ returns were here forever. And its hard to predict how long people will live.

2) The model assumed "the corporation" was an unmovable object. But it isn't. Corporations have lives, like human beings do. And some companies die. And since the pensions are an asset of the corporation, they become subject to bankruptcy proceedings, in which a future promise to pay their employees is secondary to paying the bills they already have.

3) If you work for a company your whole working life (lets say from 20 to 65 - 35 years) and you live another 20 years, that is a long time in terms of history. A lot of things can happen during that period of time that can have positive or negative impact. I'm not real eager to promise I'll be able to give you $100 in 2061, although I may have that money in my pocket today. Maybe over that time I'll need to spend that $100 for my own survival. Which is what a lot of companies did when they raided their pensions.

In the case of Northwest Airlines, I'm as upset at Union management as I am at the execs who and got paid huge salaries to run the company into the ground. The Union should have demanded conversion to 401ks twenty years ago - because this problem was evident for Northwest that long ago. The purpose of Unions is supposed to be to protect the interests of the workers, and I think they really did their membership a disservice.

Now, there are other problems in Corporate America. Raiding pensions and paying executives millions of dollars a year is unforgivable. But that has just hastened the demise of some of these companies - not kept them from being healthy.

Jen_in_NH
04-20-2006, 01:14 PM
The one good thing about my job, NYPD, is the pension. 20 years and out. Half pay plus a $12,000 variable supplement. Your pension is based on your last few years of service. So if you can knock out a ton of overtime you can do ok. I'll be 42 years old when I "retire".

DH and I have the same thing as firefighters in NH. You can retire after 20 years, at age 45, and you get 66% of your best three years. Plus health insurance. Much as the pay may not be the greatest, the benefits are definitely worth it.

Jen

dvcgirl
04-20-2006, 02:09 PM
My husband worked at the same company for 33 years...went into work at 6:00 a.m. one day and by 9:00 a.m., he was out of a job. Two weeks later, the company declared bankruptcy. DH was supposed to received a pension of around $1700.00 a month and filed for it immediately since he was over 55 and had over 30 years in the plan. We thought that we had it made.

We soon found out that the company had underfunded the pension by $145 million and since they went bankrupt, no more contributions would be going in. Fast forward, the pension was turned over to the PBGC (Pension Benefit Guaranty Company) and his benefit was reduced by 50% and there is no guarantee as to how long the pension will last since the PBGC is constantly getting company's pension plans (especially the airlines) so we could get the pension for 1 year or 5 years and that could be it.

Luckily, we had a 401(K) and I have a 403(B) plus Roth IRA's and regular IRA's to cushion the blow but it is just a shame what these companies are allowed to do to their employees. His plan was a defined benefit plan not a cash balance plan so there was no way that we could take a lump sum. My plan at work is a cash balance so I'll take my money and run and invest it myself.

Ugh....that just sucks. There's no other way to put it. I'm sorry that you're going through that. I just think that is so incredibly unfair. And you are right, we are seeing just the beginning of this. There was a very good article on cnn.money called "America's Pension Time Bomb". I'll post the link below. The kind of thing that you and your DH are experiencing is beginning to unravel all over the country, and the PBGC is so underfunded it's pathetic. 30 cents on the dollar is what many retirees see once their pension fund ends up there. It's postively criminal to employ someone for 30+ years, make all kinds of promises to them and then pull out the rug from under them. Here's the link to that article...

http://money.cnn.com/2006/01/13/news/economy/pension_fortune/index.htm

arminnie
04-20-2006, 02:57 PM
I worked in Silicon Valley (well the very Northern tip of it) where pensions are rare. My company did have a pension plus a fabulous 401K match (4:1) because as a non-public company we were unable to offer stock option like most of the other companies did.

I officially retired on 3/31 of this year. I'm taking a lump sum distribution of my retirement for several reasons. One - the interest rates are so low right now that it makes the lump sum bigger. But more importantly that money is mine as of now. I can roll it into an IRA. I do not need to touch it for a few more years. I don't have to worry about the company obliterating my pension in 20 years (or less).

I know a monthly benefit would be for the rest of my life, but if I died next year my heirs would get nothing. If I only take out 3 or 4% a year and do not invest it foolishly it should last forever, and then have some left.

So I have a pension, but I do not intend to take it as a monthly income.

Chicago526
04-20-2006, 03:20 PM
Half 'n' half. DH has a pension through his company (run by the Union, so hopefully it's being funded properly since the fox isn't guarding this particular hen house) but they won't tell us the details of it until he qualifies for the pension, he has to be there 5 years before he qualifies. Then they'll send him a packet of info and we can do much better planing from there (and investigate the pension and see if we can tell how well funded it is).

I get a 401k. They do a 100% match for the first 3% I contribute, plus I get another 8% of my yearly gross pay in years the company meets it's budget goals, which has been every year I've worked here (privately, I think the company intends to pay this no matter what unless we are litteraly fighting for survival, it's a good company run by good people, but that's just a guess). I'm fully vested now (you're 100% after 5 years). Right now I only put in the 3% to get the full match, but I'll be uping that next month when I get my raise. I'll do that again next year, and keep doing so (if all goes well) until I max it out. As far as I'm concerend, you can't have too much money to retire with! You can always figure out a way to spend it!