Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
Okay so let me start off by saying that since I got sick I haven't handled finances or the bills. Those things were never my husband's strength but we've managed to stay afloat with me helping out when I feel okay on good days "as seldom as they come along"....
We recently relocated our family cross country (from New England to CA). It was quite expensive to do (my husband's job didn't cover any of the costs but hubby says that we can write off any out of pocket costs which will help us save $$ on taxes)... The whole time we were debating if this move would be worth it, I asked my husband to research the numbers and compare to what we were spending. He said that we'd actually be saving money when it is all said and done due to the fact that health insurance is cheaper at the new job). I trusted my hubby's judgement and was quite sickly at the time and didn't have energy nor clarity to focus and research it myself (thanks to brain fog).
So I look at my husband's pay stub (he now gets paid monthly vs weekly- HUGE adjustment for us). He now pays $575/month for a pension!!!!! I was absolutely shocked. Apparently his job puts in 3x his contribution. However, he isn't even eligible for a pension until he works there for 5 years. (Not that he is planning on leaving but you never know what could happen!).
So now I have all these questions about how pensions work.. And my hubby and I just had a bit of an argument over him not researching this more thoroughly (he doesn't know the answers to my questions).. So I figured maybe you guys could shed some light:
His job said that he is eligible for a pension after 5 years of service. So what happens to the money he contributes for the first 4 years?? If he were to leave or (God forbid) pass away, is that it? Kiss the money goodbye? Or is it like typical retirement plan (401k) where you have access to your money (which I understand would be taxable but at least it is accessible should you quit or pass away)....?
How do pensions work? My husband said he is confused because it isn't like a typical matching program where the money he contributes and his job contributes is *his* when he retires.. Apparently it all goes into a fund for everyone to draw off when they retire. Wtf! So what if pension terms & conditions change? Who manages these funds? Idk.. It just seems like a horrible idea compared to typical retirement... Maybe that's because I'm completely ignorant as to how it works
My hubby said it is mandatory that he contribute a certain percentage each month (which for him works out to be almost $600/month )... Is this common for pensions? He cannot adjust the percentage he contributes. He cannot opt-out. Right now we could desperately use the $500+ each month!!
Anyone have a good understanding of pensions and care to explain to an ignorant person like me? lol
It sounds like your husband works for the State of CA, City, or County of CA type job, or similar CalPERS/CalSTERS type union pension plan.
For example my pension works like this. I contribute 6.5% of my pay to the pension plan each month. After 5 years, I'm vested into the retirement plan. I earn 2% of my highest 3 year salary average for every year of service. So when I'm 55 (minimum retirement age) and I have 33 years of service, I can retire and collect 66% of my normal pay.
If at anytime I wanted to leave before the 5 year vesting period, the employer would return all contributions with 6% annualized interest. So it's basically a guarenteed 6% return if I wanted to leave. Again this is a example of how my pension would work.
It sounds like your husband works for the State of CA, City, or County of CA type job, or similar CalPERS/CalSTERS type union pension plan.
For example my pension works like this. I contribute 6.5% of my pay to the pension plan each month. After 5 years, I'm vested into the retirement plan. I earn 2% of my highest 3 year salary average for every year of service. So when I'm 55 (minimum retirement age) and I have 33 years of service, I can retire and collect 66% of my normal pay.
If at anytime I wanted to leave before the 5 year vesting period, the employer would return all contributions with 6% annualized interest. So it's basically a guarenteed 6% return if I wanted to leave. Again this is a example of how my pension would work.
If you leave and collect your pension is it taxed?
Yes he'd pay taxes if he left and took a payout. Pension contributions were never taxed, so they'll be taxed as ordinary income if he were to take a distribution.
Instead of complaining about the pension contribution, the OP should be counting her lucky stars. Fewer people have jobs which provide pensions now as compared to 30 or 40 years ago. Financial security in retirement is a wonderful thing. It would be one reason for the husband to hang onto that job for the long term if at all possible.
Seriously, a good pension is better than gold. The best thing to do would be to write down your questions and have your husband ask the HR department to explain the details.
A pension is pretty much considered the very best of the best for retirement plans. The contribution level from the employer is amazing!!
Basically pensions give you a guaranteed lifetime income and typically give you a percent of your highest 5 earning years. They often come with a retiree health insurance option as well. When he retires, you typically have the option to take 100%, 75%, 50% or 25% of your monthly benefit. Usually with the 75% or lower options, you have access to a retiree health insurance plan--this would take the place of a Medicare Supplement plan. If you take the 75% option, for example, you get 75% of the benefit, plus health insurance, while your husband is alive. When he dies, however, you will get 25%. It is STRONGLY encouraged to have enough life insurance to cover that deficit, and a good portion of that should be whole life so you KNOW you will have the insurance.
So, make a nice dinner for your husband tonight and thank him for taking you to a place where he has this option...and then never leave this company/employer
The rest of us have to do it the hard way by socking away whatever we can in our 401(k) or IRA account, often with no employer matching. If you put $6,000/year into a 401(k) without employer matching, you're going to retire poor unless you start at age 20 with no breaks until age 65. The same in a pension with the employer kicking 3x that amount lets you retire after 20 years with your income stream intact.
Instead of complaining about the pension contribution, the OP should be counting her lucky stars. Fewer people have jobs which provide pensions now as compared to 30 or 40 years ago. Financial security in retirement is a wonderful thing. It would be one reason for the husband to hang onto that job for the long term if at all possible.
Hard to count your lucky stars when you don't understand how something works and just see the $500+ deduction... When you're paying a lot of medical bills it is easy to freak out over a high deduction/expense that you had previously never known about.
Thankfully another city data member was nice enough to take the time to explain to me in lay man's terms how it works. Now I am feeling better about all of it
Please register to post and access all features of our very popular forum. It is free and quick. Over $68,000 in prizes has already been given out to active posters on our forum. Additional giveaways are planned.
Detailed information about all U.S. cities, counties, and zip codes on our site: City-data.com.
Please register to participate in our discussions with 2 million other members - it's free and quick! Some forums can only be seen by registered members. After you create your account, you'll be able to customize options and access all our 15,000 new posts/day with fewer ads.
)... Is this common for pensions? He cannot adjust the percentage he contributes. He cannot opt-out. Right now we could desperately use the $500+ each month!! 
