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Old 01-21-2008, 09:57 AM
 
Location: St Augustine
604 posts, read 4,309,050 times
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I am looking for employment as a teacher in Florida...is anyone familiar with their retirement plans? They offer a choice of Drop/pension or a 401 type plan. How does the pension plan affect SS benefits?? as FL schools pay into ss benefits also. I'm 35 and plan to work 20 years. any insight which plan would be a better choice?
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Old 01-21-2008, 03:13 PM
 
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I don't know the particulars of your situation but ... a defined benefit pension is almost always better (if that's what you're referring to).

Just as an example: with my defined benefit pension I get 50 percent of my salary for life after 20 years of service ... plus health benefits.

With other employer 401K plans that I looked at, all they would contribute is one year's salary after 20 years ... that's it. Nothing more.

There was no comparison ... the defined pension benefit was much better. Besides, with my employer I can also contribute to a 401K although there's no matching funds.

As for SS, our payments probably will be reduced due to the pension but ... who can count on SS in 20 years anyway. If it's there, great but ... I'm not counting on it.
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Old 01-21-2008, 07:42 PM
Status: "0-0-2 start!" (set 15 days ago)
 
Location: The beautiful Rogue Valley, Oregon
7,291 posts, read 15,342,559 times
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Also keep in mind that because there is a pension when you sign up, that is no guarantee that the pension will be the same deal by the time you retire - or even that the company will still offer any kind of pension by then.

Wallet-tightening corporations tend to eye retiree benefits as one of the first disposable things.
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Old 01-22-2008, 02:45 AM
 
1,831 posts, read 4,795,523 times
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Quote:
Originally Posted by PNW-type-gal View Post
Also keep in mind that because there is a pension when you sign up, that is no guarantee that the pension will be the same deal by the time you retire - or even that the company will still offer any kind of pension by then.

Wallet-tightening corporations tend to eye retiree benefits as one of the first disposable things.
Usually I would agree with you but ... the OP is a teacher. Government employee pension funds tend to be safer. Afterall ... when's the last time you heard of government employees losing their pensions?

My state employee pension fund is protected by law so, the state cannot dip into that money. And ... it's 100 percent funded. When Schwarzenegger tried to mess with the pension fund (I live in California), the unions fought against it and Schwarzenegger lost.

The real safety test, IMO, was during the market crash of 2001-2002 ... even though the fund was down, nobody missed their pension checks.
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Old 01-22-2008, 09:08 AM
Status: "0-0-2 start!" (set 15 days ago)
 
Location: The beautiful Rogue Valley, Oregon
7,291 posts, read 15,342,559 times
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My in-laws are retiree from the U of F in Gainesville, and they've seen the terms of their pension change. Nothing as drastic as being cut back, but it's possible.

Also, look closely at the 401k - what are the options? Is it self-directed or do you only have a narrow range of choices? One company I worked for invested in funds which were private amalgams - so that you had to know every stock or bond or other instrument they held, and research each one individually, to have ANY idea of how the fund was doing, outside the quarterly reports. My son works for a large utility, and most of their 401k is somehow tied up with the company's stock. No matter how bullish you are on the company, that's just... stupid, to put all your future eggs in one basket.

EDIT: Google Oregon PERS reform to see what the state of Oregon did to pensions, btw....

Last edited by PNW-type-gal; 01-22-2008 at 09:56 AM..
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Old 01-23-2008, 03:43 AM
 
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I see your point. I guess I'm spoiled in California where the unions have done a pretty good job of protecting government employee pensions ... at least on the state level.
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Old 01-23-2008, 04:07 AM
Status: "The nicest curve on a woman's body is her smile" (set 15 days ago)
 
Location: Florida/Tennessee
2,401 posts, read 4,304,796 times
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Quote:
Originally Posted by tamcim72 View Post
I am looking for employment as a teacher in Florida...is anyone familiar with their retirement plans? They offer a choice of Drop/pension or a 401 type plan. How does the pension plan affect SS benefits?? as FL schools pay into ss benefits also. I'm 35 and plan to work 20 years. any insight which plan would be a better choice?
Pensions are state funded and SS is the fed. You pay into SS as well as your future employer, so they are unrelated and have no relationship with each other.

401 type plans are withdrawable plans when you reach the age of 59 1/2. If you are only gonna work till 55 then you'll have to do a 72T.

Pensions (check yours) sometimes allow you to withdraw funds at an earlier age.... but you must check. Not all pension plans are the same.

If it were me... I'd take the pension and establish a roth IRA. Having said that.... you must look at what the matching rate is from the employer 401. However.... if it's good and has good choices for investment options... then the employer 401 might be the better choice.

If you can do both (401 and pension) .... then do it! In this case.... more is better. Try a 20% savings rate (total), not including matching funds.
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Old 01-23-2008, 06:49 AM
 
Location: St Augustine
604 posts, read 4,309,050 times
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I guess I'll have to hunt down some online "calculators" and run numbers for different scenarios....before teaching I was a SAHM and have been keeping up on my roth and my husband has a simple ira thru work and does roth when we got extra $$...but we are both unfamiliar with pensions.

as sheri257 said, its a state of FL pension so I feel pretty secure the pension will be around in 20 years....have found that when they make changes to the plan they "grandfather in" and start anew as many docs state "if participant before XXXX" etc.
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Old 01-23-2008, 10:52 AM
GLS
 
1,985 posts, read 4,846,113 times
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Quote:
Originally Posted by tamcim72 View Post
I am looking for employment as a teacher in Florida...is anyone familiar with their retirement plans? They offer a choice of Drop/pension or a 401 type plan. How does the pension plan affect SS benefits?? as FL schools pay into ss benefits also. I'm 35 and plan to work 20 years. any insight which plan would be a better choice?
One way of evaluating pension (defined benefit) vs 401K (cash benefit) plans is to look at employer trends. Most employers are trying to push current employees into choosing cash benefit plans because they are cheaper for the employer. In economic downturns the employee shares in the risk, whereas, with a defined benefit plan they have made you a promise on a salary percentage basis. Actually you are lucky you have a choice. Most employers are automatically enrolling new employees in cash benefit programs. In a few years, the trend suggests that defined benefit plans will be phased out for new hires.

Obviously the above is very general and you have to analyze the specifics of your two choices. For example, most cash benefit plans tout the advantage of "portability" over defined benefits plans. If you only plan to be at a job for 2 to 5 years, you MAY get a better payout from the 401K plan.

Finally, I agree with Dave_n_Tenn. I would take the pension and keep shoving as much into your Roth as you can. Good luck.
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Old 01-23-2008, 12:14 PM
 
48,516 posts, read 83,901,398 times
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There was a study done and presented by public television not long ago. It to concluded that a defined benefit plan was almost always the best.They found that the reason most companies are going to 401K plans is becuase of cost to them. You also want to look at additional retirement plans offered to public employees in many states that you should take advantage of.
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