Got a pension? What is it in comparison to your last paycheck? (spouses, 2013)
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Fortunately I like my job very much, live a very full life outside of it, so working two additional years as long as I continue with good health will not be burden for me. But I will admit sometimes I feel like the financial discipline it has taken expecially during this last leg of the race to retirement is like training for the Olympics. I am shooting for what I consider a personal gold medal win after what will be a total of 46 years of training/work, but if I end up with the silver or bronze I will still be very happy.
I can relate to this. At 50, I started catch up contributions to my TSP. A couple of years later I added a Roth IRA and then a Health Savings Account. During that time I paid extra on my mortgage and paid if off in less than 20 years. Now I'm saving cash to have money for closing costs on my home and relocation costs to move to another part of the country. I've deferred retirement for 2 years to increase my pension to about 36% of salary. It seems like the savings never ends if I want to meet my goals. I started my career late at age 29 after years of college and working low paying jobs. Then my investments skills weren't good and the recession was a big blow. Now within a year of retirement, I keep a conservative allocation. Just putting 10% of salary in TSP for 30 years wasn't sufficient. It took saving about 15% of salary in my 40's and 30% of salary in my 50's and early 60's to catch up.
And it's amusing how CalPERS loves to point out that the average pension paid out is only around $30k a year. What many do not understand is that the minimum time you need to pay in in order to draw out is 5 years. If you look at the CalSTRS pension there are some who draw a few thousand a year. That low amount skews the statistics since most in the system stay until retirement of at least 25-35 years and get huge payouts for life (including cost of living increases).
I am curious what you consider to be a "huge payout". (Actual dollar figure, please).
My wife teaches at a private school. She has been there for 30 years. When she retires next year her pension will be $800 a month. This is about 30% of her last salary amount. Is this common? Typical?
For comparison, this is a simplification of the Federal Employee Retirement Plan (FERS) for new hires.
Contribute 4.4% of salary to pension plan.
Contribute 6.2% to Social Security (like most people)
Contribute 1.45% to Medicare (like most people)
After working 30 years and reaching age 60 (for example),
1.0% of high three salary times number of years, so:
1.0 x 30 = 30% for the annuity (pension).
I worked for 35+ years for what was formerly the world's largest company. Three years ago they discarded pensions for all salaried employees. If the plan had stayed intact, my pension would have been in the range of 35% of my final salary.
So, what is your net bottom line because of this? Instead of 35%, what will you be getting? Sounds like you were close enough to retirement your benefjt may have been frozen at 30%?? I assume there was a tiny compensating factor in the form of increased 401k and/or defined contribution plan company deposits. The older one is, the less significance these have, of course.
When my company did this, retirement benefit to age 75 was cut 50%, reduced from 20% of salary to 10%; after age 75 when cash deposits accounts were depleted, retirement benefit was further reduced another 50%, so that defined benefit replaced 5% of salary. Nary a COLA in sight, of course.
About the same. My pension is 30% of my final paycheck after 20 years of service. My brother-in-law retired with 50% after 22 years of service in the Army.
What concerns me most about this is that your wife was only making roughly about $2650 a month net pay after 30 years at the same school. That can't be right, I didn't do the math but that is likely equivalent to only ~$20 an hour. Maybe public is very different, but the public school teachers in my rural town are all making 80-120k after 15-20 years of service. (Their salaries are public) Most new teachers start at 40-45k.
Are you sure that number is right?
It's not unusual for a private school to have a pension formula of 1% to 1.5% per year, so I don't think the $2650 pension figure is out of line, that might represent as little as 30% of her last salary which in that case would be around $8840 a month.
Yes, but not all employees participated in the voluntary payroll deduction system. I participated since the age of 25, the earliest age at which employees could participate in the voluntary additional component of the Pension Plan. When the company dropped the pension plan each employee was provided with an "account" which contained all pension contributions (both company and individual provided) which was to remain frozen until the employee retired. This amount was said to be the Net Present Value of the former pension plan payments a retired employee would receive for life.
Translation; whether I left at age 56 or age 65 I would receive the same amount of money. I could elect to receive these funds as an annuity the company would purchase for me (they just took away my pension after ~35 years, can I trust them to not screw with the annuity in another decade or two?), or I could take it as a lump sum and manage it myself.
I left at age 56 by resigning via the retirement process, took the lump sum, turned it over to the Financial Planner we had been using for 12 years for him to manage for us, found an identical job at a good sized firm within 6 weeks - a company which does not throw employees away like garbage when they reach their mid-50's! I always planned to work until age 68, now I have an employer who will allow that.
After 35 years of service I have no pension, no post-retirement health insurance, and no post-retirement life insurance. Benefits which had been promised to all employees since before I started working for them. It is almost like I was never even there.
FWIW, the company is still in business and making tens of billions of dollars each year in profits.
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I could elect to receive these funds as an annuity the company would purchase for me (they just took away my pension after ~35 years, can I trust them to not screw with the annuity in another decade or two?), or I could take it as a lump sum and manage it myself.
