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Author: Lauraly One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 19257  
Subject: State pension vs. Higher salary Date: 4/18/2012 5:28 PM
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I am not retired, but I hope to retire well. I am 40 and for the last 4 years have worked as a programmer for a state agency here in Arizona.
State workers have not received a raise in 5 years, and this year is not looking like it will happen either.

When I started here, I took a 5% pay cut, which I though was a fair exchange for the state benefits, namely the pension.
Four years later my salary has stagnated, while the going rate in the public sector for programmers with my skills has gone up 10-20k.

My question is, at what point is a pension not worth it? I like the security of it, but as the wage gap increases, I wonder if I could just make my own investments with the extra money from a higher salary.
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Author: telegraph Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17666 of 19257
Subject: Re: State pension vs. Higher salary Date: 4/18/2012 5:55 PM
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you probably missed out on the best deal.

It's best to have 30 years of service....that usually guarantees quite a pension.

How much pension will you get if you retire at the age you want to retire at? HOw fast does it accumulate and when can you retire?

Is AZ likely to dump the plan and stick your 'cash balance' into a 401K for you and end the pension plan like many others might do?




t.

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Author: TMFPMarti Big funky green star, 20000 posts Home Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17667 of 19257
Subject: Re: State pension vs. Higher salary Date: 4/18/2012 6:24 PM
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My question is, at what point is a pension not worth it? I like the security of it, but as the wage gap increases, I wonder if I could just make my own investments with the extra money from a higher salary.

There are a couple of other things possibly more important for you to weigh.

How secure is that pension, and what are its provisions? Government pensions are subject to the whims of the politicians in office when the benefits are being paid unless they're buying a third-party annuity during your working years. Along the same line, what about inflation? When my mother turned 65 the state of Kansas sill had mandatory retirement at that age. (It's since been outlawed for most occupations at the Federal level.) In the last couple of years before her death at 89 her pension wasn't enough to pay her health insurance premium.

Are you also paying into Social Security? If not, your SS benefit could be reduced by the Windfall provision. If that applies you can read up on that at www.ssa.gov.

Phil
Rule Your Retirement Home Fool

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Author: fleg9bo Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17668 of 19257
Subject: Re: State pension vs. Higher salary Date: 4/18/2012 6:34 PM
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DW and I both worked for governments for a short time back in the 70s, she for the state of MN and I for Hennepin County (Minneapolis). Until a few years ago I thought we might have been better off sticking with those jobs than entering the private sector.

While we earned much more and amassed a comfortable nest egg in the private sector, had we risen to equivalent career levels with government, we could have retired early (as we actually did) and our pensions today would likely be more than the cautious annual withdrawl we take from our private portfolio. And after all, the portfolio is subject to market forces while the pensions would have been guaranteed by the taxpayers of MN and Hennepin, right?

Maybe not so right. The way finances are starting to unravel in various places due to irresponsible pension and benefit promises made to public employees in the past, might well have me reassessing that sense of security.

--fleg

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Author: SeattlePioneer Big funky green star, 20000 posts Top Favorite Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17669 of 19257
Subject: Re: State pension vs. Higher salary Date: 4/18/2012 6:54 PM
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Retiree Health Insurance? Especially EARLY Retiree Health Insurance?

This is an increasingly rare bird in the private sector.






Seattle Pioneer

Paying $1136/month for my individual health insurance at age 62

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Author: alstroemeria Big gold star, 5000 posts Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17670 of 19257
Subject: Re: State pension vs. Higher salary Date: 4/20/2012 1:30 PM
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Something to keep in mind while trying to determine if your state pension is worth it... Does the pension cover state legislators? That's the saving grace of my husband's state pension. To trash the pensions of state college Retirees, legislators would have to trash their own pensions. I'm pretty confident that won't happen!

My husband plans to retire next year with 10 years of service, so the pension will be small (something like $700/month with the 100 % survivor option), but he can also stay in the health plan at the employee rate (he was grandfathered--you now need 15 years for that bennie), which turns into a Medicare supplemental at age 65 at the same premium (well, the premium is apt to be higher a few years from now).

Oh, it sux to have a pay freeze--BTDT, sorry it happened to you.

Something else to keep in mind while you make decisions about future employment...Private sector programmers are often laid off in their 50s, so do try to save what you need to retire on by then.

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Author: CountUptotenII Big funky green star, 20000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 17671 of 19257
Subject: Re: State pension vs. Higher salary Date: 4/20/2012 2:51 PM
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Somewhat off your point, but it seems clear that the several government entities didn't (and don't) have money in the budget for current salaries. The pensions are later, from someone else's budget. Moves the pain til later. Those chickens are coming home to roost.

Count Uptoten

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