Anyone track their actual pension benefit start date?

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baconavocado
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Anyone track their actual pension benefit start date?

Post by baconavocado » Sun Nov 03, 2019 11:23 pm

In other words, the date your pension plan stops paying you back your own money and starts paying you money from the pension fund.

For example, I paid a certain percentage of my salary into my pension plan throughout my working career. The plan paid a fixed interest rate on those deposits and issued an annual statement to me that showed my payments, the accrued interest, my account balance, and an estimate of the pension amount at retirement age. If I left employment before vesting, my payments could be refunded to me.

At retirement, the annual statements stop and monthly payments start. In the beginning, all the payments come out of your account, money that was withheld from your paycheck. If you die before your account is exhausted, your survivor is entitled to a refund of the remaining account balance. If you survive long enough for your account to be exhausted, subsequent payments come from the pension fund. (Of course, if you die and you've named a beneficiary, payments continue to be made to the beneficiary throughout their life, or in accordance with the payout option you specified at retirement.)

I retired in 2017 and I calculated that I won't start receiving benefits that I didn't actually pay for until March 2021.

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Re: Anyone track their actual pension benefit start date?

Post by tibbitts » Sun Nov 03, 2019 11:46 pm

baconavocado wrote:
Sun Nov 03, 2019 11:23 pm
In other words, the date your pension plan stops paying you back your own money and starts paying you money from the pension fund.

For example, I paid a certain percentage of my salary into my pension plan throughout my working career. The plan paid a fixed interest rate on those deposits and issued an annual statement to me that showed my payments, the accrued interest, my account balance, and an estimate of the pension amount at retirement age. If I left employment before vesting, my payments could be refunded to me.

At retirement, the annual statements stop and monthly payments start. In the beginning, all the payments come out of your account, money that was withheld from your paycheck. If you die before your account is exhausted, your survivor is entitled to a refund of the remaining account balance. If you survive long enough for your account to be exhausted, subsequent payments come from the pension fund. (Of course, if you die and you've named a beneficiary, payments continue to be made to the beneficiary throughout their life, or in accordance with the payout option you specified at retirement.)

I retired in 2017 and I calculated that I won't start receiving benefits that I didn't actually pay for until March 2021.
I have 10 years of actual service, 2 I bought, and 1 from sick leave. So 13 years. It will take about 4 years from 1/1/2020 (first payment) for me to receive the first dollar not from my account, but my employer contributed to the account too.

For the two years I paid for entirely, break-even will be about 14 years from 1/1/2020 (age 75), depending on what interest rate you choose to assume.

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Re: Anyone track their actual pension benefit start date?

Post by gr7070 » Sun Nov 03, 2019 11:53 pm

Who cares. It's a sunk cost.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Sun Nov 03, 2019 11:59 pm

gr7070 wrote:
Sun Nov 03, 2019 11:53 pm
Who cares. It's a sunk cost.
A pension is a benefit. This is a way of measuring to what extent you've taken advantage of the benefit.

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Re: Anyone track their actual pension benefit start date?

Post by Jakabedy » Mon Nov 04, 2019 12:03 am

A super rough estimate: 4 years, which seems to be the same for several folks. Interesting.

eta: I'm 10.25 years away from retiring with 16 years of service. I contribute 10.7% of my income toward my pension.
Last edited by Jakabedy on Mon Nov 04, 2019 12:05 am, edited 1 time in total.

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Re: Anyone track their actual pension benefit start date?

Post by neilpilot » Mon Nov 04, 2019 12:04 am

Each of my 2 pensions were Defined Benefits plans, and as such my actual benefit started the first month of my retirement.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Mon Nov 04, 2019 12:07 am

neilpilot wrote:
Mon Nov 04, 2019 12:04 am
Each of my 2 pensions were Defined Benefits plans, and as such my actual benefit started the first month of my retirement.
So you didn't have to make payments into the pension fund? No withholding from your paycheck for your pension?

Sweet

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Re: Anyone track their actual pension benefit start date?

Post by gr7070 » Mon Nov 04, 2019 12:07 am

baconavocado wrote:
Sun Nov 03, 2019 11:59 pm
gr7070 wrote:
Sun Nov 03, 2019 11:53 pm
Who cares. It's a sunk cost.
A pension is a benefit. This is a way of measuring to what extent you've taken advantage of the benefit.
You've already retired. Nothing is changing this, thus the sunk cost.

The time to look closely at the value of your benefits was when you could change your overall compensation.

Unless there's something I'm missing here - very possible.

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Re: Anyone track their actual pension benefit start date?

Post by retiredflyboy » Mon Nov 04, 2019 12:14 am

Around 4 years.
Facts are stubborn things. Everything works until it doesn’t.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Mon Nov 04, 2019 12:26 am

gr7070 wrote:
Mon Nov 04, 2019 12:07 am
baconavocado wrote:
Sun Nov 03, 2019 11:59 pm
gr7070 wrote:
Sun Nov 03, 2019 11:53 pm
Who cares. It's a sunk cost.
A pension is a benefit. This is a way of measuring to what extent you've taken advantage of the benefit.
You've already retired. Nothing is changing this, thus the sunk cost.

The time to look closely at the value of your benefits was when you could change your overall compensation.

Unless there's something I'm missing here - very possible.
That's one way to look at it, another way is to watch your health post-retirement so you can maximize your lifespan and thus your pension benefit. Get as much as you can.

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Re: Anyone track their actual pension benefit start date?

Post by gr7070 » Mon Nov 04, 2019 12:35 am

baconavocado wrote:
Mon Nov 04, 2019 12:26 am
gr7070 wrote:
Mon Nov 04, 2019 12:07 am
baconavocado wrote:
Sun Nov 03, 2019 11:59 pm
gr7070 wrote:
Sun Nov 03, 2019 11:53 pm
Who cares. It's a sunk cost.
A pension is a benefit. This is a way of measuring to what extent you've taken advantage of the benefit.
You've already retired. Nothing is changing this, thus the sunk cost.

The time to look closely at the value of your benefits was when you could change your overall compensation.

Unless there's something I'm missing here - very possible.
That's one way to look at it, another way is to watch your health post-retirement so you can maximize your lifespan and thus your pension benefit. Get as much as you can.
I'm looking to maximize my time here, but for absolutely no consideration of maximizing what I take from my pension plan.

I'm looking to maximize my enjoyment of life here via time with family and friends. I couldn't care less how that compares to my pensions ROI.

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Re: Anyone track their actual pension benefit start date?

Post by gr7070 » Mon Nov 04, 2019 1:02 am

Additionally, you're comparing a fictitious number. That interest added to your contribution is fictitious now that you're receiving retirement benefits that number has no relevance.

Comparing your withdrawn amount to some fake accumulated amount doesn't matter either. Why not use 8% or 12%, heck use -10% your break even is that much faster. It's made up anyway.

If you have a defined benefit you can calculate your rate of return for every month lived. I still don't understand why one cares in the slightest.

I'm living for the sake of life and what I do with it, not how many checks I cash.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Mon Nov 04, 2019 1:20 am

gr7070 wrote:
Mon Nov 04, 2019 1:02 am
Additionally, you're comparing a fictitious number. That interest added to your contribution is fictitious now that you're receiving retirement benefits that number has no relevance.

Comparing your withdrawn amount to some fake accumulated amount doesn't matter either. Why not use 8% or 12%, heck use -10% your break even is that much faster. It's made up anyway.

If you have a defined benefit you can calculate your rate of return for every month lived. I still don't understand why one cares in the slightest.

I'm living for the sake of life and what I do with it, not how many checks I cash.
There are probably differences between pension plans, but in my case the accumulated amount, my account balance, is not fake. As I stated, if I die before my account is depleted, the balance can be refunded to my survivor.

Best of luck to you.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Mon Nov 04, 2019 1:53 am

baconavocado wrote:
Mon Nov 04, 2019 1:20 am
gr7070 wrote:
Mon Nov 04, 2019 1:02 am
Additionally, you're comparing a fictitious number. That interest added to your contribution is fictitious now that you're receiving retirement benefits that number has no relevance.

Comparing your withdrawn amount to some fake accumulated amount doesn't matter either. Why not use 8% or 12%, heck use -10% your break even is that much faster. It's made up anyway.

If you have a defined benefit you can calculate your rate of return for every month lived. I still don't understand why one cares in the slightest.

I'm living for the sake of life and what I do with it, not how many checks I cash.
There are probably differences between pension plans, but in my case the accumulated amount, my account balance, is not fake. As I stated, if I die before my account is depleted, the balance can be refunded to my survivor.

Best of luck to you.
I made a mistake in my last statement. If I die pre-retirement, my account balance can be refunded to my survivor. If I die post-retirement and I haven't specified a beneficiary or depleted my account, the balance reverts to the plan.

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Re: Anyone track their actual pension benefit start date?

Post by UpperNwGuy » Mon Nov 04, 2019 3:31 am

Why are we even having this discussion?

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Re: Anyone track their actual pension benefit start date?

Post by Valuethinker » Mon Nov 04, 2019 3:36 am

baconavocado wrote:
Mon Nov 04, 2019 12:26 am
gr7070 wrote:
Mon Nov 04, 2019 12:07 am
baconavocado wrote:
Sun Nov 03, 2019 11:59 pm
gr7070 wrote:
Sun Nov 03, 2019 11:53 pm
Who cares. It's a sunk cost.
A pension is a benefit. This is a way of measuring to what extent you've taken advantage of the benefit.
You've already retired. Nothing is changing this, thus the sunk cost.

The time to look closely at the value of your benefits was when you could change your overall compensation.

Unless there's something I'm missing here - very possible.
That's one way to look at it, another way is to watch your health post-retirement so you can maximize your lifespan and thus your pension benefit. Get as much as you can.
You can certainly wreck your health - tobacco, excessive consumption of alcohol, obesity etc. Many occupations, particularly blue collar, are associated with shorter life spans. Poor people do not live as long by quite a dramatic amount.

But your health in retirement is very much determined by your genes once you strip out those bad things. Some people are raring to go in their 90s, some are falling apart in their early 70s.

My father managed 70 years without any major operations or medical issues. Then, he had 2 heart bypasses in 8 years (before the latter one, he could not walk due to a clogged artery). He still walked 3-4 miles every day when he died.

And something completely different killed him.

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Re: Anyone track their actual pension benefit start date?

Post by delamer » Mon Nov 04, 2019 11:53 am

With federal civil service pensions, a portion of each month’s pension is not taxable because it is funded by the employee’s own contributions (which are made post-tax). The total number of months with a non-taxable portion varies depending on age at retirement and whether there is a spousal annuity.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Mon Nov 04, 2019 12:10 pm

Valuethinker wrote:
Mon Nov 04, 2019 3:36 am
You can certainly wreck your health - tobacco, excessive consumption of alcohol, obesity etc. Many occupations, particularly blue collar, are associated with shorter life spans. Poor people do not live as long by quite a dramatic amount.

But your health in retirement is very much determined by your genes once you strip out those bad things. Some people are raring to go in their 90s, some are falling apart in their early 70s.

My father managed 70 years without any major operations or medical issues. Then, he had 2 heart bypasses in 8 years (before the latter one, he could not walk due to a clogged artery). He still walked 3-4 miles every day when he died.

And something completely different killed him.
I agree that lifestyle factors, like diet and exercise and the other ones you mentioned, have a large effect on lifespan and quality of life as we get older.

I'm hoping to live long enough to maximize my pension benefit and not be one of the people who pay into the plan for many years and then die soon after retiring. That's exactly what happened to several of my colleagues.

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Re: Anyone track their actual pension benefit start date?

Post by Jack FFR1846 » Mon Nov 04, 2019 12:56 pm

neilpilot wrote:
Mon Nov 04, 2019 12:04 am
Each of my 2 pensions were Defined Benefits plans, and as such my actual benefit started the first month of my retirement.
My one small pension starts whenever I decide I want it to start. I turned 62 back in January and that's where I could have started to get monthly payments. It was 100% company funded and is now administered by Fidelity, so I can see monthly payments based on the exact month I want to start. I plan to take a lump sum at 65. The way the plan is set up, increases in monthly or lump sum stop after 65.
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Re: Anyone track their actual pension benefit start date?

Post by gr7070 » Mon Nov 04, 2019 1:11 pm

baconavocado wrote:
Mon Nov 04, 2019 12:10 pm
I'm hoping to live long enough to maximize my pension benefit and not be one of the people who pay into the plan for many years and then die soon after retiring. That's exactly what happened to several of my colleagues.
Money's just not that important and a horrible barometer for life. Maximize the air you breathe and the neurons firing.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Mon Nov 04, 2019 1:42 pm

gr7070 wrote:
Mon Nov 04, 2019 1:11 pm
baconavocado wrote:
Mon Nov 04, 2019 12:10 pm
I'm hoping to live long enough to maximize my pension benefit and not be one of the people who pay into the plan for many years and then die soon after retiring. That's exactly what happened to several of my colleagues.
Money's just not that important and a horrible barometer for life. Maximize the air you breathe and the neurons firing.
That's an interesting point of view for the Bogleheads forum.

I would say that understanding how your pension works and getting the biggest benefit from it is one way to manage your finances post-retirement. For example, rather than working a long time to get the largest pension possible (and running the risk of dying before you realize all of the benefits you paid for), save money in a 401k or Roth and retire earlier. You might find that you get much more out of your pension than you paid into it, and that you have much more free time breathe air and fire your neurons.

Of course, as others have noted, every pension is a little different and YMMV.

I'd also point out that simple annuities work the same way - in the beginning, their just giving your own money back to you. You have to outperform in the lifespan department to get the biggest benefit.

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Re: Anyone track their actual pension benefit start date?

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Re: Anyone track their actual pension benefit start date?

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Re: Anyone track their actual pension benefit start date?

Post by Thesaints » Tue Nov 05, 2019 6:49 pm

Two considerations:

1) Is the money contributed calculated on an inflation-adjusted basis ?

2) Is the insurance value of the pension plan accounted for ? In other words, the fact that the pension will pay no matter how long one ends up living.

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Re: Anyone track their actual pension benefit start date?

Post by celia » Tue Nov 05, 2019 8:17 pm

DH and I each bought "extra years of service" to increase the size of our pensions. He used post-tax money and I used tIRAs to pay for it. The part that is the return of your post-tax money is not taxed again when the pension starts until you get the "same dollar amount" back. After that, the whole pension is taxed.

After 10 years of retirement, his post-tax money is still being returned to him. I think it is supposed to take 12 or 15 years until all the post-tax money is returned. That doesn't mean the base pension is built the same way since most people buy the "extra years" when they are near retirement while the base pension contributions started when you were employed there.

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Re: Anyone track their actual pension benefit start date?

Post by Duckie » Wed Nov 06, 2019 6:51 pm

baconavocado wrote:In other words, the date your pension plan stops paying you back your own money and starts paying you money from the pension fund.
It depends on the figuring. If I include only the amounts I paid into the pension plan it was used up in about five years. If I also include their growth estimates (expected earnings and unrealized gains) it took about 11 years. However, I doubt their estimates (which were made before I retired) expected 2007-2009.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Thu Nov 07, 2019 12:58 am

Thesaints wrote:
Tue Nov 05, 2019 6:49 pm
Two considerations:

1) Is the money contributed calculated on an inflation-adjusted basis ?

2) Is the insurance value of the pension plan accounted for ? In other words, the fact that the pension will pay no matter how long one ends up living.
1) No. I suppose I could have done that but it would have been much more complicated since there were many contributions over a long period of time. However, the pension plan made an annual interest payment on the total account balance at the end of every year, so that would adjusted the value of the dollars.

2) Not sure how to do that.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Thu Nov 07, 2019 1:03 am

celia wrote:
Tue Nov 05, 2019 8:17 pm
DH and I each bought "extra years of service" to increase the size of our pensions. He used post-tax money and I used tIRAs to pay for it. The part that is the return of your post-tax money is not taxed again when the pension starts until you get the "same dollar amount" back. After that, the whole pension is taxed.

After 10 years of retirement, his post-tax money is still being returned to him. I think it is supposed to take 12 or 15 years until all the post-tax money is returned. That doesn't mean the base pension is built the same way since most people buy the "extra years" when they are near retirement while the base pension contributions started when you were employed there.
Even if you buy extra years of service, as @tibbitts also noted above, you can still calculate the total amount you've spent on your pension (add up everything that was withheld from your paycheck and add the extra payments made to buy service credit), and now calculate how long it has taken to get those benefits back post-retirement. No need to separately analyze the money spent to buy extra service credit unless you're facing that decision and trying to figure out if it's worthwhile. You already bought the service credit so lump all your payments into the pension plan together.

Now, how long before you're getting benefits that you didn't actually pay for yourself?

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Re: Anyone track their actual pension benefit start date?

Post by Thesaints » Thu Nov 07, 2019 2:37 am

baconavocado wrote:
Thu Nov 07, 2019 12:58 am
1) No. I suppose I could have done that but it would have been much more complicated since there were many contributions over a long period of time. However, the pension plan made an annual interest payment on the total account balance at the end of every year, so that would adjusted the value of the dollars.
But you are calculating your "break-even" based on nominal dollars. If I contributed $1000 fifty years ago, I'm not even close to breaking even after collecting ten $100 payments today.
2) Not sure how to do that.
Then it is not a fair comparison. You are neglecting to account for the actual value of one side of the equation.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Thu Nov 07, 2019 10:17 am

Thesaints wrote:
Thu Nov 07, 2019 2:37 am
baconavocado wrote:
Thu Nov 07, 2019 12:58 am
1) No. I suppose I could have done that but it would have been much more complicated since there were many contributions over a long period of time. However, the pension plan made an annual interest payment on the total account balance at the end of every year, so that would adjusted the value of the dollars.
But you are calculating your "break-even" based on nominal dollars. If I contributed $1000 fifty years ago, I'm not even close to breaking even after collecting ten $100 payments today.
2) Not sure how to do that.
Then it is not a fair comparison. You are neglecting to account for the actual value of one side of the equation.
Can you suggest a way to do the calculation you describe in 2)? I would guess that the value of the insurance depends on the stability of the pension plan, the ability of the plan to make the payments. We've seen some major corporations reneg on their pension obligations over the years, even some local governments have failed to pay their pensions.

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Re: Anyone track their actual pension benefit start date?

Post by Admiral » Thu Nov 07, 2019 11:21 am

18 months is the estimate on our plan that was given to us. That is, after 18 months your cash balance (your contribution) is depleted and it's the employer's money plus interest. This may have upped a bit due to recent changes that are upping our contributions. I think in some cases years of service and salary (which affect the payout) make the payoff period longer. There's also a maximum percent of salary that one can earn. I think it's like 85%.

Pretty good deal! I agree that this conversation is mostly academic.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Thu Nov 07, 2019 12:54 pm

I looked again at the question of whether the dollars that I invested into the pension plan during my working career should be adjusted for inflation before determining when those contributions are depleted during the payout phase of the plan and I decided they shouldn't be adjusted. The reason is that my pension plan paid a fixed annual interest rate on those contributions. The interest that was paid had the effect of adjusting the value of the contributions, although the rate that was paid was generally higher than the prevailing inflation rate. My pension account had a discrete value that was reported annually, and as I mentioned, that account value could have been refunded to me if I had left employment before vesting.

I thought it was reasonable to adjust the value of the monthly payments during the payout phase, so I assumed an average annual inflation rate of 3% during the payout phase (and I assumed that the remaining contributions would continue to accrue interest at the previous rate).

This adjustment rolled back my "start date" by about 3 months, in other words, my contribution account will be depleted by December 2020 and I begin to get real benefits in the year 2021.

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Re: Anyone track their actual pension benefit start date?

Post by Admiral » Thu Nov 07, 2019 1:16 pm

baconavocado wrote:
Thu Nov 07, 2019 12:54 pm
I looked again at the question of whether the dollars that I invested into the pension plan during my working career should be adjusted for inflation before determining when those contributions are depleted during the payout phase of the plan and I decided they shouldn't be adjusted. The reason is that my pension plan paid a fixed annual interest rate on those contributions. The interest that was paid had the effect of adjusting the value of the contributions, although the rate that was paid was generally higher than the prevailing inflation rate. My pension account had a discrete value that was reported annually, and as I mentioned, that account value could have been refunded to me if I had left employment before vesting.

I thought it was reasonable to adjust the value of the monthly payments during the payout phase, so I assumed an average annual inflation rate of 3% during the payout phase (and I assumed that the remaining contributions would continue to accrue interest at the previous rate).

This adjustment rolled back my "start date" by about 3 months, in other words, my contribution account will be depleted by December 2020 and I begin to get real benefits in the year 2021.
I guess I'm flummoxed by why you care. It's well known that for most savers in (non-DB) retirement accounts, much of the final account balance upon retirement is one's own contributions. That is, the money you put in, not the growth. In many cases it can exceed 40%.

But... so what? It's not like you spent the money. It's yours, and you used it to earn compound interest. Upon retirement it's returned to you. Imagine a job where your employer matched nothing. I know many attorneys who get zero matching. It's ALL their money.

Why do you care when "your money" runs out and your "employer's money" or "growth" begins?

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Thu Nov 07, 2019 7:44 pm

Admiral wrote:
Thu Nov 07, 2019 1:16 pm
I guess I'm flummoxed by why you care. It's well known that for most savers in (non-DB) retirement accounts, much of the final account balance upon retirement is one's own contributions. That is, the money you put in, not the growth. In many cases it can exceed 40%.

But... so what? It's not like you spent the money. It's yours, and you used it to earn compound interest. Upon retirement it's returned to you. Imagine a job where your employer matched nothing. I know many attorneys who get zero matching. It's ALL their money.

Why do you care when "your money" runs out and your "employer's money" or "growth" begins?
I think I tried to describe it in posts above, but I'll try one more time.

Everyone needs a way to finance their retirement. Those funds can come from a public or private pension, social security, post-tax investments, pre-tax investments, or more likely a combination of all of these.

How much can or should you depend on a pension for retirment funding. Look at how pension plans operate. They get money from various sources like employer contributions, employee contributions, and investment earnings and distribute it to retirees. But every pension plan has winners and losers as well. Some retirees are going to get more out than they put in and others are going get less out than they put in. Pension plan managers depend on this. My analysis is a way of determining whether you're in the first group or the second group and make people think about ways they can manage their lives to be in the first group.

No one wants to pay into a pension plan their entire lives and then drop dead without a beneficiary the first month that they're retired. That's great for the solvency of the pension plan but bad planning on the part of the retiree. So I like to think about ways to maximize the amount of retirement funding a person can get from a pension and at least get back as much as you put into it.

Also, as I mentioned above, if your pension is entirely funded by your employer, none of this matters, you're in the black after you get your first pension check. This is only for employees that have to contribute their own money into their plans and may or may not get that money back.

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Re: Anyone track their actual pension benefit start date?

Post by Thesaints » Thu Nov 07, 2019 8:01 pm

baconavocado wrote:
Thu Nov 07, 2019 10:17 am
Can you suggest a way to do the calculation you describe in 2)? I would guess that the value of the insurance depends on the stability of the pension plan, the ability of the plan to make the payments. We've seen some major corporations reneg on their pension obligations over the years, even some local governments have failed to pay their pensions.
Absolutely ! That's why bonds pricing is done by experienced professionals and not by the first person who happens to be passing by.

The fact that it is not straightforward to evaluate benefits and level of guarantee of a promised series of future payments, does not mean that we are authorized to ignore them in our comparisons.

Your motivation is not wrong: am I better off funding a pension, or keeping my money ? That's what essentially you are asking. The answer is complex and there are several factors in play. Ignoring all the complications in order to give an answer is not very useful. That answer is probably quite wrong, or even if we are lucky and it turns to be about right, we can't tell.

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arcticpineapplecorp.
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Re: Anyone track their actual pension benefit start date?

Post by arcticpineapplecorp. » Thu Nov 07, 2019 10:19 pm

OP, did you do the same for SS (i.e., calculate when you're taking out more than you contributed)? If not, why not?
"May you live as long as you want and never want as long as you live" -- Irish Blessing | "Invest we must" -- Jack Bogle

Admiral
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Re: Anyone track their actual pension benefit start date?

Post by Admiral » Fri Nov 08, 2019 9:47 am

baconavocado wrote:
Thu Nov 07, 2019 7:44 pm
Admiral wrote:
Thu Nov 07, 2019 1:16 pm
I guess I'm flummoxed by why you care. It's well known that for most savers in (non-DB) retirement accounts, much of the final account balance upon retirement is one's own contributions. That is, the money you put in, not the growth. In many cases it can exceed 40%.

But... so what? It's not like you spent the money. It's yours, and you used it to earn compound interest. Upon retirement it's returned to you. Imagine a job where your employer matched nothing. I know many attorneys who get zero matching. It's ALL their money.

Why do you care when "your money" runs out and your "employer's money" or "growth" begins?
I think I tried to describe it in posts above, but I'll try one more time.

Everyone needs a way to finance their retirement. Those funds can come from a public or private pension, social security, post-tax investments, pre-tax investments, or more likely a combination of all of these.

How much can or should you depend on a pension for retirment funding. Look at how pension plans operate. They get money from various sources like employer contributions, employee contributions, and investment earnings and distribute it to retirees. But every pension plan has winners and losers as well. Some retirees are going to get more out than they put in and others are going get less out than they put in. Pension plan managers depend on this. My analysis is a way of determining whether you're in the first group or the second group and make people think about ways they can manage their lives to be in the first group.

No one wants to pay into a pension plan their entire lives and then drop dead without a beneficiary the first month that they're retired. That's great for the solvency of the pension plan but bad planning on the part of the retiree. So I like to think about ways to maximize the amount of retirement funding a person can get from a pension and at least get back as much as you put into it.

Also, as I mentioned above, if your pension is entirely funded by your employer, none of this matters, you're in the black after you get your first pension check. This is only for employees that have to contribute their own money into their plans and may or may not get that money back.
Every pension plan that I've ever heard of requires an employee contribution.

You can do all the maximizing you want, but unless you know your date of death, it can all be for naught. That's why most people choose a survivor (in our plan that can be a spouse or another beneficiary--though annoyingly not a trust). In addition, I'm also not familiar with any pension plan that lets employees determine their own contribution amount. Typically this is a static percentage determined by a) the employer and b) the pension board. So, while one can "buy" credits to add to a vested balance, basically the employee is not in control of the contribution. (My spouse's employer also provides a 457 plan beyond the pension, but that is 100% voluntary.)

So, if, as you note, "My analysis is a way of determining whether you're in the first group or the second group and make people think about ways they can manage their lives to be in the first group" then--assuming a required contribution, and assuming one cannot control the day one drops dead, I still don't understand the practical steps one might take.

It's like social security in most cases. You MUST pay in, you do not control the amount, you may drop dead the day after you file, or you may live to be 105 and come out way ahead. The only real control you have is when to file. And, I suppose, you could choose not to file as well (and approximately nobody does this).

Since money is fungible and you've already paid in, I don't see the difference in knowing "whose" money it is you're receiving. If you could control the contribution, then yes, there could be some value in, say, choosing another retirement vehicle. But you can't. Even in the case where you purchase credit, you still face the same situation: you drop dead the day after you file, in which case you've "lost." Or you live to 105, in which case you've won--by receiving the money from all those with an untimely demise. Same principle as an insurance pool.

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Re: Anyone track their actual pension benefit start date?

Post by oldfatguy » Fri Nov 08, 2019 9:52 am

Admiral wrote:
Fri Nov 08, 2019 9:47 am

Every pension plan that I've ever heard of requires an employee contribution ...
I'd take that a step further and suggest that all the contributions are employee contributions, regardless of how they are labeled or categorized, because they are part of the compensation received in exchange for labor. Every penny contributed to my pension plans is money I have earned.

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Re: Anyone track their actual pension benefit start date?

Post by Admiral » Fri Nov 08, 2019 9:58 am

oldfatguy wrote:
Fri Nov 08, 2019 9:52 am
Admiral wrote:
Fri Nov 08, 2019 9:47 am

Every pension plan that I've ever heard of requires an employee contribution ...
I'd take that a step further and suggest that all the contributions are employee contributions, regardless of how they are labeled or categorized, because they are part of the compensation received in exchange for labor. Every penny contributed to my pension plans is money I have earned.
Well maybe but most people don't think this way. Perhaps more accurate in many cases is that the employer's contribution is basically in lieu of a larger salary. In the same sense that employer-provided heath insurance is not "free" because it reduces the wages one would otherwise be paid.

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Re: Anyone track their actual pension benefit start date?

Post by oldfatguy » Fri Nov 08, 2019 10:11 am

Admiral wrote:
Fri Nov 08, 2019 9:58 am
oldfatguy wrote:
Fri Nov 08, 2019 9:52 am
Admiral wrote:
Fri Nov 08, 2019 9:47 am

Every pension plan that I've ever heard of requires an employee contribution ...
I'd take that a step further and suggest that all the contributions are employee contributions, regardless of how they are labeled or categorized, because they are part of the compensation received in exchange for labor. Every penny contributed to my pension plans is money I have earned.
Well maybe but most people don't think this way. Perhaps more accurate in many cases is that the employer's contribution is basically in lieu of a larger salary. In the same sense that employer-provided heath insurance is not "free" because it reduces the wages one would otherwise be paid.
Agree that most people don't think about it that way, but I think they should. All benefits are part of compensation, and it baffles me a little that so many people think of them as an act of generosity from the employer. One of my pet peeves is that so many employers are willing to pay a lot more for family health insurance than they do for single coverage, and don't think of it as additional compensation.

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Re: Anyone track their actual pension benefit start date?

Post by Admiral » Fri Nov 08, 2019 10:14 am

oldfatguy wrote:
Fri Nov 08, 2019 10:11 am
Admiral wrote:
Fri Nov 08, 2019 9:58 am
oldfatguy wrote:
Fri Nov 08, 2019 9:52 am
Admiral wrote:
Fri Nov 08, 2019 9:47 am

Every pension plan that I've ever heard of requires an employee contribution ...
I'd take that a step further and suggest that all the contributions are employee contributions, regardless of how they are labeled or categorized, because they are part of the compensation received in exchange for labor. Every penny contributed to my pension plans is money I have earned.
Well maybe but most people don't think this way. Perhaps more accurate in many cases is that the employer's contribution is basically in lieu of a larger salary. In the same sense that employer-provided heath insurance is not "free" because it reduces the wages one would otherwise be paid.
Agree that most people don't think about it that way, but I think they should. All benefits are part of compensation, and it baffles me a little that so many people think of them as an act of generosity from the employer. One of my pet peeves is that so many employers are willing to pay a lot more for family health insurance than they do for single coverage, and don't think of it as additional compensation.
Agree. My employer, once per year, mails out a "total compensation" document showing the cash value one gets: salary, employer-side of taxes, employer contribution for healthcare, match for retirement etc. When we do budgeting it's generally 130% of salary for total comp.

gr7070
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Re: Anyone track their actual pension benefit start date?

Post by gr7070 » Fri Nov 08, 2019 10:15 am

oldfatguy wrote:
Fri Nov 08, 2019 9:52 am
Admiral wrote:
Fri Nov 08, 2019 9:47 am

Every pension plan that I've ever heard of requires an employee contribution ...
I'd take that a step further and suggest that all the contributions are employee contributions, regardless of how they are labeled or categorized, because they are part of the compensation received in exchange for labor. Every penny contributed to my pension plans is money I have earned.
I started to type this exact same point out in a previous post of mine, as well, and just deleted it. The whole thread is silly.

There's so many subjective choices in the calculation they want to make. Some random "interest gained" which isn't even a thing, now that they're retired. Why not compare compounding market gains one could have made outside the pension. Ignoring other things like healthcare provided value.

They talk about learning the pension plan and maximizing value to them. They're retired!! There are no options left.

This thread is just silly.

The OP doesn't get it. They want to keep score by the number of checks received. It's so unimportant.

Live your best life! Leave as big a positive impact on the world as possible. Enjoy your time, family, friends. Be good.

You do *those* things and you've won the game.

Your pension doesn't care about the money per individual and neither do the rest of us who are in/out of your pension.

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Re: Anyone track their actual pension benefit start date?

Post by neilpilot » Fri Nov 08, 2019 12:21 pm

Admiral wrote:
Fri Nov 08, 2019 9:58 am
oldfatguy wrote:
Fri Nov 08, 2019 9:52 am
Admiral wrote:
Fri Nov 08, 2019 9:47 am

Every pension plan that I've ever heard of requires an employee contribution ...
I'd take that a step further and suggest that all the contributions are employee contributions, regardless of how they are labeled or categorized, because they are part of the compensation received in exchange for labor. Every penny contributed to my pension plans is money I have earned.
Well maybe but most people don't think this way. Perhaps more accurate in many cases is that the employer's contribution is basically in lieu of a larger salary. In the same sense that employer-provided heath insurance is not "free" because it reduces the wages one would otherwise be paid.
Between my DW and I, we collect on 3 pensions. All were from Defined Contribution plans, i.e. there was no separate employee contribution. This type of plan has become a dinosaur of the past.

If you want to take the discussion to the theoretical point that we contributed toward those pensions because we worked, then fine. But, as pointless as this thread has become, that argument will make further discussion even more ridiculous.

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Re: Anyone track their actual pension benefit start date?

Post by Admiral » Fri Nov 08, 2019 12:30 pm

neilpilot wrote:
Fri Nov 08, 2019 12:21 pm
Admiral wrote:
Fri Nov 08, 2019 9:58 am
oldfatguy wrote:
Fri Nov 08, 2019 9:52 am
Admiral wrote:
Fri Nov 08, 2019 9:47 am

Every pension plan that I've ever heard of requires an employee contribution ...
I'd take that a step further and suggest that all the contributions are employee contributions, regardless of how they are labeled or categorized, because they are part of the compensation received in exchange for labor. Every penny contributed to my pension plans is money I have earned.
Well maybe but most people don't think this way. Perhaps more accurate in many cases is that the employer's contribution is basically in lieu of a larger salary. In the same sense that employer-provided heath insurance is not "free" because it reduces the wages one would otherwise be paid.
Between my DW and I, we collect on 3 pensions. All were from Defined Contribution plans, i.e. there was no separate employee contribution. This type of plan has become a dinosaur of the past.

If you want to take the discussion to the theoretical point that we contributed toward those pensions because we worked, then fine. But, as pointless as this thread has become, that argument will make further discussion even more ridiculous.
Just so there's no confusion, in common usage a "Defined Contribution" plan is not a pension plan where only the company contributes, it's the most commonly used plan today, where both employer and employee contribute defined amounts, and the payout fluctuates based on the market.

Defined benefit plans are pension plans where (typically) both sides contribute but the payout is fixed/guaranteed and the company/pension plan absorbs the investment risk.

What you describe is a defined benefit plan where ONLY the employer pays in. As you note, these plans likely do not exist anymore. Where are yours from?
Last edited by Admiral on Fri Nov 08, 2019 12:41 pm, edited 1 time in total.

oldfatguy
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Re: Anyone track their actual pension benefit start date?

Post by oldfatguy » Fri Nov 08, 2019 12:40 pm

neilpilot wrote:
Fri Nov 08, 2019 12:21 pm


If you want to take the discussion to the theoretical point that we contributed toward those pensions because we worked, then fine. But, as pointless as this thread has become, that argument will make further discussion even more ridiculous.
Why is that argument ridiculous? Do you think the employer paid into that pension for you because they liked your smile, or thought you were a swell person? It was compensation for your labor.

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Re: Anyone track their actual pension benefit start date?

Post by neilpilot » Fri Nov 08, 2019 12:58 pm

oldfatguy wrote:
Fri Nov 08, 2019 12:40 pm
neilpilot wrote:
Fri Nov 08, 2019 12:21 pm


If you want to take the discussion to the theoretical point that we contributed toward those pensions because we worked, then fine. But, as pointless as this thread has become, that argument will make further discussion even more ridiculous.
Why is that argument ridiculous? Do you think the employer paid into that pension for you because they liked your smile, or thought you were a swell person? It was compensation for your labor.
It's ridiculous in the context of the OP's initial post, i.e. baconavocado is asking about the difference between the amount he paid as a "percentage of my salary into my pension plan throughout my working career".

But yes, especially in my DW's case, the pension was based entirely on her smile. :D

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baconavocado
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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Fri Nov 08, 2019 1:10 pm

Admiral wrote:
Fri Nov 08, 2019 9:47 am

Every pension plan that I've ever heard of requires an employee contribution.

You can do all the maximizing you want, but unless you know your date of death, it can all be for naught. That's why most people choose a survivor (in our plan that can be a spouse or another beneficiary--though annoyingly not a trust). In addition, I'm also not familiar with any pension plan that lets employees determine their own contribution amount. Typically this is a static percentage determined by a) the employer and b) the pension board. So, while one can "buy" credits to add to a vested balance, basically the employee is not in control of the contribution. (My spouse's employer also provides a 457 plan beyond the pension, but that is 100% voluntary.)

So, if, as you note, "My analysis is a way of determining whether you're in the first group or the second group and make people think about ways they can manage their lives to be in the first group" then--assuming a required contribution, and assuming one cannot control the day one drops dead, I still don't understand the practical steps one might take.

It's like social security in most cases. You MUST pay in, you do not control the amount, you may drop dead the day after you file, or you may live to be 105 and come out way ahead. The only real control you have is when to file. And, I suppose, you could choose not to file as well (and approximately nobody does this).

Since money is fungible and you've already paid in, I don't see the difference in knowing "whose" money it is you're receiving. If you could control the contribution, then yes, there could be some value in, say, choosing another retirement vehicle. But you can't. Even in the case where you purchase credit, you still face the same situation: you drop dead the day after you file, in which case you've "lost." Or you live to 105, in which case you've won--by receiving the money from all those with an untimely demise. Same principle as an insurance pool.
Here are two ways that you can manage your pension benefit to avoid being in the "pension losers" group:

1) Retire earlier. The later that you retire, the more likely it is that you will die before the money that you paid into the system will be returned to you. Of course, the earlier that you retire, the lower your pension, so this is a balancing act. If you retire earlier, you many need to plan for other income streams to supplement your income.

2) Take care of your health. Believe it or not, many health factors are directly under your control. A large percentage of modern diseases are caused by lifestyle choices, like smoking, drinking, excess weight, and lack of exercise. The longer you live, the more likely you will maximize your pension benefit.

Depending on your plan, there may be additional measures you can take that may not benefit you directly but may benefit your survivors or heirs.

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Fri Nov 08, 2019 1:20 pm

arcticpineapplecorp. wrote:
Thu Nov 07, 2019 10:19 pm
OP, did you do the same for SS (i.e., calculate when you're taking out more than you contributed)? If not, why not?
I've looked at that but I don't think I have records of the amounts I paid into Social Security going back to when I was a teenager. The records I have seem to show the total earnings that were taxed for each year, but not the actual amounts withheld. This would be an interesting calculation though and I might try doing it for the years that I have actual withholding numbers (25-30 years).

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Re: Anyone track their actual pension benefit start date?

Post by baconavocado » Fri Nov 08, 2019 2:06 pm

baconavocado wrote:
Fri Nov 08, 2019 1:20 pm
arcticpineapplecorp. wrote:
Thu Nov 07, 2019 10:19 pm
OP, did you do the same for SS (i.e., calculate when you're taking out more than you contributed)? If not, why not?
I've looked at that but I don't think I have records of the amounts I paid into Social Security going back to when I was a teenager. The records I have seem to show the total earnings that were taxed for each year, but not the actual amounts withheld. This would be an interesting calculation though and I might try doing it for the years that I have actual withholding numbers (25-30 years).
I see that I can get the SS tax data from their web site, so I will try to analyze this in the next few days.

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Re: Anyone track their actual pension benefit start date?

Post by shorvath » Fri Nov 08, 2019 2:25 pm

1) Retire earlier. The later that you retire, the more likely it is that you will die before the money that you paid into the system will be returned to you. Of course, the earlier that you retire, the lower your pension, so this is a balancing act. If you retire earlier, you many need to plan for other income streams to supplement your income.
2) Take care of your health. Believe it or not, many health factors are directly under your control. A large percentage of modern diseases are caused by lifestyle choices, like smoking, drinking, excess weight, and lack of exercise. The longer you live, the more likely you will maximize your pension benefit.
OP, I feel like this is where a lot of people are feeling a disconnect with your motivation. Maximizing pensions plans is not the deciding factor for making either of those decisions, imo

1) For a lot of people, retiring early is function of the amount of money, not the source of it. If you don't have the dollar amount to retire comfortably, are you going to jump the gun just to make sure that the pension math comes out in your favor?

2) We all (mostly? like 90% at least, IDK) want to maximize our lifespans. I can't imagine that "getting the most out of our pension plans" is the major motivating factor for not wanting to die.
Drunken Roboticist

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