Best government pension plan in the U.S.?

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Topic Author
infotrader
Posts: 441
Joined: Tue Feb 28, 2017 2:39 pm

Best government pension plan in the U.S.?

Post by infotrader »

I watched someone talked about his government pension plan in Texas, and it is pretty mind boggling.
According to him, he contributed 7% or his salary and his government plan will match 3 times of his contribution The money will guarantee to grow 7% annually:
Current annual gross salary: $96,944
Projected Account Balance: $877,924
Employer Matching: $1,755,849
Total Account Value: $2,633,753

He is making about $96,944 with 3% projected annual increase, but the time he retires in 30 years, he will get a huge pension, probably much higher than his salary:
Benefit Payment Estimator
Payment Options
For You
1.00
For Your Beneficiary
Single Life
$18,411/month for life
10-Year Guaranteed Term
$18,201/month for life
15-Year Guaranteed Term
$17.913/month for life
50% to Beneficiary
$17.553/month for life
75% to Beneficiary
$17.133/month for life
100% to Beneficiary
$16,733 month for life
100% to Beneficiary with Pop-up
$16,580/month for life

I have no idea if it is true or not. Also, I am not sure it it is a DB or DC plan. I wonder if any of you have heard of pensions as good as this one?
jom018
Posts: 13
Joined: Tue Apr 04, 2017 10:56 pm
Location: California

Re: Best government pension plan in the U.S.?

Post by jom018 »

I doubt this person gave all the details and thus is not as lucrative as it may sound. However, there are plenty of pensions that are likely close in mirroring this person's real pension with all the details (which I imagine is still pretty substantial).

This person's is likely similar to mine - I work for a large private/public hybrid university system. I contribute 9% pre tax, my employer matches 21% but this all basically all goes into the pension pot. My contributions are tallied for me so I can see them and they grow 6% annually (just like their 7% but this is only "real" if I ever leave and take my contributions with me thus taking myself out of the pension). If I make it 30 years and take the pension (or take the pension at any point), these contributions are just melted into the pension pot and I do not see them anymore (along with the 6% growth along the way).

I would be hard pressed to believe his pension amount will end up being more than his salary at retirement but I guess it is possible - most pensions (even the lucrative ones) have some equation that caps the amount. If I hit around 30 years of service credit, my max pension monthly payment would be about 80% of my "average monthly compensation over a year" just prior to retirement.
Topic Author
infotrader
Posts: 441
Joined: Tue Feb 28, 2017 2:39 pm

Re: Best government pension plan in the U.S.?

Post by infotrader »

jom018 wrote: Thu May 06, 2021 12:38 am I doubt this person gave all the details and thus is not as lucrative as it may sound. However, there are plenty of pensions that are likely close in mirroring this person's real pension with all the details (which I imagine is still pretty substantial).

This person's is likely similar to mine - I work for a large private/public hybrid university system. I contribute 9% pre tax, my employer matches 21% but this all basically all goes into the pension pot. My contributions are tallied for me so I can see them and they grow 6% annually (just like their 7% but this is only "real" if I ever leave and take my contributions with me thus taking myself out of the pension). If I make it 30 years and take the pension (or take the pension at any point), these contributions are just melted into the pension pot and I do not see them anymore (along with the 6% growth along the way).

I would be hard pressed to believe his pension amount will end up being more than his salary at retirement but I guess it is possible - most pensions (even the lucrative ones) have some equation that caps the amount. If I hit around 30 years of service credit, my max pension monthly payment would be about 80% of my "average monthly compensation over a year" just prior to retirement.
Thank you. What you described is just what I understand: when you retire, basically all goes into the pension pot. The pension will be calculated based on a formula.
jom018
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Location: California

Re: Best government pension plan in the U.S.?

Post by jom018 »

The total account value you posted after is sort of meaningless in these type of DBP pensions - the contributions you make and your employer make in a pension system just feed into the overall pension which is governed by its own rules for payout that have nothing to do with the contributions. For instance, I may have my contributions and my employer contributions equal millions of dollars by the time I retire but my pension payout is governed by an equation that does not take them into account.
Luckywon
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Re: Best government pension plan in the U.S.?

Post by Luckywon »

California Public Employees Retirement System which covers California state, school and public agencies like police departments, has an extremely large number of people with pensions greater than $200k/year, with COLA.

Highest pension is $551k/year for the former Administrator of the City of Vernon, which is a 5.2 square mile city in the County of Los Angeles.
Fire captains are in the $150-$200k range.
Police often more than $100k.
Teachers often more than $100k.

Here's a link to the database of individual pensions. Quite eye popping.

Actionably, this data points strongly toward a career in the public sector in California.

https://transparentcalifornia.com/pensions/calpers/
123
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Re: Best government pension plan in the U.S.?

Post by 123 »

The California State Retirement System rewards those that stick with it. Some of my elementary school teachers who stuck it out for 30 - 35 years with the same school district receive annual pensions of $90,000+.
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Nate7out
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Re: Best government pension plan in the U.S.?

Post by Nate7out »

My wife is a teacher in IL - she puts in about 1.5% (lol , no wonder it is 40% funded) , the school district puts in 9% (supposedly, it is not transparent), and her pension that she can take 12 years from now is about 120% of her current gross with a fixed 3% COLA. Retirement age would be 54 after 31 years of teaching.

Also, when the union newsletter said the pension was fully funded last year - they were referring to the statutory minimum, not the $ amount the actuaries said was necessary ($4B vs $7B).
mouth
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Re: Best government pension plan in the U.S.?

Post by mouth »

I can't speak for this exact situation, but there is indeed such a thing as a Cash Value Pension which is a type of Define Benefit Plan (DBP) and it 100% is a pot of money that is only mine. In my case I contribute nothing, but my firm contributes a % of eligible salary every year and there is an an annual interest payment as well. When I retire I can take it as lump sum or as an annuity (with various options) that is based on the balance. It isn't mingled with anyone else's balance.

So it is a thing, but maybe, probably, OPs friend still isn't that.

https://www.investopedia.com/terms/c/ca ... onplan.asp
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JoMoney
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Re: Best government pension plan in the U.S.?

Post by JoMoney »

Sounds pretty good. Do they pay into Social Security as well? I'm guessing not... which could make it look like an even better deal, imagine getting a pension like that and your only contribution is the equivalent of what others are paying into Social Security.
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Topic Author
infotrader
Posts: 441
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Re: Best government pension plan in the U.S.?

Post by infotrader »

Luckywon wrote: Thu May 06, 2021 1:12 am California Public Employees Retirement System which covers California state, school and public agencies like police departments, has an extremely large number of people with pensions greater than $200k/year, with COLA.

Highest pension is $551k/year for the former Administrator of the City of Vernon, which is a 5.2 square mile city in the County of Los Angeles.
Fire captains are in the $150-$200k range.
Police often more than $100k.
Teachers often more than $100k.

Here's a link to the database of individual pensions. Quite eye popping.

Actionably, this data points strongly toward a career in the public sector in California.

https://transparentcalifornia.com/pensions/calpers/
What I saw on Youtube is different.
I am from California, and I use that site site quite often. I fully understand the situations behind these high pensions in CA: local plans allow huge overtime pay in one year to be calculated as basis for pension or extremely high salaries for some people.
Last edited by infotrader on Thu May 06, 2021 8:29 am, edited 1 time in total.
Topic Author
infotrader
Posts: 441
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Re: Best government pension plan in the U.S.?

Post by infotrader »

JoMoney wrote: Thu May 06, 2021 5:43 am Sounds pretty good. Do they pay into Social Security as well? I'm guessing not... which could make it look like an even better deal, imagine getting a pension like that and your only contribution is the equivalent of what others are paying into Social Security.
Reading the comments above, I believe your explanation is more convincing. I guess it is just a poorly designed estimator which does not take all the factors into consideration.

Personally, I belong to a public pension plan which pays into both the pension (7% personal contribution and 10% from the employer, and it used to be no personal contribution from 1990-2010) and SS. The pension is calculated based on: years of service, highest 3 year average, age factor (2.5% at 60).
orange2334
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Re: Best government pension plan in the U.S.?

Post by orange2334 »

Nate7out wrote: Thu May 06, 2021 5:32 am My wife is a teacher in IL - she puts in about 1.5% (lol , no wonder it is 40% funded) , the school district puts in 9% (supposedly, it is not transparent), and her pension that she can take 12 years from now is about 120% of her current gross with a fixed 3% COLA. Retirement age would be 54 after 31 years of teaching.

Also, when the union newsletter said the pension was fully funded last year - they were referring to the statutory minimum, not the $ amount the actuaries said was necessary ($4B vs $7B).
Do you have a source for this? I'm not seeing this on TRS website. (teacher contributions)
Keenobserver
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Re: Best government pension plan in the U.S.?

Post by Keenobserver »

Ever have a look at FDNY and California fire fighter pension ?
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Ketawa
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Re: Best government pension plan in the U.S.?

Post by Ketawa »

Military retirement at 20+ years before the blended retirement system.

2.5% of high 3 base salary per year of service starting at the day of retirement (as early at 38-42 for someone who joins out of high school or college), adjusted for COLA, with cheap health insurance coverage.

-Typical enlisted member retiring as an E-7, about $30K per year in 2021 dollars, more with higher ranks or years of service.
-Typical officer retiring as an O-4, about $51K per year in 2021 dollars, more with higher ranks or years of service.

After the blended retirement system, it would be 20% lower (2.0% per year of service), with the benefit of up to 5% matching TSP contributions. The matching contributions don't make up the difference for a 20% cut to the pension benefit, but they help.
rich126
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Re: Best government pension plan in the U.S.?

Post by rich126 »

I think as the population growth slows down (which it is) many of these plans are going to be in serious trouble. Letting people retire in 20 years in their early 40s isn't a viable option long term w/o sizable population growth and most of the world is facing declining growth.

The old federal plan (CSRS) gave employees 2% times years of service times high 3 (I think) year average salary. So if you worked 35 years you'd get 70%. However, they didn't pay into social security and don't receive it.

The newer plan (FERS) gives you 1% instead of the 2% above but you do pay in and receive social security. It has gotten less attractive as the employee contribution went from a token 0.8% to over 4% now.

I recall my father going through his mother's documents when she passed away and was surprised how much the state of NJ was paying her as a retired school teacher. I have no idea how long she taught because I only knew her when she was long retired. Apparently the payments must have been COLA because they were much larger than any salary she earned while working. This was many eons ago.

Unfortunately starting a job that currently has a great pension plan now doesn't mean it will be kept the same for the next 20-40 years.
Grt2bOutdoors
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Re: Best government pension plan in the U.S.?

Post by Grt2bOutdoors »

Keenobserver wrote: Thu May 06, 2021 8:47 am Ever have a look at FDNY and California fire fighter pension ?
Have you? Post it up if you know the details. That said, not many want to run into burning buildings with all the equipment on their back. It takes a real physical toll.
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surfstar
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Re: Best government pension plan in the U.S.?

Post by surfstar »

infotrader wrote: Thu May 06, 2021 8:20 am
Luckywon wrote: Thu May 06, 2021 1:12 am California Public Employees Retirement System which covers California state, school and public agencies like police departments, has an extremely large number of people with pensions greater than $200k/year, with COLA.

Highest pension is $551k/year for the former Administrator of the City of Vernon, which is a 5.2 square mile city in the County of Los Angeles.
Fire captains are in the $150-$200k range.
Police often more than $100k.
Teachers often more than $100k.

Here's a link to the database of individual pensions. Quite eye popping.

Actionably, this data points strongly toward a career in the public sector in California.

https://transparentcalifornia.com/pensions/calpers/
What I saw on Youtube is different.
I am from California, and I use that site site quite often. I fully understand the situations behind these high pensions in CA: local plans allow huge overtime pay in one year to be calculated as basis for pension or extremely high salaries for some people.
Sure, but you'd have to go back in time to get hired under the old rules. If you are not established as a CALPERS "classic" member, you fall under PEPRA. Pension reform was instituted 8 years ago. It will take a generation+ before all the classic members retire and pass on.

The same pensions are not available for new members. So the "action" to take is to make a time-machine, apparently.
carolinaman
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Re: Best government pension plan in the U.S.?

Post by carolinaman »

I retired from local govt with a pension in the NC state pension system (LGERS). We paid 6% of pre tax salary and govt match varied but is currently about 11%. Working 30 years will get you about 55% of salary. We also pay SS and my combined SS+pension was around 67% of my last salary. Our system has safeguards that prevent some of the tactics to "juice" pension payouts that some jurisdictions have allowed, i.e. CA.

COLAs are only paid with surplus earnings. In 10 years, I have only received 1% and future COLAs are doubtful. I have no complaints as I know this is a good plan and low inflation has prevented much erosion of our purchasing power.

LGERS was funded at 95% in 2017 which was one of the best in the country. I believe it has declined a little since then but still very strong.

Our local govt also provides fully paid premiums for medigap and prescriptions which is better than can be bought on the open market.

I believe people hired after 2006 or so will have a less lucrative plan and no medical premium payments.

I know CA has a great plan and states that offer COLAs are attractive, but many of the least funded plans offer COLAs. I do not see how they can keep that up.

I am not familiar with TX but I believe your friend overstated his plan.

I would be concerned about the retirement plans for pensions that are poorly funded. See link below:

https://www.gobankingrates.com/retireme ... -pensions/
Luckywon
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Re: Best government pension plan in the U.S.?

Post by Luckywon »

surfstar wrote: Thu May 06, 2021 10:26 am
infotrader wrote: Thu May 06, 2021 8:20 am
Luckywon wrote: Thu May 06, 2021 1:12 am California Public Employees Retirement System which covers California state, school and public agencies like police departments, has an extremely large number of people with pensions greater than $200k/year, with COLA.

Highest pension is $551k/year for the former Administrator of the City of Vernon, which is a 5.2 square mile city in the County of Los Angeles.
Fire captains are in the $150-$200k range.
Police often more than $100k.
Teachers often more than $100k.

Here's a link to the database of individual pensions. Quite eye popping.

Actionably, this data points strongly toward a career in the public sector in California.

https://transparentcalifornia.com/pensions/calpers/
What I saw on Youtube is different.
I am from California, and I use that site site quite often. I fully understand the situations behind these high pensions in CA: local plans allow huge overtime pay in one year to be calculated as basis for pension or extremely high salaries for some people.
Sure, but you'd have to go back in time to get hired under the old rules. If you are not established as a CALPERS "classic" member, you fall under PEPRA. Pension reform was instituted 8 years ago. It will take a generation+ before all the classic members retire and pass on.

The same pensions are not available for new members. So the "action" to take is to make a time-machine, apparently.
My understanding is that PEPRA reformed some of the most egregious features of CALPERS, like the "spiking" of pay with overtime before retiring, but its pensions remain extremely generous. If you are in the system, some details of what the current benefits are like would be interesting. Do the pension benefits include health insurance coverage before Medicare? Do you pay into/receive Social Security?

Many of the people I know working in the public sector in California plan to retire after 20 years with significant pensions, in addition to their own defined contribution benefits. Some are under CALPERS and some PEPRA. I'd still strongly recommend looking at such a job to anyone starting out, or at least factoring in the value of the retirement benefits.
surfstar
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Re: Best government pension plan in the U.S.?

Post by surfstar »

Luckywon wrote: Thu May 06, 2021 11:30 am
surfstar wrote: Thu May 06, 2021 10:26 am
infotrader wrote: Thu May 06, 2021 8:20 am
Luckywon wrote: Thu May 06, 2021 1:12 am California Public Employees Retirement System which covers California state, school and public agencies like police departments, has an extremely large number of people with pensions greater than $200k/year, with COLA.

Highest pension is $551k/year for the former Administrator of the City of Vernon, which is a 5.2 square mile city in the County of Los Angeles.
Fire captains are in the $150-$200k range.
Police often more than $100k.
Teachers often more than $100k.

Here's a link to the database of individual pensions. Quite eye popping.

Actionably, this data points strongly toward a career in the public sector in California.

https://transparentcalifornia.com/pensions/calpers/
What I saw on Youtube is different.
I am from California, and I use that site site quite often. I fully understand the situations behind these high pensions in CA: local plans allow huge overtime pay in one year to be calculated as basis for pension or extremely high salaries for some people.
Sure, but you'd have to go back in time to get hired under the old rules. If you are not established as a CALPERS "classic" member, you fall under PEPRA. Pension reform was instituted 8 years ago. It will take a generation+ before all the classic members retire and pass on.

The same pensions are not available for new members. So the "action" to take is to make a time-machine, apparently.
My understanding is that PEPRA reformed some of the most egregious features of CALPERS, like the "spiking" of pay with overtime before retiring, but its pensions remain extremely generous. If you are in the system, some details of what the current benefits are like would be interesting. Do the pension benefits include health insurance coverage before Medicare? Do you pay into/receive Social Security?

Many of the people I know working in the public sector in California plan to retire after 20 years with significant pensions, in addition to their own defined contribution benefits. Some are under CALPERS and some PEPRA. I'd still strongly recommend looking at such a job to anyone starting out, or at least factoring in the value of the retirement benefits.
I wouldn't call PEPRA extremely generous.
I tried and couldn't find a decent comparison for classic vs PEPRA - probably because classic members could belong to a range of systems/benefits. PEPRA is much more standardized.

https://www.latimes.com/socal/daily-pil ... story.html
That's a decent summary of PEPRA benefits.
Basic benefits formulas for non-safety employees

The formula for non-safety employees is called the “2% at age 62" formula. The normal age of retirement is 62, and the employee receives a benefit equal to 2% of pensionable compensation for each year of service.

Therefore, an employee who retires at age 62 after 30 years of service would receive an annual pension benefit equating to 60% of his or her pensionable compensation. The minimum age to receive retirement benefits is 52, and the employee’s pension benefit is reduced if he or she retires before age 62.


60% pension at 62 with 30 years of service. Good, yes, but nothing compared to [some] classic member benefits.

It will be highly variable for each person/member. I was lucky enough to be/continue under classic. I do not pay into social security - it will vary by employer for PEPRA, I believe. However due to my pension, I will likely receive $0 spousal benefit with WEP and GPO applying; and a meager amount for the SS I paid into prior to my gov't employment. That's fine, I guess, I know my pension will be a great benefit. However, I also contribute 12% of my gross pay towards my pension; a significant chunk.

Medical - we're hoping to FIRE early - we'll lose out on accessing CALPERS healthcare. If I work until 50, which is 3-5 years more than we're planning, I would qualify, though. We save heavily, so the pension will just be a portion of our retirement funds, and greatly reduced compared to working until a 'normal' retirement age. We value time more than money and will lose substantial benefits accordingly. Maybe things will change our plan, but that's the current goal.

I'm all for pension reform - too many were underfunded and the benefits (especially with spiking and other unethical means used) were far too generous. It will take a long time for the reforms to help, though. If the original systems had been better implemented, and prevented very high pensions and abuse (PEPRA has a felony provision that should have always applied, IMO), it would have been a much more equitable system for 'old' and 'new' employees. This is just my opinion on the CA system, also. Other states and Federal, I am less informed of.

(edit) for additional info on current/classic CALPERS benefits, https://www.calpers.ca.gov/docs/forms-p ... nefits.pdf review the PERCENTAGE OF FINAL COMPENSATION for the various systems. Some are similar to PEPRA, some have much higher % at various ages due to the factors being so different.
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gwe67
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Re: Best government pension plan in the U.S.?

Post by gwe67 »

infotrader wrote: Thu May 06, 2021 12:27 am I watched someone talked about his government pension plan in Texas, and it is pretty mind boggling.
According to him, he contributed 7% or his salary and his government plan will match 3 times of his contribution The money will guarantee to grow 7% annually:
Current annual gross salary: $96,944
Projected Account Balance: $877,924
Employer Matching: $1,755,849
Total Account Value: $2,633,753

He is making about $96,944 with 3% projected annual increase, but the time he retires in 30 years, he will get a huge pension, probably much higher than his salary:
Benefit Payment Estimator
Payment Options
For You
1.00
For Your Beneficiary
Single Life
$18,411/month for life
10-Year Guaranteed Term
$18,201/month for life
15-Year Guaranteed Term
$17.913/month for life
50% to Beneficiary
$17.553/month for life
75% to Beneficiary
$17.133/month for life
100% to Beneficiary
$16,733 month for life
100% to Beneficiary with Pop-up
$16,580/month for life

I have no idea if it is true or not. Also, I am not sure it it is a DB or DC plan. I wonder if any of you have heard of pensions as good as this one?
A lot of this is incorrect. The employees contribute 9.5% and state/state agency contributes 10%. The account balance grows IIRC at 2.5%. But this only matters if leaving before drawing pension, and taking refund of the account balance. Account balance does not affect pension amount because it is defined benefit.

Defined benefit is 2.3 times years of service for the 36 or 60 (depending on "group" of employee) highest monthly gross pay. Retirement eligibility and penalties for early retirement also depend on "group" of employee.

Employees also contribute to social security/medicare. Add in some voluntary 401k/457 contributions, medical/life/dental/AD&D insurance premiums, dependent care deductions, flexible spending account, etc. and net pay gets pretty small.

Your friend's salary is much higher than the median. Many TX state employees qualify for food stamps and other public aid programs.
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Luckywon
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Re: Best government pension plan in the U.S.?

Post by Luckywon »

surfstar wrote: Thu May 06, 2021 1:16 pm
I wouldn't call PEPRA extremely generous.
I tried and couldn't find a decent comparison for classic vs PEPRA - probably because classic members could belong to a range of systems/benefits. PEPRA is much more standardized.

https://www.latimes.com/socal/daily-pil ... story.html
That's a decent summary of PEPRA benefits.
Basic benefits formulas for non-safety employees

The formula for non-safety employees is called the “2% at age 62" formula. The normal age of retirement is 62, and the employee receives a benefit equal to 2% of pensionable compensation for each year of service.

Therefore, an employee who retires at age 62 after 30 years of service would receive an annual pension benefit equating to 60% of his or her pensionable compensation. The minimum age to receive retirement benefits is 52, and the employee’s pension benefit is reduced if he or she retires before age 62.


60% pension at 62 with 30 years of service. Good, yes, but nothing compared to [some] classic member benefits.

It will be highly variable for each person/member. I was lucky enough to be/continue under classic. I do not pay into social security - it will vary by employer for PEPRA, I believe. However due to my pension, I will likely receive $0 spousal benefit with WEP and GPO applying; and a meager amount for the SS I paid into prior to my gov't employment. That's fine, I guess, I know my pension will be a great benefit. However, I also contribute 12% of my gross pay towards my pension; a significant chunk.

Medical - we're hoping to FIRE early - we'll lose out on accessing CALPERS healthcare. If I work until 50, which is 3-5 years more than we're planning, I would qualify, though. We save heavily, so the pension will just be a portion of our retirement funds, and greatly reduced compared to working until a 'normal' retirement age. We value time more than money and will lose substantial benefits accordingly. Maybe things will change our plan, but that's the current goal.

I'm all for pension reform - too many were underfunded and the benefits (especially with spiking and other unethical means used) were far too generous. It will take a long time for the reforms to help, though. If the original systems had been better implemented, and prevented very high pensions and abuse (PEPRA has a felony provision that should have always applied, IMO), it would have been a much more equitable system for 'old' and 'new' employees. This is just my opinion on the CA system, also. Other states and Federal, I am less informed of.

(edit) for additional info on current/classic CALPERS benefits, https://www.calpers.ca.gov/docs/forms-p ... nefits.pdf review the PERCENTAGE OF FINAL COMPENSATION for the various systems. Some are similar to PEPRA, some have much higher % at various ages due to the factors being so different.
Thanks for all the fascinating inside scoop. You've done well for yourself, and have earned it, congratulations.

Given prevailing low interest rates with many warning to expect lower returns on investments in the future, that pension may be worth more than ever. No pension here and admittedly a bit jealous here :mrgreen:
reln
Posts: 531
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Re: Best government pension plan in the U.S.?

Post by reln »

infotrader wrote: Thu May 06, 2021 12:27 am I watched someone talked about his government pension plan in Texas, and it is pretty mind boggling.
According to him, he contributed 7% or his salary and his government plan will match 3 times of his contribution The money will guarantee to grow 7% annually:
Current annual gross salary: $96,944
Projected Account Balance: $877,924
Employer Matching: $1,755,849
Total Account Value: $2,633,753

He is making about $96,944 with 3% projected annual increase, but the time he retires in 30 years, he will get a huge pension, probably much higher than his salary:
Benefit Payment Estimator
Payment Options
For You
1.00
For Your Beneficiary
Single Life
$18,411/month for life
10-Year Guaranteed Term
$18,201/month for life
15-Year Guaranteed Term
$17.913/month for life
50% to Beneficiary
$17.553/month for life
75% to Beneficiary
$17.133/month for life
100% to Beneficiary
$16,733 month for life
100% to Beneficiary with Pop-up
$16,580/month for life

I have no idea if it is true or not. Also, I am not sure it it is a DB or DC plan. I wonder if any of you have heard of pensions as good as this one?
Seems too be on error. Maybe the match is 3% not 21%.
Samcdonough
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Joined: Tue Apr 13, 2021 3:22 pm

Re: Best government pension plan in the U.S.?

Post by Samcdonough »

My firefighter pension and retirement is pretty generous. It is not the exact same for everyone on the job anymore but this is my contract.

Contribute 10% of base salary
3% per year up to 20 years 2.5% after that. Up to max of 85% of highest two year salary.
Purchase of service time with unused leave and military service.
No social security carve out and no loss of healthcare upon retirement.
Non matching 457b
Optional 3 year DROP
jackbeagle
Posts: 155
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Re: Best government pension plan in the U.S.?

Post by jackbeagle »

I would like to see the pension formulas for big cities in states that allow public sector to unionize. It seems that these are more rife with things like pension spiking than even federal programs.
Reamus294
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Re: Best government pension plan in the U.S.?

Post by Reamus294 »

Sounds like a cash-balance pension plan similar to the county retirement system. That looks possible but I don’t think I saw an age in there. Other cash-balance plans I’ve seen with similar matching appear to get to a 100% salary replacement in the 28-32 year range, but life expectancy (age) plays a big part. For a little perspective, a 3% annual salary increase over 30 years also has them at a $235k annually or $19.6k per month.
runninginvestor
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Re: Best government pension plan in the U.S.?

Post by runninginvestor »

rich126 wrote: Thu May 06, 2021 10:17 am I think as the population growth slows down (which it is) many of these plans are going to be in serious trouble. Letting people retire in 20 years in their early 40s isn't a viable option long term w/o sizable population growth and most of the world is facing declining growth.
....
Figure 8 in the liabilities section in this report, you start seeing the gap between active employees flatlining while retired employees increase over the past decade. It will be interesting over the next couple years if this gap widens if more people were forced into retirement. Any case, the lower expected returns also put a pretty heavy dampener on any future expected benefits.

But the Appendix shows a summary of funded status of some of the tip public pensions. I believe you can search for a top private sector study as well (separate report).


https://www.milliman.com/en/insight/202 ... ding-study
Ron Ronnerson
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Re: Best government pension plan in the U.S.?

Post by Ron Ronnerson »

I'll add a data point. I’m a CalSTRS member (public-school teacher) and am an old-timer (in the system prior to 2013, when the reforms began). I contribute 10.25% of salary toward the pension, my employer contributes 16.15% (set to increase to about 18% next year), and the state contributes 10.33%. This adds up to 37% of payroll and is expected to continue increasing at least a bit more in the years ahead. Prior to the reforms, the contribution rates were much lower. Since newer members have less generous benefits and all parties (employees, employers, and the state) are contributing quite a bit more now as well, the long-term trajectory of CalSTRS has changed and it is on a much better path in terms of funding levels.

I plan to retire at age 61.5, with 33 years of service (I'm currently in year 18). Since I will have more than 25 years of service, only the single highest annual salary is used instead of averaging out 3 years (this benefit of using only one year is not available to those hired after 2013). Also, since I will have more than 30 years of service credit, I get 0.2% added to my age factor (this additional perk for getting to 30 years is called the career factor and is only available to those hired prior to 2013).

Currently, teachers in my school district with 30+ years of experience and a master's degree earn about $128k.

The pension benefit formula is: service credit x age factor x final compensation

So, this results in the following numbers for me: 33 years x 0.024 age factor x $128,000 final compensation (in 2021 dollars)

The member-only benefit comes to about $101k in current dollars. I plan to choose my wife, who is born in the same year as me, as a 100% option so that she continues to receive my pension if I die before her. Choosing her as an option (which I intend to do upon turning 55 years of age) would reduce my pension to about $92k/year. If I pass before her, she continues to receive the $92k. If she passes before me, my pension benefit would bump back up to $101k.

Additionally, there is also a defined benefit supplemental account. 2% of my salary went into that account until 2010 and it continues to accrue interest. Additionally, if I work extra duties, 8% of the salary earned from those duties gets directed to the supplemental account. I plan to annuitize the supplemental account upon retirement. I also have 100 days of sick time accumulated at this point and unused sick time increases the pension as well.

After factoring in the supplemental account and sick time, I expect to get a pension of right around $100k/year (current dollars) with 100% survivor benefits and COLA. There is a huge shortage of teachers where I work. The median home price in the neighborhood where I teach is around $2M and starting salary is about $70k. The pension doesn’t pay the bills in the meantime so few are willing to sign up for the deal.

I no longer contribute to social security but do have more than 40 credits from prior to going into teaching. My social security will be small due to the windfall elimination provision and I will also be affected by the government pension offset.
Luckywon
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Re: Best government pension plan in the U.S.?

Post by Luckywon »

Ron Ronnerson wrote: Thu May 06, 2021 7:58 pm
The member-only benefit comes to about $101k in current dollars. I plan to choose my wife, who is born in the same year as me, as a 100% option so that she continues to receive my pension if I die before her. Choosing her as an option (which I intend to do upon turning 55 years of age) would reduce my pension to about $92k/year. If I pass before her, she continues to receive the $92k. If she passes before me, my pension benefit would bump back up to $101k.
Interesting to see real life numbers. Curious, you said you would select your wife as the other person benefiting-is it an option to select someone else, like a child or grandchild? So they would receive the pension for their lifetime?
Ron Ronnerson
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Re: Best government pension plan in the U.S.?

Post by Ron Ronnerson »

Luckywon wrote: Thu May 06, 2021 8:07 pm
Ron Ronnerson wrote: Thu May 06, 2021 7:58 pm
The member-only benefit comes to about $101k in current dollars. I plan to choose my wife, who is born in the same year as me, as a 100% option so that she continues to receive my pension if I die before her. Choosing her as an option (which I intend to do upon turning 55 years of age) would reduce my pension to about $92k/year. If I pass before her, she continues to receive the $92k. If she passes before me, my pension benefit would bump back up to $101k.
Interesting to see real life numbers. Curious, you said you would select your wife as the other person benefiting-is it an option to select someone else, like a child or grandchild? So they would receive the pension for their lifetime?
Yes, it is an option to select someone else. However, the age of that person affects the option factor. My wife and I are very close in age (few months apart) and choosing her as an option at age 55 (the earliest I can select her), would result in an option factor of roughly 0.91. If she were younger, the option factor would be a lower number.

So my formula would be: 33 years of service x 0.024 age factor x $128,000 final compensation (in 2021 dollars) x 0.91 approximate option factor
Luckywon
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Re: Best government pension plan in the U.S.?

Post by Luckywon »

Ron Ronnerson wrote: Thu May 06, 2021 8:36 pm
Luckywon wrote: Thu May 06, 2021 8:07 pm
Ron Ronnerson wrote: Thu May 06, 2021 7:58 pm
The member-only benefit comes to about $101k in current dollars. I plan to choose my wife, who is born in the same year as me, as a 100% option so that she continues to receive my pension if I die before her. Choosing her as an option (which I intend to do upon turning 55 years of age) would reduce my pension to about $92k/year. If I pass before her, she continues to receive the $92k. If she passes before me, my pension benefit would bump back up to $101k.
Interesting to see real life numbers. Curious, you said you would select your wife as the other person benefiting-is it an option to select someone else, like a child or grandchild? So they would receive the pension for their lifetime?
Yes, it is an option to select someone else. However, the age of that person affects the option factor. My wife and I are very close in age (few months apart) and choosing her as an option at age 55 (the earliest I can select her), would result in an option factor of roughly 0.91. If she were younger, the option factor would be a lower number.

So my formula would be: 33 years of service x 0.024 age factor x $128,000 final compensation (in 2021 dollars) x 0.91 approximate option factor
I see, makes sense..nothing for free... thanks!
Nate7out
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Re: Best government pension plan in the U.S.?

Post by Nate7out »

orange2334 wrote: Thu May 06, 2021 8:37 am
Nate7out wrote: Thu May 06, 2021 5:32 am My wife is a teacher in IL - she puts in about 1.5% (lol , no wonder it is 40% funded) , the school district puts in 9% (supposedly, it is not transparent), and her pension that she can take 12 years from now is about 120% of her current gross with a fixed 3% COLA. Retirement age would be 54 after 31 years of teaching.

Also, when the union newsletter said the pension was fully funded last year - they were referring to the statutory minimum, not the $ amount the actuaries said was necessary ($4B vs $7B).
Do you have a source for this? I'm not seeing this on TRS website. (teacher contributions)
My source is her W2 which shows an amount for TRS.

ETA: The District contributions are itemized on pay stubs - it is more like 11% to TRS including TRS health ins. Her contribution is 1.5% as I noted, but it is coded as TRS Health Ins. on the pay stub. I think the contribution %'s are controlled by the union contract with the district. However, I am not sure. If I find out more I will update.

The below Boston College website is where you can research Public retirement plans and see that IL TRS is about 40% funded.

https://crr.bc.edu/
Last edited by Nate7out on Fri May 07, 2021 6:47 am, edited 1 time in total.
RVdreamin
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Re: Best government pension plan in the U.S.?

Post by RVdreamin »

This is a very interesting post. Someone posted about military retirement (and the new blended retirement). I thought I'd provide a real world example.

I retired from the military after 27 years (in 2014). My pension is 67% (2.5%/year) of my last 3 years base salary. My base salary is my salary without a housing and subsistence allowance (which, for me, was approximately 20% of my total pay). My pension is COLA adjusted and my survivor benefit (which is 55% of my current benefit) costs 6.5% of my pension (but is pre-tax).

In addition, my Tricare medical insurance (for me and my wife) costs about $650/year and continues on into retirement.

My pension started immediately when I retired in 2014 (at age 49) and is roughly $90,000/year. In addition, I paid into SS. We are planning to retire in a year or two and my military pension plus our combined SS benefits will probably cover our retirement needs even with a safety factor.

Despite several military deployments, moving every 2-3 years, and my oldest child attending 5 different schools in 6 years at one point we are extremely blessed and thankful. We met and were surrounded by the very best people this country has to offer and our children benefited even more than we did. Finally, I had absolutely no idea of the benefits of a military pension (and especially not the benefits of excellent medical coverage for a very affordable price) when I signed up but looking at it now I'm really glad I did!

Thanks for reading.
Ron Ronnerson
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Re: Best government pension plan in the U.S.?

Post by Ron Ronnerson »

RVdreamin wrote: Thu May 06, 2021 10:37 pm This is a very interesting post. Someone posted about military retirement (and the new blended retirement). I thought I'd provide a real world example.

I retired from the military after 27 years (in 2014). My pension is 67% (2.5%/year) of my last 3 years base salary. My base salary is my salary without a housing and subsistence allowance (which, for me, was approximately 20% of my total pay). My pension is COLA adjusted and my survivor benefit (which is 55% of my current benefit) costs 6.5% of my pension (but is pre-tax).

In addition, my Tricare medical insurance (for me and my wife) costs about $650/year and continues on into retirement.

My pension started immediately when I retired in 2014 (at age 49) and is roughly $90,000/year. In addition, I paid into SS. We are planning to retire in a year or two and my military pension plus our combined SS benefits will probably cover our retirement needs even with a safety factor.

Despite several military deployments, moving every 2-3 years, and my oldest child attending 5 different schools in 6 years at one point we are extremely blessed and thankful. We met and were surrounded by the very best people this country has to offer and our children benefited even more than we did. Finally, I had absolutely no idea of the benefits of a military pension (and especially not the benefits of excellent medical coverage for a very affordable price) when I signed up but looking at it now I'm really glad I did!

Thanks for reading.
Thank you for your service and enjoy your retirement!
Luckywon
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Re: Best government pension plan in the U.S.?

Post by Luckywon »

RVdreamin wrote: Thu May 06, 2021 10:37 pm This is a very interesting post. Someone posted about military retirement (and the new blended retirement). I thought I'd provide a real world example.

I retired from the military after 27 years (in 2014). My pension is 67% (2.5%/year) of my last 3 years base salary. My base salary is my salary without a housing and subsistence allowance (which, for me, was approximately 20% of my total pay). My pension is COLA adjusted and my survivor benefit (which is 55% of my current benefit) costs 6.5% of my pension (but is pre-tax).

In addition, my Tricare medical insurance (for me and my wife) costs about $650/year and continues on into retirement.

My pension started immediately when I retired in 2014 (at age 49) and is roughly $90,000/year. In addition, I paid into SS. We are planning to retire in a year or two and my military pension plus our combined SS benefits will probably cover our retirement needs even with a safety factor.

Despite several military deployments, moving every 2-3 years, and my oldest child attending 5 different schools in 6 years at one point we are extremely blessed and thankful. We met and were surrounded by the very best people this country has to offer and our children benefited even more than we did. Finally, I had absolutely no idea of the benefits of a military pension (and especially not the benefits of excellent medical coverage for a very affordable price) when I signed up but looking at it now I'm really glad I did!

Thanks for reading.
Sounds like a great journey, thanks for sharing. May I ask what your rank was when you retired? Interested in whether your pension numbers are unusual and due to being at the top of the scale.
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warner25
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Re: Best government pension plan in the U.S.?

Post by warner25 »

Ketawa wrote: Thu May 06, 2021 8:57 am Military retirement at 20+ years...
Luckywon wrote: Fri May 07, 2021 12:23 am
RVdreamin wrote: Thu May 06, 2021 10:37 pm ...military retirement...
Sounds like a great journey, thanks for sharing. May I ask what your rank was when you retired? Interested in whether your pension numbers are unusual and due to being at the top of the scale.
At 27 years and $90k/year, I'm guessing O-6 (Colonel or Navy Captain), a rank which only a single-digit % of officers will ever see, and this brings me to my point: The military retirement system is generous, but the up-or-out promotion system and 20-year cliff vesting is brutal. I'm an O-4 at 13 years with a good performance record, but I'm aware that just a couple lukewarm annual evaluations (or a negative one) would prevent me from making O-5 and potentially prevent me from continuing to 20 years as an O-4. Transferring to a reserve component is a weak consolation. The best Plan B, in my mind, is becoming a Federal civilian and buying back the years of military service for credit towards FERS.
RVdreamin
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Re: Best government pension plan in the U.S.?

Post by RVdreamin »

Yes, I should have added that I was very lucky and able to retire as an O6/Colonel.

To warner25: At 13 years in it's probably past the point of no return--I'd gut it out at least until 20 years (or consider transitioning to the reserves). Even if unfortunate enough to not make O-5, normally you'll be able to continue to 20 years. The pension/medical benefits are, in my opinion, worth the effort.

I'll add that although I don't have regrets, if I had to do it all over again I probably would have retired at 20 years and started my transition to a second career that many years earlier. For me, my military career field allowed me a very easy transition to federal civilian service but since I'm planning to retire (again) prior to 60, I won't have enough civilian time for a civilian retirement annuity. However, with my military retirement and SS in the future not having a civilian retirement annuity hasn't altered our retirement plans.
Ramjet
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Re: Best government pension plan in the U.S.?

Post by Ramjet »

Not saying this is the best, just sharing what mine is:

I contribute 10% of my salary, employer matches 7.5%. I invest this money as I see fit (total market funds). Fully vested after 5 years. Can withdrawal at 55 or later. At withdrawal you roll lump sum into an IRA or can convert to an annuity with an inflation adjustment. Additionally, there is a 4.5% employer contribution to a retirement medical account. Vested after 15 years.
VT & HFEA
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Wiggums
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Re: Best government pension plan in the U.S.?

Post by Wiggums »

Interesting to see the various pension payouts. I wonder if there is a correlation between pension amount and shortfalls. Those with the highest payouts are more likely to be underfunded?
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infotrader
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Re: Best government pension plan in the U.S.?

Post by infotrader »

RVdreamin wrote: Fri May 07, 2021 6:52 am Yes, I should have added that I was very lucky and able to retire as an O6/Colonel.

To warner25: At 13 years in it's probably past the point of no return--I'd gut it out at least until 20 years (or consider transitioning to the reserves). Even if unfortunate enough to not make O-5, normally you'll be able to continue to 20 years. The pension/medical benefits are, in my opinion, worth the effort.

I'll add that although I don't have regrets, if I had to do it all over again I probably would have retired at 20 years and started my transition to a second career that many years earlier. For me, my military career field allowed me a very easy transition to federal civilian service but since I'm planning to retire (again) prior to 60, I won't have enough civilian time for a civilian retirement annuity. However, with my military retirement and SS in the future not having a civilian retirement annuity hasn't altered our retirement plans.
Thank you for your service and info. It is very interesting!
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pahkcah
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Re: Best government pension plan in the U.S.?

Post by pahkcah »

rich126 wrote: Thu May 06, 2021 10:17 am I think as the population growth slows down (which it is) many of these plans are going to be in serious trouble. Letting people retire in 20 years in their early 40s isn't a viable option long term w/o sizable population growth and most of the world is facing declining growth.

The old federal plan (CSRS) gave employees 2% times years of service times high 3 (I think) year average salary. So if you worked 35 years you'd get 70%. However, they didn't pay into social security and don't receive it.

The newer plan (FERS) gives you 1% instead of the 2% above but you do pay in and receive social security. It has gotten less attractive as the employee contribution went from a token 0.8% to over 4% now.

I recall my father going through his mother's documents when she passed away and was surprised how much the state of NJ was paying her as a retired school teacher. I have no idea how long she taught because I only knew her when she was long retired. Apparently the payments must have been COLA because they were much larger than any salary she earned while working. This was many eons ago.

Unfortunately starting a job that currently has a great pension plan now doesn't mean it will be kept the same for the next 20-40 years.
Thank you for mentioning CSRS. DW and I are both retirees under the Civil Service Retirement System (CSRS). The CSRS pension computation is based on number of years and months worked times high-three salary, but the percentage applied per year is not a straight 2% until an employee’s eleventh year. Here are the percentages used to compute a CSRS pension:

First 5 years of work – 1.5% per year
Second 5 years of work – 1.75% per year
All years past 10 – 2% per year

A CSRS retiree with 30 years of service would earn a pension of 56.25% (5 x 1.5%, plus 5 x 1.75%, plus 20 X 2%) times high-3. The CSRS employee contribution rate was 7% until 1999. The contribution rate was raised in 1999 to 7.25% and then to 7.40% in 2000. And, the COLA is the same as the yearly Social Security COLA, assuming there is one in a particular year.

The maximum pension for time worked under CSRS was 80% of high-three. To achieve this percentage, it required an employee to work 41 years and 11 months. We were, however, allowed to add all unused sick leave (in monthly increments) to our total years worked. I supervised an employee who worked 44 years and had the equivalent of two years of unused sick leave. His pension was 84% of his high-three.
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infotrader
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Re: Best government pension plan in the U.S.?

Post by infotrader »

Ron Ronnerson wrote: Thu May 06, 2021 7:58 pm I'll add a data point. I’m a CalSTRS member (public-school teacher) and am an old-timer (in the system prior to 2013, when the reforms began). I contribute 10.25% of salary toward the pension, my employer contributes 16.15% (set to increase to about 18% next year), and the state contributes 10.33%. This adds up to 37% of payroll and is expected to continue increasing at least a bit more in the years ahead. Prior to the reforms, the contribution rates were much lower. Since newer members have less generous benefits and all parties (employees, employers, and the state) are contributing quite a bit more now as well, the long-term trajectory of CalSTRS has changed and it is on a much better path in terms of funding levels.
I think CalSTRS plan does not offer health care premium subsidy after retirement, which makes it a little difficult to retire earlier.
Ron Ronnerson
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Re: Best government pension plan in the U.S.?

Post by Ron Ronnerson »

infotrader wrote: Fri May 07, 2021 9:49 am
Ron Ronnerson wrote: Thu May 06, 2021 7:58 pm I'll add a data point. I’m a CalSTRS member (public-school teacher) and am an old-timer (in the system prior to 2013, when the reforms began). I contribute 10.25% of salary toward the pension, my employer contributes 16.15% (set to increase to about 18% next year), and the state contributes 10.33%. This adds up to 37% of payroll and is expected to continue increasing at least a bit more in the years ahead. Prior to the reforms, the contribution rates were much lower. Since newer members have less generous benefits and all parties (employees, employers, and the state) are contributing quite a bit more now as well, the long-term trajectory of CalSTRS has changed and it is on a much better path in terms of funding levels.
I think CalSTRS plan does not offer health care premium subsidy after retirement, which makes it a little difficult to retire earlier.
It’s true that CalSTRS doesn’t contribute toward health insurance and that could be a factor for some. However, the district I work for pays 0% for employee health benefits but 100% for retiree health benefits. This encourages some to retire earlier than they might do otherwise.
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Ketawa
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Re: Best government pension plan in the U.S.?

Post by Ketawa »

warner25 wrote: Fri May 07, 2021 2:10 am At 27 years and $90k/year, I'm guessing O-6 (Colonel or Navy Captain), a rank which only a single-digit % of officers will ever see, and this brings me to my point: The military retirement system is generous, but the up-or-out promotion system and 20-year cliff vesting is brutal. I'm an O-4 at 13 years with a good performance record, but I'm aware that just a couple lukewarm annual evaluations (or a negative one) would prevent me from making O-5 and potentially prevent me from continuing to 20 years as an O-4. Transferring to a reserve component is a weak consolation. The best Plan B, in my mind, is becoming a Federal civilian and buying back the years of military service for credit towards FERS.
I'm an O-4 at 12 years. I think I'm well set up to make O-5 in a few years. Even if I don't, I have tenure as an O-4 in my service; I'd have to really screw up to lose my commission entirely.

I look at the pension as a multimillion benefit, would it would cost to buy an inflation-adjusted annuity starting at age 41. I'd be giving up at least $300K in annual income on top of my salary/benefits for the next 8 years to get out now.
rich126
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Re: Best government pension plan in the U.S.?

Post by rich126 »

pahkcah wrote: Fri May 07, 2021 9:30 am
rich126 wrote: Thu May 06, 2021 10:17 am I think as the population growth slows down (which it is) many of these plans are going to be in serious trouble. Letting people retire in 20 years in their early 40s isn't a viable option long term w/o sizable population growth and most of the world is facing declining growth.

The old federal plan (CSRS) gave employees 2% times years of service times high 3 (I think) year average salary. So if you worked 35 years you'd get 70%. However, they didn't pay into social security and don't receive it.

The newer plan (FERS) gives you 1% instead of the 2% above but you do pay in and receive social security. It has gotten less attractive as the employee contribution went from a token 0.8% to over 4% now.

I recall my father going through his mother's documents when she passed away and was surprised how much the state of NJ was paying her as a retired school teacher. I have no idea how long she taught because I only knew her when she was long retired. Apparently the payments must have been COLA because they were much larger than any salary she earned while working. This was many eons ago.

Unfortunately starting a job that currently has a great pension plan now doesn't mean it will be kept the same for the next 20-40 years.
Thank you for mentioning CSRS. DW and I are both retirees under the Civil Service Retirement System (CSRS). The CSRS pension computation is based on number of years and months worked times high-three salary, but the percentage applied per year is not a straight 2% until an employee’s eleventh year. Here are the percentages used to compute a CSRS pension:

First 5 years of work – 1.5% per year
Second 5 years of work – 1.75% per year
All years past 10 – 2% per year

A CSRS retiree with 30 years of service would earn a pension of 56.25% (5 x 1.5%, plus 5 x 1.75%, plus 20 X 2%) times high-3. The CSRS employee contribution rate was 7% until 1999. The contribution rate was raised in 1999 to 7.25% and then to 7.40% in 2000. And, the COLA is the same as the yearly Social Security COLA, assuming there is one in a particular year.

The maximum pension for time worked under CSRS was 80% of high-three. To achieve this percentage, it required an employee to work 41 years and 11 months. We were, however, allowed to add all unused sick leave (in monthly increments) to our total years worked. I supervised an employee who worked 44 years and had the equivalent of two years of unused sick leave. His pension was 84% of his high-three.
CSRS ended before I started so I didn't know the details.

Before I left the government in 2019 there was a guy there still working in his 80s. His daughter was almost ready for retirement herself. Money wise it was pointless for him to continue to work but his wife had passed on and I don't think he had anything else to keep him going.
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infotrader
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Re: Best government pension plan in the U.S.?

Post by infotrader »

Ron Ronnerson wrote: Fri May 07, 2021 10:10 am
infotrader wrote: Fri May 07, 2021 9:49 am
Ron Ronnerson wrote: Thu May 06, 2021 7:58 pm I'll add a data point. I’m a CalSTRS member (public-school teacher) and am an old-timer (in the system prior to 2013, when the reforms began). I contribute 10.25% of salary toward the pension, my employer contributes 16.15% (set to increase to about 18% next year), and the state contributes 10.33%. This adds up to 37% of payroll and is expected to continue increasing at least a bit more in the years ahead. Prior to the reforms, the contribution rates were much lower. Since newer members have less generous benefits and all parties (employees, employers, and the state) are contributing quite a bit more now as well, the long-term trajectory of CalSTRS has changed and it is on a much better path in terms of funding levels.
I think CalSTRS plan does not offer health care premium subsidy after retirement, which makes it a little difficult to retire earlier.
It’s true that CalSTRS doesn’t contribute toward health insurance and that could be a factor for some. However, the district I work for pays 0% for employee health benefits but 100% for retiree health benefits. This encourages some to retire earlier than they might do otherwise.
That is quite interesting. Never thought of situation like that.
Coato
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Re: Best government pension plan in the U.S.?

Post by Coato »

infotrader wrote: Fri May 07, 2021 9:49 am
Ron Ronnerson wrote: Thu May 06, 2021 7:58 pm I'll add a data point. I’m a CalSTRS member (public-school teacher) and am an old-timer (in the system prior to 2013, when the reforms began). I contribute 10.25% of salary toward the pension, my employer contributes 16.15% (set to increase to about 18% next year), and the state contributes 10.33%. This adds up to 37% of payroll and is expected to continue increasing at least a bit more in the years ahead. Prior to the reforms, the contribution rates were much lower. Since newer members have less generous benefits and all parties (employees, employers, and the state) are contributing quite a bit more now as well, the long-term trajectory of CalSTRS has changed and it is on a much better path in terms of funding levels.
I think CalSTRS plan does not offer health care premium subsidy after retirement, which makes it a little difficult to retire earlier.
If you’re a teacher check with your district. Our’s let’s you stay in the employee health care (same cost as when teaching) from 55-Medicare with 10 year’s service.
LunarOpal
Posts: 14
Joined: Sun Mar 28, 2021 1:10 pm

Re: Best government pension plan in the U.S.?

Post by LunarOpal »

I have (or qualify for; I'm not retired) a "standard" Indiana DB pension.

The factor is 1.1%, so the pension calculation is [years of service]*.011*[average of top 5 years of salary].

So basically 1/3 of my salary after 30 years. Not particularly generous as pensions go...but I'll take it. I think the majority (or plurality) of pensions use a factor around 1.1%

On the plus side, I don't have to contribute anything to it, and the state deposits 3% of my salary into a 403(a) account. (There is also a 457(b) DC plan which is where almost all of my retirement funds are held).

No automatic COLA (although there was one this year; there's usually a 13th check, but it doesn't compound and is around $400-$500).

We do qualify for SS, however, and the pension is something like 91% funded, so there is that.


Police and firefighters get more generous pensions, and judges and elected prosecutors get more generous pensions still.
wootwoot
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Re: Best government pension plan in the U.S.?

Post by wootwoot »

The way to really get an oversized payout is through pension spiking.

https://en.m.wikipedia.org/wiki/Pension_spiking
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warner25
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Re: Best government pension plan in the U.S.?

Post by warner25 »

RVdreamin wrote: Fri May 07, 2021 6:52 am At 13 years in it's probably past the point of no return--I'd gut it out at least until 20 years (or consider transitioning to the reserves). Even if unfortunate enough to not make O-5, normally you'll be able to continue to 20 years. The pension/medical benefits are, in my opinion, worth the effort.
Ketawa wrote: Fri May 07, 2021 10:16 am I look at the pension as a multimillion benefit, would it would cost to buy an inflation-adjusted annuity starting at age 41. I'd be giving up at least $300K in annual income on top of my salary/benefits for the next 8 years to get out now.
Oh, I fully concur on the value of the retirement benefits. My point was not that anyone should walk away at 12 or 13 years. My point, especially to the non-military folks reading this, is that a 20+ year military officer retirement is not a given. It's not a career in which one can just show up and punch the clock everyday until reaching retirement eligibility. At least in the Army, in recent years, one needs to consistently be among the top ~50% of peers to get promoted, which only gets harder as one moves up in rank. An Army O-4 who doesn't make O-5 needs to receive a special offer of "selective continuation" for three more years to reach retirement. In 2014-2015, during the most recent "right sizing" effort, I witnessed the involuntary separation of several O-4s with ~15 years.
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