Another pension question

[kershnic]

Help me evaluate the value of this.... I'm 29. I will be vested in my company's pension plan in September 2013 (5 years working there). My best estimate of the pension benefits if I should quit after 5 years is that I would be paid $350/month from when I turn 65 onwards.

New employees are no longer eligible for this pension plan, but the company has made it clear that they intend to honor the plan for all previous employees. Company has been around for over 100 years. But of course it's a long long time before I turn 65.

How much is this worth, compared to say contributions to 401k/403b or Roth IRA? Should I consider it at all? If I wanted to leave my job before September 2013 (but not to get paid better somewhere else) would that be stupid?

[rubytue]

FWIW, Based on historical inflation data, $350 now will be worth about $50/month in 30 years.

Would $50/month make a difference to you now? That could give you a good idea on how $350/month will affect your budget in 30+ years.

[lelolopa]

I assume this is qualified plan, therefore protected by pension insurance, so whatever is accrued up to date under the plan is protected. Just know that the company can change their pension plan at any time and your future accruals can be frozen.
If you want to know how much your accruals are worth call the benefits department and request age 65 estimate based on 5 years of accruals with the lump sum value of benefits at 10/1/2013. They should be able to run this estimate. They will also tell you the relative value of lump sum which will compare the value of lump sum to the monthly benefit.
If you terminate before vesting, you will not be entitled to any benefit.
I also assume that this is the defined benefit formula plan you have. It is called defined plan since you know the formula and benefit you will receive at age 65. The Defined Contribution plans (401k/403b) are called that as the contributions to the plan are defined, but the benefit you will receive depends on the investments and risk you take with your investments. If you know what you are doing investing the assets, then you might like Defined Contribution plans.
Susie Orman says, people first, then money then things, so unless your job is unbearable and makes you depressed and stressed out to the point you cannot exist and if you are not changing your job to get better pay, better benefits - if I was you I would at least stay until you are vested in the plan. Good luck!

[kershnic]

Aug 28, 2012 20:14:48 GMT -5 rubytue said:

FWIW, Based on historical inflation data, $350 now will be worth about $50/month in 30 years.

Would $50/month make a difference to you now? That could give you a good idea on how $350/month will affect your budget in 30+ years.

Yeah, inflation. I knew it would be a lot less but it's sort of disturbing how much less it could be.

$50/month would make a small difference to me now but certainly wouldn't make or break it for me. But I didn't really start saving for retirement until the last year or two (grad school, then entry level job that barely paid the monthly bills) so $600/year times 10 or 20 or more years retired does seem significant considering what I've saved already.

[kershnic]

Aug 28, 2012 20:24:10 GMT -5 lelolopa said:

I assume this is qualified plan, therefore protected by pension insurance, so whatever is accrued up to date under the plan is protected. Just know that the company can change their pension plan at any time and your future accruals can be frozen.
If you want to know how much your accruals are worth call the benefits department and request age 65 estimate based on 5 years of accruals with the lump sum value of benefits at 10/1/2013. They should be able to run this estimate. They will also tell you the relative value of lump sum which will compare the value of lump sum to the monthly benefit.
If you terminate before vesting, you will not be entitled to any benefit.
I also assume that this is the defined benefit formula plan you have. It is called defined plan since you know the formula and benefit you will receive at age 65. The Defined Contribution plans (401k/403b) are called that as the contributions to the plan are defined, but the benefit you will receive depends on the investments and risk you take with your investments. If you know what you are doing investing the assets, then you might like Defined Contribution plans.
Susie Orman says, people first, then money then things, so unless your job is unbearable and makes you depressed and stressed out to the point you cannot exist and if you are not changing your job to get better pay, better benefits - if I was you I would at least stay until you are vested in the plan. Good luck!

Thanks for the information. It is a defined benefit plan, and it's still accruing value and they claim it will continue to do so for the foreseeable future (as long as I continue to work there of course).

I tried asking HR about it several times and each time was referred back to a written document they distributed at the time of the changes (they reduced the rate at which the value accrues and canceled it for any new hires as of a certain date about a year ago). The document details what the benefit will be for different workers in several different scenarios, but they all assume continuing to work at this company until retirement. (But it clearly states that you're vested after 5 years).

The company doesn't offer any sort of match to retirement savings, so I haven't contributed to the 403b. I do contribute to a Roth IRA.

The job is annoying but good for my resume. I'm not quitting any time soon because I need the infertility coverage that comes with the insurance plan.... but I really want to quit and go back to school.

[lelolopa]

I know they don't want to calculate benefit estimates because it is costly (the cost of an estimate can run up to few thousand dollars in complex cases). However, you are entitled to receive an estimate, so call them up and tell them you need this for your financial adviser/accountant/lawyer and that that is what he needs and you need this in 4 weeks max.
You can also find what your rights are as a participant in the Qualified plan (including requesting a written estimate) on line. Quote that section of the law, and they will quickly comply. If you mention lawyer they will think you are either getting divorced or postnup or getting married and doing prenup, but who cares what they think. :-)
Not many medical plans have infertility coverage. Infertility treatments are very exspensive if your insurance does not cover it. so that alone is valuable.
But whatever road you take and whatever your decisions are, good luck!