Originally Posted by CantStayAway

I’m glad that you are happy with your A plan. While it may not seem like it, there is definitely a specific rate of return tied to a pension. The same way that when you lease a car you are paying a specific interest amount on the money. The only difference between a lease and a traditional car loan is the dealership does not have to tell you what percentage rate that is with a lease. In both cases (a pension and a lease), you have to back into it yourself with some complicated math formulas. The bottom line is that his response about pensions returning 5 to 6% is pretty accurate.



If you want to compare apples to apples, look at how much monthly is put into your A plan. You can put it into a financial calculator that you find on Google and assume a 10% return with monthly additions over the length of your career. You will find quite a large sum at the end of your career. Take that large sum and multiply it by 10%. I bet that number will be more than the monthly payment that you will receive from your pension. On top of that, when you die that lump sum can be given to your heirs.

Originally Posted by flensr

I do know how pensions work. And state and federal pensions work very similarly to private pensions, in that a portion of compensation is paid into a pension fund which gets invested and managed by the company, and in the end is treated effectively like a long-term annuity, where the amount initially invested in the pension fund theoretically can't be touched and you never get that nest egg back when you die. The diff between a company and govt pension is that govt pensions are at risk of being borrowed from, at the stroke of a pen by the legislature and governor, while corporate pensions are somewhat more rigorously regulated yet still at risk to cover company liabilities. A govt can also budget more to cover pension payouts if they fail to contribute enough into the pension fund, while a company that under-contributes to its pension fund ends up having to cash-flow the difference and might end up defaulting on the whole thing if they end up with too much pension liabilities and not enough pension fund investments.



Also, I was specifically talking about an "A/B strategy" for managing your own retirement assets. Nothing to do with A and B "plan" retirements. A/B fund strategies with regards to your own investments refers to having separate conservative and aggressive funds within your own retirement accounts, and is a way to maximize returns over the long term while managing risk over an approx 5-year rolling period. A properly followed A/B fund strategy can maintain market average returns essentially indefinitely without risking losing everything or even having to cut withdrawal rate in a market downturn lasting several years. My point in bringing this up is that almost every pension on the planet returns ballpark 5%, no better than an annuity that you can purchase, because of how they're run. If you properly invest the amount contributed to the pension in your name instead (ie. take the buy-out if that's an option and invest it yourself), you should be able to see returns closer to 8-10% over almost any timeframe. The trick is to have an "A fund" containing 5 years of household expenses invested conservatively, and the remainder in the "B fund" invested as aggressively as desired. In the history of the stock market, there have been very few 5-year periods where the market has not turned a profit, and over the history of the market it has returned an average approx 10-11%. So a 5 year "A fund" should cover almost any conceivable market downturn, you live off the A fund when the market is bad, and you refill your A fund from the aggressively invested B fund when the market is good. It works, and it returns about double what you see from a typical company run pension. You can easily calculate return your company's pension is expected to return by taking the buyout amount, and figuring the rate of return it would have to have in order to pay out the expected pension payout for life. Generally you'll see that it's ballpark 5%.



Money works the same regardless of your industry and history has shown that ALL pensions can be at risk. An unhealthy pension fund can go bankrupt, and a healthy pension fund can get raided to cover other liabilities in the event of bankruptcy. That's the same no matter where you are.

Originally Posted by Profane Kahuna

How much would you need to invest every year to mirror that $130,000 pension, just in case it gets stolen and you want a backup retirement fund?



Variables: 20 years of work at the company till 65, live another 25 years.

Originally Posted by SASD209

I 2nd the 1st suggestion, knowing it’ll be difficult to police. probably set up one thread with just the template to fill and a 2nd thread to discuss the details? May not be easy but it’ll make the readability easier on the end user.

Originally Posted by Silver02ex

I would say that’s average, if you don’t account for inflation or taxes. Look at the history of most growth mutual funds or an S&P 500 index funds.

Originally Posted by BoilerUP

You know many people IN RETIREMENT who have all their savings in a SP500 index fund?

That’s very a aggressive and risky investment strategy for a retiree...

Originally Posted by BoilerUP

You know many people IN RETIREMENT who have all their savings in a SP500 index fund?

That’s very a aggressive and risky investment strategy for a retiree...

Originally Posted by FXLAX

A pension doesn’t go completely away. If it’s divested to the PBGC, that $130k/yr would go down to about $70k/yr.

Sorry I can’t answer that math question. Someone smarter than me can probably do it. But it should take into account that no one will completely lose their pension. Maybe calculating it only for the amount one would lose, in this case 130-70=$60k/yr?

Originally Posted by Profane Kahuna

This is old

Originally Posted by BoilerUP

A decade and a half old, to be exact...just a couple things have changed in the airline industry and financial world since then.

Here's the current PBGC benefit chart:
https://www.pbgc.gov/wr/benefits/gua...imum-guarantee

Originally Posted by BoilerUP

You know many people IN RETIREMENT who have all their savings in a SP500 index fund?

That’s very a aggressive and risky investment strategy for a retiree...