Each year I receive my annual pension update calculating my years in the district and how much that has equated to, plus any interest that’s been accrued. It’s quite a pitiful number, but it doesn’t count the one-to-one match that started a few years back. It really isn’t a complete picture of how much I’ve actually accumulated and our retirement is also based on a few other factors that will be calculated closer to my retirement, but it gives me a ball-park.
Each year I also receive a newsletter updating members on the various funds that our pension is invested in and a bunch of other stuff that I just generally don’t read. The exception to this annual non-read material was this year. I decided to read the ‘Welcome’ portion of the newsletter just for the heck of it. You know what? It scared me half to death! Well, maybe that’s a bit of an exaggeration, but it did make me worry a bit. According to the newsletter, our pension plan only has enough funds to pay retirement packages through 2044. They explained how they came up with this year, but I wasn’t reading all of the nitty-gritty details. I’ll have to go back and investigate this a little more.
But 2044? I quickly subtracted that year from this year and came up with 33 more years of pension payments. Adding 33 years to my current age only brings me to 71 years old! I’m pretty darn certain I’ll still be kicking by age 71. So what does this mean, exactly?
I don’t have much say in the amount of income I contribute to my pension; it’s in lieu of Social Security. Which means I’m not expecting very much, if anything, from Social Security. And, most people in my profession bank on their pensions in retirement because they are pretty sweet, as in about 80% of their top salary within a 3 year range as long as they meet certain age and time requirements. Sweet, huh? But if my pension gives out only 8 or so years into retirement, what other options do I have?
Well I know, for one, that I can’t count entirely on my pension, which is why this year one of my goals (or resolutions) is to open a retirement account. I’m still debating between a 403(b) or a 457(b) and at some point I’d like to contribute to both. Since I’m starting late, they won’t be as fully funded as if I had started 10 years ago, but as long as I have something coming from my pension plan, and a teeny bit from Social Security I should be able to live respectively well even with a smaller nest egg.
Of course, 33 years gives the pension managers time to figure out solutions to this financial dilemma, some of which include increasing the retirement age from 55 to something a little more in line with Social Security, or reducing the pension payout, or reworking how they figure out the final pension payment (basically instead of 80% of the highest salary within a 3-year time period, something more akin to a smaller percentage or 80% of the last year’s salary, etc.). As long as they don’t terminate the health care portion of the pension (yes, health care is included), I don’t see any one expense being gargantuan. Obviously, the older one gets, the most expensive bill is usually health care. I think I’d rather have them reduce the amount of my pension payment than cut health care out of the plan.
Later this year I’ll be updating my status on which retirement plan I selected and my savings progress.
Are any of you in a similar situation? Are pensions going the way of the housing market?