This will be me at 90.
This will be me at 90.

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?

14 Comments

  1. Peggy Robinette Reply

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  2. I am a teacher in Los Angeles for 10 years. I will retire in 6.5 years. My pension will be small compared with my other retirement sources, however I hope there will no changes for the people who are close to retirement. I expect changes for new people, but that will make it harder and harder to recruit. Start you 403B with a token amount and add to it.
    .-= krantcents´s last blog ..Resumes That Work =-.

    • @Krantcents – I’m sure that there won’t be any pension changes for a while (especially knowing how slowly they work 😉 ) Who knows what will happen in the future, but that’s why I am starting something this year to supplement it!

  3. I had a pension with my first job, and they gave me a lump sum check and I put it into a 401k. That is the extent of our pension between the two us, and I think it is worth all of about 10,000 dollars right now.

    I can see why this would be upsetting, it is definitely not what you expected. I also didn’t realize that you did not get pensions and social security.

    Were you able to get any further information from the school district? Or is that just the way it is?
    .-= Everyday Tips´s last blog ..10 Home Renovation Tips – Learn From Our Experience =-.

    • @Everyday Tips – The way I understand the whole pension/social security thing is that if I ever contributed to social security, I will get some of that back, but not as much as what my annual reports calculate. However, my pension is in lieu of social security and has been this way for over 9 years. I’m not sure all pensions work this way, but state pensions do. I can attend retirement seminars as I get closer to retirement and they will give me a better picture of my pension come retirement. However, I have a ways to go before I can do this (I don’t think they’ll even really speak to me until I reach 50 or 55).

  4. Alas, I’m pensionless 🙁

    Hopefully they can figure out a solution like you said though! Like Kris, I didn’t realize that if you had a pension, you wouldn’t receive Social Security. You must have worked other jobs where you did contribute to social security?
    .-= Money Reasons´s last blog ..Sometimes Free Is Better =-.

    • @Money Reasons – prior to teaching, I had about 15 years where I paid into Social Security. However, it didn’t amount to much since I wasn’t making very much. As I get closer to retirement, I’ll have a better picture of how much, if any, I’ll receive from Soc. Security.

  5. Scary thought, but at least you found about it now! I am pensionless and don’t know much about the alternatives. But thanks for the wake up call as it’s never too early to analyze your retirement strategy. For what it’s worth, you are quite resourceful and I’m sure you’ll be fine in the end. 🙂
    .-= Buck Inspire´s last blog ..Moving Day- Hell on Earth =-.

    • @Buck Inspire – Back up plans should be my middle name; I’m constantly having to come up with different strategies to meet my goals. Thankfully, I don’t procrastinate on most things (except this whole retirement planning thingy!) Although I’m still young enough to do something about it.

      @FirstGenAmerican – That’s a good way to look at your pension – as an added bonus if you happen to get it. 40 years is a long time and it just isn’t safe to stick all your eggs in one basket, so to speak.

      @Money Reasons – Thanks for the bike comment. I’m pretty sure I’ll still be riding at 90. 😉

  6. I’m one of those rare breeds who has a pension fund but works in the private sector. I actually pretend like it doesn’t exist because it’s not nearly enough to live on and like you said anything can happen 40 years from now.

    In my case, I’m relying on my company’s solvency through the next 40-50 years. Who the heck knows what’ll happen by then, so for now, I pretend like it doesn’t exist and am planning my retirement the old fashioned way. I’m treating it as a potential windfall. Better to be safe than sorry.

  7. Oh, I forgot to say that I love that picture of the elderly woman riding her bike! Finances aside, I can imagine you still riding at that age since I know you really enjoy riding your bike 🙂
    .-= Money Reasons´s last blog ..Which Financial Author Should You Follow =-.

  8. Budgeting in the Fun Stuff Reply

    My husband is an elementary school librarian and his pension is a big part of our plans too, but we also have a Roth IRA and my 401(k) just in case Texas has the same problems. Good luck!

  9. I’m glad you realized this young enough to do something about it! I definitely wouldn’t depend on politicians making smart decisions. I expect that the retirement age will go up and benefits will go down, as you said.

    I think it’s a good idea to not put all your eggs in one basket. I have a bunch of different potential income streams ranging from business investments to precious metals.

    • @Jennifer Barry – Another option I’m thinking will be a reality for me may also include working part-time past retirement. I’m still far off from retiring, but I can see myself wanting to generate income even though I’m “retired.” 😉

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