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A Pension – Seen as a Blessing and a Curse

Before any of you decide to scream at me or question my sanity, please understand that I understand how awesome a pension is.  I do.  I promise.  But my husband and I were talking about his pension recently, the one he will hopefully receive if he continues working in our school districts for another 24 years, and he brought up a side of them that I hadn’t looked at before.

My Husband’s View of a Pension

In short, he knows that having one is awesome.  In fact, he knows that it is so awesome that he is scared to consider other job opportunities because giving up a pension would hurt too much.  He thinks that giving up it up would pretty much doom our early retirement goals.  And this would be why he sees his future pension as a blessing and a curse.  It’s also another example of how I am the optimist in our relationship and he…well…isn’t.

My View of a Pension

I personally never thought about it like that.  I told him that I looked at it as an awesome bonus for making it 30 years in the cruddy school districts here.  If he didn’t end up wanting to stay, I figured we would just have to start saving even more elsewhere.  Plus, we are fully funding 2 Roth IRA’s now and my 401(k) for as long as I stay in my current day job.  I never thought that he was stuck.

Our Current View of a Pension

After talking it over, it is obvious that my husband still feels a little tied to the school system, but at least he likes being a school librarian.  He isn’t torturing himself.  I still feel pretty optimistic that we could retire pretty early even if we didn’t have a pension.  We live on about half of what we make and I think a lot of people retire on way less than what we are saving as just as our backup retirement funding.  I think we are doing very well with or without the blessing of a pension.

What do you think of pensions?  I know a lot of people don’t think a pension will even be around anyway, so I think saving elsewhere is just going to have to be the best we can do… 

FYI:  I worked at a dead end cubicle job from 2005-2011 for about $30,000 per year.  I went self-employed in July 2011 and make between $70,000-$90,000 through blogging, professional pet sitting, hubby's reffing, and our rental home.  If you’d like to start your own site (link to my free step-by-step guide), I highly suggest checking out Bluehost (my referral link with a nice discount for you, PLUS a free custom header banner from me!).  Please contact me any time at budgetingfunstuff*at*gmail*dot*com with questions or just to brainstorm! I’d love to help!
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17 thoughts on “A Pension – Seen as a Blessing and a Curse

  1. I understand how your husband feels. I have a great job with great benefits, but it kind of makes you feel trapped sometimes. You suddenly realize that moving anywhere else would be crazy financially, and therefore, you feel like you need to stay where you are in order to provide for your family.

  2. Well, it is nice, but it is not always secure. I have contributed to my pension as a state employee for the last 10 years. Turns out that all public employees in the state have been contributing, but the state hasn’t been doing its part by also contributing. Now there is a bill to raise public employees’ contributions from 8% of gross to 16% of gross, with no change in benefits to make up for the state’s poor money management.

    I will be leaving my job this summer, and I will be taking my retirement with me and investing it elsewhere. Honestly, I don’t trust that it will be there in 30 years, thanks to the state.

    Tell your husband a pension is not a reason to stick it out in a job he may not like.

  3. There’s actually a term for that, “job-lock.”

    My MIL was pretty miserable all the time I knew her. Finally, 5 years before her pension vested, she had enough and quit the job she’d hated so long and took a different job elsewhere, losing those pension benefits. It’s like she’s a completely different person. DH says he doesn’t remember her ever being so optimistic and carefree, and just happy in general.

    I’m a state employee, but have a 403(b) instead– makes me mobile. I’m surprised he doesn’t have a choice between a defined benefit and a defined contribution (403(b)) pension, or maybe he did once but picked defined benefit. In the future, he can do a 403(b) and invest in an annuity, and it will be like a DB pension but mobile.

  4. I would seriously wonder whether a pension would be around since it is something that you have no control over. He needs to love his job as has been stated above because the possibility of having something like a pension 30 years into the future is not worth the hassle.

  5. I can see his point, but at the same time the lack of pensions for the current generation of workers as well as future generations is going to cause problems down the road, and make for less lucrative retirements and more dependance on handouts.

  6. I may be one of the few who know both sides. Early in my career, I gave up a pension and probably one of the best benefits packages. Over my career, I earned more money by leaving that company working for others and for myself. I started teaching 10 years ago and will receive a pension in 6 years. It will be modest because of my short tenure in the district, but I will take it. A pension is nice, but it is not everything. School districts across the nation are strapped for funds and increases will be non existent similar to the last 10 years. Good work in schools is not rewarded (monetarily).

  7. For me this hits home because i’m in this situation currently. I feel like i’d be making the stupidest move ever if I left my city and tried to move into the private sector. At 25 i’m already vested into my city’s pension because I started working full time at 20.

    For most people, a government pension will be 60-70% of their income… For me it will be closer to 90% because I’ll have so many service years and it will allow me to retire at 50 or 56 at the latest…

    That’s something really had to leave aside.

  8. I believe both sides of this question are very reasonable ways to view pension opportunities. It is understandable of your husband to want to hold on to the pension he is currently working toward. Many people incorporate such an agreement into a retirement plan and it can be difficult to change the direction that you’ve been working towards for several years. The part I think is most important for your situation is how much the pension actually provides in relation to how well he enjoys the work. If you’re already savings a sufficient amount for retirement, then not having to rely on your husbands pension is its own blessing in disguise if you both decide to take an alternative route in your future savings.

  9. Pensions do exist in the private sector too. My company has a defined-contribution plan, along with a 401k match. If an job opportunity presented itself outside the company, I’d just evaluate the cost-benefit. Would the loss of my potential future benefits be outweighed by the gains (economic or emotional) of the new job.

    His pension is a great economics lesson. Because of the value of the pension, it makes a great employee retention tool.

  10. With state budgets in the toilet, I would plan on receiving nothing, and be glad when it comes.

    As a product, pensions are definitely a dying breed. The number of people receiving them is in a very serious decline. I figure they’ll be virtually gone from the private sector in the next decade. However, I’m certain state governments will continue to promote them, as they provide for an easy way to finance state and local budgets if a portion of the savings are diverted to municipal bonds.

  11. @LifeAndMyFinances, yep, exactly.

    @Melissa, I have let him know he should do whatever he enjoys, but he seems to like this enough to let the pension keep him there.

    @Nicole, nope, he has to contribute to the pension but the 403(b) is optional.

    @cashflowmantra, I agree.

    @Money Beagle, well, we definitely won’t need it, so hopefully Mr. BFS won’t stay unless he wants to.

    @krantcents, I’ve always thought that teachers were soooo overlooked…

    @South County Girl, we’ll see if you and Mr. BFS stay with it or not for the next 20 years. Good luck. But I agree with everyone else, if you ever just get sick of it, don’t make yourself miserable.

    @FinancialAdvisorMVP, good advice.

    @MikeS, I never thought of the economics lesson behind this, lol. I agree you simply have to do the cost-benefit analysis over time.

    @JT McGee, it aggravates the heck out of me that we have to act like social security won’t be around, pensions won’t be around, Roth IRA’s may lose their cool benefits, and 401(k)’s may keep us from being able to get any of the social security that may be left. In short, we’re supposed to be walking pessimists that may end up eating cat food anyway. I think I rather just assume things will work out, save that way, and deal with cat food if I have to down the road…

  12. I’ve been substitute teaching for a local school district for 10 years and have a small amount vested in its pension plan. However, I’m realistic and know that things will most likely change before I retire in 20-25 years (hopefully as a full-time teacher). This means I can’t count entirely on it for my retirement,unlike my older peers who are retiring with full benefits and 80% of their highest grossing salary.

    I’m working on backup plans; mutual funds and eventually a 403(b) once I’m hired as a full-time employee. Unfortunately, I love teaching and can’t see giving that up anytime soon for a higher paying career.

    As long as your husband still enjoys what he does, and you’ve made alternate plans for retirement, looking at the pension as a “bonus” is a good way to view it. However, the pension alone isn’t a good enough reason to stick with a job you despise.

  13. My husband and I both have pensions from the places we’ve worked (but we’re older than you and those things still existed in the private sector when we entered the workforce).

    I honestly haven’t even considered it as an income stream. The private sector ones don’t pay out anywhere near what the public sector ones do as a % of income, so I’m just looking at it as a potential windfall at some point in the future. I couldn’t even tell you what my estimated payout is. I don’t even track it.

    We used to have something similar in the private sector with stock options that aren’t vested right away. They called them the “golden handcuffs.”

  14. Like First Gen American, I’ve also seen pensions and stock options that vest over a long period called golden handcuffs. They can be a huge advantage while still being stifling.

  15. We are retired & currently living on a combination of social security & my husband’s pension from a private sector job. We did not count on the pension being there, but it’s a big help now that it’s coming in. He gets about 55% of his last salary. We always contributed the max for the match in the 401K as our back-up plan. Fortunately we haven’t had to touch it yet. However it’s no where near enough if we were not getting the pension. We hold our breath every time his old company is in the news as a possible take-over target. Even with a big, well-known company, there are no guarantees that the pension will be there.

    The thing that has helped us the most has been living below our means for all of our married lives. We could make it on just SS and the 401K if we each take part-time jobs to supplement & inflation stays low. The pension does not have an inflation adjustment–it’s a fixed amount.

    Since we chose to finance our 4 kids’ college educations 100% (not the best idea according to most financial advisors) we have them as our emergency back up plan. We are a close family & they are all grateful they did not have loans to pay for the undergrad education. They had to pay for anything beyond that. I don’t say this is the best way for others, but it’s what we wanted to do.

    So far it’s working for us & we are able to have little breathing room now that the youngest has graduated from college. I’m so glad we don’t have a “keeping up with the Joneses” lifestyle. That has been huge.

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