This post is a direct continuation of Pension Series Part 30. In that article, I introduced my general framework for maximizing your defined benefit (DB) pension, which I call Grumpus Maximization. I also walked through the first two steps of Grumpus Maximization, which were (1) setting expectations and (2) orienting on yourself and your pension. These two steps are about understanding your retirement needs and your pension. In fact, step 2 required answering nine questions along those lines, not all of which were easy.
This article covers steps 3 through 5 of the Grumpus Maximization framework. As a preview, step 3 involves determining your Gap Number, which I discuss in detail below. Step 4 identifies tax minimization and investment maximization strategies that complement your pension’s steady earned income. Finally, step 5 discusses identifying other pension maximization opportunities. Continue reading →
Helping pensionable workers determine the value of their defined benefit (DB) pension to make well-informed Golden Albatross decisions is the raison d’être for this website. Thus, I write most of my articles for pensionable workers trying to determine whether staying for their DB pension is worth it. However, those aren’t the only articles I write. Although much smaller in number, I also publish articles for pensionable workers who decide to stay. If a unifying theme to those articles exists, it’s pension maximization.
What’s pension maximization? In practical terms, pension maximization ensures your pension’s positive impact in retirement is as significant as possible. You maximize your pension by taking active steps during your pensionable career. My Gap Number, Roth vs. Traditional, buying back years, and pension geoarbitrage articles provide examples of actionable steps pensioners can take. That said, unlike my Golden Albatross-themed articles, I never laid out a framework for pension maximization. In other words, after a worker decides to stay, I never answered the simple “now what?” question.
The remainder of this article, and its follow-on, layout my framework for answering “now what?” I call this framework Grumpus Maximization.
Yes, it’s a somewhat cheesy metaphor. But, Grumpus Maximization is a catchphrase designed to stick, much like the Golden Albatross. Who knows? It might even aid future marketing attempts like printing t-shirts with “Got Pension?” on the front and “Get Maximized @ grumpusmaximus.com” on the back …
That’s not helping, is it? Fine, I’ll sidebar the marketing discussion for now. Continue reading →
Not every blog post I publish stands the test of time. While I always aim to produce “evergreen” articles, meaning they stand on their merits regardless of age, I don’t always succeed. My original pension subsidized healthcare post was a great example of this shortcoming.
When I published the article, the US’s Affordable Care Act (ACA), also known as Obamacare, appeared on its way to the scrap heap due to domestic US politics. This made estimating the value of healthcare attached to a US-defined benefit (DB) pension even tougher. It also led me to rant about how overly complex and unfair the system was for those going through their Golden Albatross decision. As a result, I concluded that it was an invaluable benefit for those lucky enough to have healthcare attached to their pension, especially ifthey intended to retire before Medicare eligibility at age 65. Therefore, it should weigh heavily in their Golden Albatross decision.
That was it. I didn’t develop any complex formulas or provide helpful suggestions on accomplishing the seemingly impossible. Nor did I provide many links to others who had tried. So much for value-added, huh?
In Part 28 of the Pension Series, I stated that age, tenure, and (in some cases) gender mattered more than any singular pension design element during a pensionable worker’s Golden Albatross pension decision. I based that statement on the evidence from my master’s thesis research. For my thesis, I ran a survey for pensioners and pensionable workers which I called the Golden Albatross survey. To complete the thesis I statistically analyzed the results of the survey, which I discussed in Pension Series Part 28. This post expands on the gender portion of those findings by focusing on the impact of defined benefit pensions for women in retirement.
Much like Pension Series Part 24 (Black Pensions), for this article I examine if and how the Golden Albatross decision-making framework should be modified for a specific sub-set of pensionable workers. In this case, that sub-set is women. In doing so, I specifically focus on the disparities in retirement savings between men and women and the impact of defined benefit (DB) pensions on women’s retirement outcomes. I conclude that the Golden Albatross calculation is different for female versus male pensionable workers. Continue reading →
As the title of this Pension Couch post suggests, I help solve the mystery behind a lump-sum offer for a reader. I decided to code-name that reader Charleston because I have relatives who live in South Carolina. As with all Pension Couch posts, most of this article is made up of my lightly edited email to Charleston. In that email, I analyzed her two options: either take the lump sum or stick with the pension annuity. The wild card that makes this article different from my other lump-sum articles is that her lump-sum offer was from what’s known as a church pension plan (aka church plan).
I’ve never written about a lump-sum offer from a church plan. Actually, I’ve never written about church pension plans full-stop. Moreover, while I discuss them in this article, I don’t go too deep. I’ve made a note to write a post on church plans for the Pension Series in the future, though, because they’re an important topic. In the meantime, all you need to know is church plans don’t have to abide by the US’s Employee Retirement Income Security Act of 1974 (ERISA). For those of you unfamiliar with ERISA, it is the “federal law that sets minimum standards for most … retirement and health plans in private industry to provide protection for individuals in these plans.”
Since church plans in the US don’t have to follow the federal minimum standards, their inner workings are somewhat opaque. This opacity can create some severe pension safety concerns for plan members. Moreover, it also turns out the lax rules governing church plans impact how these plans can calculate lump-sum offers. Therefore, the mystery in this story isn’t a “who’s done it?” but a “how was it done?” Continue reading →
What should pensionable employees who leave their job before normal retirement age (NRA) do with their pension at their former employer? Should they roll the pension over into a self-directed retirement account like an IRA? Or, should they wait until NRA and collect the annuity?
These are simple enough questions, but not ones I ever had to deal with personally since my pension never accrued a value while I worked. That said, there are ways to determine the answers to these questions. But, as with many things connected to pensions, such as the Golden Albatross inflection point, it often involves a mix of math and emotion. It certainly did for one reader who had a pension roll-over question, so I made it the topic of this Pension Couch post.
For those that don’t remember, Pension Couch articles are created from lightly edited and sanitized email/message exchanges in which I answer readers’ pension questions. Names and some details have been sanitized to protect the innocent. Also, don’t forget that I speak in general about pensions throughout this post because every pension plan is different. So, make sure you research your specific plan before taking any action! Continue reading →
Based on the title of this post, can you guess which article on the Golden Albatross blog has the most views? If you said The Pension Series (Part 17): Buying Years – A Case Study, then have a beer on me. I promise I’ll pay you back when I get my next US $20 royalty check from my publisher! In any case, the contest isn’t even close. Part 17 has triple the number of views than the second most-viewed post, The Pension Series (Part 3): What Is Your Pension Worth?. It’s probably as close to viral as one of my pension-related posts will ever get. Although, it did this over two years instead of two weeks. I guess that means a lot of readers have access to a pension buyback.
As I describe in Part 17, a pension buyback (aka buying back years) is a process through which pensionable workers can transfer the number of years they worked in a former pension plan into their current pension plan through a cash purchase. This allows the pensionable employee to increase tenure (in the eyes of their current pension system) when the value from their previous pension doesn’t transfer over. Therefore, it makes a pending pension annuity from the current pension plan more valuable. As a result, buying back years isn’t typically cheap. Pensionable employees with this option need to determine if the purchase is worth it.
The option to buy back years isn’t offered universally by pension plans. If you want to know more about the basics of a pension buyback, and how to calculate if it’s worth it, I encourage you to read Pension Series Part 17 if you haven’t already. Doing so will boost your understanding for the remainder of this article … and increase those view numbers even further! Continue reading →
To justify studying Golden Albatross (i.e., stay-or-go) pensionable job decisions for my master’s program, I made an argument. I’m not talking about a Facebook or Twitter argument where everyone types in CAPITAL LETTERS and no one changes their mind. I’m talking about an academic argument. That’s right, I moved beyond my typical ranting via the interwebs and masqueraded as a social scientist for a few months. Let me tell ya, white lab coats for hairy knuckle draggers are hard to come by!
I’ll let you guess which one is me.
My thesis argued that human resources (HR) managers needed to know which pension design elements made their pensionable workers most likely to stay. Reasons they might need to know this included if pension plan re-design was required after a fiscal crisis — like the dot-com crash in the early 2000s. Since the main reason for offering a pension is to create worker retention, I reasoned that pensionable employers would want to avoid cutting design elements that most attracted workers towards staying.
Of course, the argument was hypothetical. I have neither the ear of HR managers anywhere nor the nerve to advocate cutting design elements from pensions. I simply made the argument to convince my advisor and those (un)lucky enough to grade my thesis. However, after collecting and analyzing the results from my pension survey, I was ready to declare ‘Don’t mess with healthcare!’ to any HR manager that would listen.
If you’ve read Pension Series Part 27, then you know why. Survey participants ranked ‘pension subsidized healthcare’ as the design element that made them consider staying at their job the most during their Golden Albatross decision. In fact, the final weighted score for healthcare was ten percentage points higher than the second-place design element, ‘immediate annuity.’ Therefore, the results appeared to support a ‘keep your money grubbing hands off of healthcare’ declaration.
That said, I’m glad I didn’t declare this straight away. As you’re about to find out, age, tenure, and gender are far more powerful elements during a Golden Albatross decision than any singular pension design element — even one as popular as healthcare. Continue reading →
I loved the Animaniacs cartoon when I was a teenager, especially one episode called “Survey Ladies.” In it, two ladies run around a shopping mall hounding the Animaniacs screaming, “would you like to take a survey?” and asking crazy questions like, “would you eat beans with George Wendt?” For those of you who don’t know, George Wendt was Norm in the sitcom Cheers.
That’s how I felt in March 2021 as I administered a pension survey to US-based pensionable workers and retirees from several personal finance Facebook groups and my blog’s email distribution list. I ran around (virtually) trying to convince pensionable workers and retirees to take my survey and answer many seemingly crazy pension-related questions. Sadly, I couldn’t figure out a way to work George Wendt or beans into it. Continue reading →
Guess what? I may not have needed to coin the Golden Albatross metaphor! It’s sad but true. I cried (on the inside) when I discovered that business management academics had an entire theory that captured employees’ stay-or-go psychological condition long before I arrived on the scene with the Golden Albatross. It’s called ‘continuance commitment.’
While neither as catchy as the Golden Albatross nor limited to just pensionable workers, continuance commitment fits the Golden Albatross metaphor perfectly. The only difference is that the Golden Albatross describes the situation for pensionable workers. On the other hand, continuance commitment captures the stay or go feeling that any worker might face while working any type of job.
Is this albatross masquerading as a management theory?
This post is all about continuance commitment and why I think it’s vital that pensionable workers know about it. The article starts small, with a definition of continuance commitment, and then moves on to the general theory. I then explain how continuance commitment fits into the study of voluntary employee turnover. I also link continuance commitment, voluntary turnover, and defined benefit pensions (DBPs) together. Afterward, I take a quick look at how continuance commitment ties into pension plan design, which I discussed in Pension Series Part 25. I do this to set up the discussion for Part 27 of the Pension Series. Finally, I end on a cautionary note about the types of employees continuance commitment produces. Continue reading →
