The Pension Couch: A Lump-Sum Offer Mystery

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

The Pension Couch: Pension Roll-Over Questions

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

The Pension Couch: Pension Buyback or Freedom Buyback?

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

Worth vs. Worth It: Homeownership

A Word From The Editor

Guest post time! This article is another from friend of the blog, Chris Pascale. Never one to shy away from the controversial money topics, Chris takes on the homeownership versus renting debate. He does this by comparing the running costs of homeownership to renting over decades. In doing so, Chris concludes that while owning the property in which you live is usually a money-losing proposition, it’s a vastly smaller money-losing proposition than renting. Therefore, since we all have to live somewhere, owning is the most efficient use of one’s housing money.

Chris’s cost comparison methods are vastly different from my opportunity cost method, which determined my first home’s $750K opportunity cost. While I focused on what my down payment money could have been doing, Chris concentrates on the housing option with the least cost associated with it over time. Mine was very much a “property as investment” argument, while he makes a “most bang for the smallest buck” argument. Same topic, different points of view. We value differences of opinion at GM HQ, especially when backed up by numbers. That’s a royal “we” since GM HQ is still a one-man show.

Financial Independence (FI) enthusiasts who like to optimize their financial decisions for efficiency may find Chris’s homeownership argument particularly persuasive. Where FI adherents often look for the financial option with the 1% better outcome, Chris’s analysis shows that owning creates financial savings with a much higher order of magnitude. Not only that, but he presents his findings in a much more concise manner than I ever could.

Golden Albatross readers will recognize Chris’s “worth vs. worth it” argument as well. He’s good at relating his Life & Money articles to the basic value proposition this blog is built upon. For Chris, homeownership is very much “worth it.” So, with that introduction out of the way, sit back and enjoy the read. As always, the words are his, but the pictures and comments are my attempt to provide some levity!

   — GM Continue reading

The Pension Series (Part 28): The Golden Albatross Vs. Age, Tenure, and Gender

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!

age tenure gender

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

The Pension Couch: Early Retirement Penalties

I run a Facebook group for pensioners, pensionable workers, and/or their significant others called Golden Albatross/Golden Handcuffs. The group relies on the wisdom of the crowd to answer members’ pension-related questions and/or discuss pension-related topics. From time to time, the group serves up good topics to write about. For instance, I recently exchanged comments about the early retirement penalties built into their pension with a group member. It didn’t appear that the group member understood the reason for these penalties. As a result, I provided a short explanation as to why they did.

Fortunately, the Facebook exchange reminded me of a more in-depth email exchange I had with a reader a few months ago on the topic of early retirement penalties. Since the email conversation was far better organized (and researched) than my Facebook exchange, it seemed like a good candidate for a Pension Couch post. For those that don’t remember, Pension Couch articles are posts created from lightly edited and sanitized email exchanges in which I answer readers’ pension questions. In this instance, I answer McGruff’s (the crime dog from Public Service Announcements in my childhood) questions about the early retirement penalties built into his/her law enforcement pension plan.

Do early retirement penalties spell death for pensioners’ early retirement hopes?

Continue reading

The Pension Couch: 8 More Years

Believe it or not, I get fan emails from time to time. They come in many different forms. Some of it is precisely what it sounds like, meaning people take the time to drop me a nice note and say how much they liked the blog, the book (or both), or how much something I wrote resonated with them. I’d be lying if I didn’t say that my ego likes those emails. I’d also be lying if I said I have great tracking system for responding to all them. So, if I owe you a response, please accept my apology in advance as I try to work through the backlog. More importantly, please keep sending those types of emails because I find them extremely motivating. They help me write, even on days when I’m not feeling particularly creative.

Advice requests are another form of fan emails I receive. Those motivate me too because I get to help people directly. Most of the time, the advice being sought is pension-related. For instance, sometimes, people want me to analyze their pension as a whole. In contrast, others ask about a specific pension design element. Anyone who’d like to see or listen to me provide an overall analysis of a pension can check out the ChooseFI episode where I counseled a young married couple about the wife’s pension.

Less often, advice requests center on career/life issues associated with pensionable jobs. These issues sometimes include a mental health angle. Since I blog about my mental health issues connected to my previous pensionable job, it’s no surprise that readers reach out with similar problems or questions. That’s the gist of the latest email, which I discuss below. Continue reading

18 Months of Kiwiarbitrage

In my original Kiwiarbitrage article, I explained how I determined that my family and I could afford to “retire” to New Zealand (NZ). I also stated that I would write many more articles on New Zealand and geoarbitrage. Since then, I’ve written precisely none … until now!

This article starts with general lessons that any expatriate (EXPAT) pensioner should know before moving, some of which I didn’t. Secondly, since several readers contacted me over the past few months and asked what the cost of living in New Zealand is like, I discuss that below. The article is organized so people can read the sections they’re interested in and skip the rest. I also try not to concentrate too much on COVID-19 pandemic-specific lessons but rather lessons that apply to all environments.

Finally, this article is anything but definitive. There will be others. For instance, I want to write one for EXPAT US military retirees and veterans. However, I limited this article to just the general lessons I’ve learned from retiring overseas and cost of living insights for the sake of time. Continue reading

The Pension Series (Part 27): The Golden Albatross Pension Survey

Would You Like To Take A Pension Survey?

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

The Pension Series (Part 26): Continuance Commitment

An Albatross By Another Name

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.

continuance commitment

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