Tag Archives: Defined Benefit Pensions

Choices and Thankfulness

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Choices

I’ll have you know that I do most the cooking on Thanksgiving in our house.

Happy Thanksgiving

“What are you thankful for this year?” is a commonly asked Thanksgiving question. It’s usually asked around dinner tables, which is where we Americans typically celebrate this holiday designed to bring us together and reflect on the bounty in our lives. In fact, Mrs. Grumpus and I asked our children the same question tonight as we ate.

Grumpus Minimus #1 (the older one) dutifully answered that he was thankful for his mom, dad, family, and friends. He then proceeded to list every single one of his friends. Grumpus Minimus #2 (the younger one) said he was thankful for Hickam Air Force Base, where he likes to go and watch Hawaiian airline’s planes land (Hickam AFB shares a flight line with the Honolulu airport). I bet no Air Force Base has ever been loved as much as GM#2 loves Hickam.

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The Pension Series (Part 17): Buying Years – A Case Study

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The Set Up

A reader (let’s call her Buffy) recently asked me if I could help her and her husband (let’s call him Angel) determine if “buying years back” from Angel’s pension would be worth it. For those of you unfamiliar with the concept of “buying years back”, it basically means under certain circumstances a worker can pay the pension fund to add years onto their final pension calculation. I only learned of the concept of “buying years” after starting this blog. Although the concept appears common in many European retirement systems, and the Canadian national system; the feature is reserved for public pension systems at the local, state, and (non-military) federal level in the U.S. The worker usually qualifies through special circumstances like prior military service (that fell short of pension eligibility), or previous participation in a separate public pension system (e.g. a teacher who moves from one school system to another).

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The Pension Series (Part 16): VA Disability

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Friendship Is Rare

Does anyone have a friend that dates back to first grade? I don’t mean an acquaintance either. I mean someone that’s been there almost your entire life through thick and thin. Someone who is more like a brother or a sister than a friend. I’m happy to report that I got one. I’m also happy to report that he decided to write an article for my blog!

Now, I believe it’s good etiquette that people who host blogs introduce anyone who writes a guest post. In fact, that’s what Darrow Kirkpatrick did for me when I wrote Part 8 of the Pension Series for his blog. However, in this case, my friend interwove his story into the blog post. So instead of a long-winded introduction, I’ll simply say:

Here’s a great post on the tax benefits of VA disability from a best friend of mine that I’ve known since 1982!

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The Trade War Will Not Be Televised …

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… But, It Will Be Tweeted

Tariff by bloody tariff apparently.

Yes folks that’s right, despite all the talk of North Korean nukes, the Singapore summit, and “historic” de-nuclearization agreements reached (which were apparently the same as previous historic agreements); something far more sinister and much less subtle occurred recently — and I’m not talking about U.S. -sponsored human rights abuse committed along the U.S.-Mexico border either. No, I refer to the fact that U.S. President Donald Trump, and his team of economic advisors (and I use that term loosely), saw fit to consummate the trade war they’d been threatening since early 2018 … with the entire world!

Trade War

Why the entire world Mr. President?

In the last weeks of late-May and first weeks of early-June 2018, President Trump canceled all country-based exceptions to the 25% steel and 10% aluminum tariffs he imposed earlier in 2018. This move angered long-time allies and trading partners around the world including our North American Free Trade  (NAFTA) Partners Canada and Mexico; the European Union (EU); and other countries such as Brazil, Japan, and India. In retaliation, the EU  enacted counter-tariffs on U.S. imports; prompting further tariffs threats from President Trump on European cars. The EU also lodged an official complaint to the World Trade Organization (WTO), and Harley Davidson announced it is transferring some production to Europe to avoid the tariffs on its motorcycles sold in Europe. Continue reading →

The Pension Series (Part 15): The Pension Benefit Guarantee Corporation (PBGC)

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Rushin’ Headlong

PBGC

Wrong type of rushin’

It’s time to take on the somewhat controversial topic of the PBGC. I touched upon it already in several previous posts. In fact, I mentioned it as early as Part 1 of the Pension Series, and as recently as Post 14. Yet, I never tackled it head-on; so it feels like I’m overdue for an article on the PBGC specifically. I was half-hoping someone in my Facebook Group had experience with it because primary sources are always best when researching a topic. However, given the typical conditions attached to the PBGC’s intervention in a pension fund, it’s better that no one has.

Now, for those of you who are thinking, “PBGC? WTF is the PBGC?”, I hear you. I departed from my typical pattern with this post. Normally I warm up my audience with a nice long intro that culminates in an explanation of the topic at hand. However, I dispensed with the niceties this time. With that said, it’s probably best if I at least explain what the PBGC is for anyone who doesn’t know or doesn’t remember. Continue reading →

The Pension Series (Part 14): Pension Risk Transfer

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The Prodigal Series Returns

Welcome back to the Pension Series everyone! I hope you didn’t interpret my several month hiatus (from the series) as a lack of interest in the intersection between pensions and Financial Independence (FI). If you did, then let me assure you that I remain committed to the topic. In fact, my Facebook Group members can attest that I typically post one or two articles a week to prompt discussion on the topic of pensions and FI. That said, I must admit after the rush to write and publish parts 11 through 13 of the Pension Series, it took me a while to find more content that met my standards. At this point in the series, I look for topics that I haven’t already addressed; that help my readers navigate the Golden Albatross decision; and/or enable planning for FI using a pension.

The Search Is Over

Luckily, I recently found a few more topics which deserve examination. Several of the latest topics stem from articles I posted in my Facebook Group. In fact, it wasn’t until I posted an article about FedEx transferring a large portion of its pension fund to Met Life in my Facebook Group, that I realized the topic of pension risk transfer deserved an entire article itself.

In the past few months I’ve noted several stories from both the U.S. and U.K. about companies transferring some or all of their pension funds to insurance companies. The FedEx story started a conversation in my Facebook Group about winners and losers in risk transfer scenarios where a pension fund transfers obligations to an insurance company. Between the company who owns the pension fund, the insurance company, and the plan participants; most of the respondents from my group seemed to think the plan participants (i.e. current and future pensioners) lost. I must admit that I agreed.

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The Death Binder!

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I am ready to meet my Maker. Whether my Maker is prepared for the great ordeal of meeting me is another matter. — Winston Churchill

Death Binder

Death and Binders

I did something different this week for work. I deployed to a foreign country for a military exercise. I’m writing this post from that country as a matter of fact. It’s the first time since my Afghanistan tour in 2013 that I’ve deployed abroad with all my gear. It’s also the first time since my financial awakening that I’ve deployed. Granted, I traveled multiple times on official orders since Afghanistan and was also stationed overseas for multiple years. However, except for our Permanent Change of Station (PCS) move from Europe to Hawaii, I consider my travel comparable to business trips. There’s something different about packing up all your combat gear that sharpens the mind. As a result, while not a tour to a combat zone, I used this military exercise as an excuse to build my “Death Binder”.

Just for the record, Mrs. Grumpus hates the term, Death Binder. In fact, she won’t let me call it the Death Binder in the house. Instead, we call it the “Financial Binder” or “Financial Folder”. However, I call it the Death Binder when she’s not around. I do that partly because of my love of heavy metal. There’s something about the term Death Binder that makes me want to throw the devil sign up in the air and bang my head while shouting “DEATH BINDER” in my loudest metal voice.

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Four Golden Albatross Financial Lessons

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A Message to Future You

financial lessons

Four Golden Albatrosses take flight

If you’re reading my articles in chronological order, either in real time or at some undetermined time in the future, you’ll know that my two preceding articles were counter-points to other people’s financial ideas. As much fun as I had writing articles that used macroeconomics to argue against other people’s theories; doing so courts a certain amount of negativity. Granted, the counter-points needed to be made, and I believe I kept the articles congenial, lighthearted, and fact-based. However, at the end of the day, I still argued against someone’s work as opposed to building my own. As a result, I hit the pause button on the Risk Series this week, in order to focus on a more positive message.

Ironically, despite my online negativity I’ve actually been doing some positive stuff in the real world — which just might be the understatement of a lifetime in regards to the internet. Over the past three weeks, I counseled three different military members and/or their spouses on financial issues. Two of those counseling sessions took place face-to-face; while the third took place via email. All of them proved a great experience … for me at least. I learn a lot about myself and other people every time I counsel someone. Whereas I felt like a reluctant financial voyeur during my first counseling session; I actually enjoy them now. Continue reading →

The Golden Albatross Financial Philosophy

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The Request

Golden Albatross

Professor X enjoying his lunch break.

A few months ago a military member from a mid-career service school approached me through my blog with a request. He’s an instructor, so let’s call him Professor X. One of Professor X’s topics is personal finance as it relates to effective management of one’s career. He’d read my blog and believed several of my articles were appropriate material for his students. As a result, he asked me to speak via video to his class. After we exchanged a few emails on proposed topics, legal conflicts of interest, and technical hurdles; I agreed to appear in uniform as a military member, smart in the ways of finance, but without mention of my blog.

With this scheduled event now only a few days away, I thought it prudent to script my remarks. I also thought it would be worth turning those remarks into a blog post. Since Professor X’s request forced me to distill numerous blog posts into one coherent speech about my financial philosophy, I figured some of my readers might find it useful. As a result, this post doesn’t cover any new territory. It simply synthesizes a lot of what I’ve written previously in one place. Who knows? If I ever write a book, this article might form a good basis for the first chapter.

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The Golden Albatross vs. The Insurance Industry (Part 2): Annuity Valuation Case Study

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Insurance Annuity Valuation Question

Annuity Valuation

What me worry?

A reader, whom I’ll call Lady J, recently asked me if I could value her future insurance annuity scenarios vs. her current cash-out value. She wanted an annuity valuation done in the same manner as the Pension Lump Sum Case Study I wrote for the Pension Series. The question intrigued me. My initial reaction was, yes, I could. Since a Defined Benefit Pension (DBP) is just another phrase for an annuity; I didn’t think it would prove too hard if she could provide the appropriate details. I told Lady J as much, and she promptly supplied me with details I needed.

Surprisingly, the annuity valuation proved both easier and harder than I initially thought. Easier in the sense that based on the numbers provided by Lady J, my Master Pension Value Calculator spit out an answer to her question in no time. Harder in the sense that once I reviewed the terms of her annuity policy, and the facts surrounding her initial investment, it forced me to ponder numerous “what if’s”. Thus, consider this article in two parts. First, I walk through the facts surrounding Lady J’s situation and the process of annuity valuation. Second, I address a few different issues, both good and bad, I noticed with this annuity. Continue reading →