Tag Archives: pension safety

The Pension Series (Part 30): Pension Maximization

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Pension Maximization

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 →

The Pension Series (Part 29): The Golden Albatross vs. Women’s Pensions

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Recent History

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 →

The Pension Couch: A Lump-Sum Offer Mystery

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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 Buyback or Freedom Buyback?

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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 →

The Pension Couch: Early Retirement Penalties

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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 Series (Part 27): The Golden Albatross Pension Survey

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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 →

6 Lessons From 18 Months as a Pensioner

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Back in Time

Wow! Where did the time go? I blinked, and my first year-and-a-half as a pensioner flew by. Before you start laughing about my use of the term “pensioner,” I’m aware that in many parts of the world, “old age” comes in front of the word “pensioner.” However, since I’m only in my mid-40s, I’m not ready for the Old Man Grumpus moniker just yet. Let’s just agree that pensioner describes someone who receives defined benefit pension payments, like me, for the past 18 months.

I’m not the first personal finance or Financial Independence Retire Early (FIRE) blogger to write about the lessons from their first X number of months in retirement. In fact, it’s a popular topic. That said, none of the articles specifically address pension-related lessons learned. This article fills that void. So, I’ll put aside my usually verbose introduction and reveal six pension-related lessons that I’ve learned during my first 18 months as a pensioner.

Continue reading →

The Pension Series (Part 24): The Golden Albatross vs. Black Pensions

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Black Pensions Matter

On April 4, 1968, Martin Luther King Jr. was assassinated in Memphis, Tennessee, while supporting a Black sanitation workers strike (Hutchinson, 2019). Most Americans probably know those sad facts because they either lived through them or studied them at school. However, most Americans probably don’t know that the sanitation workers’ demands included a “10% wage increase, fair promotion policies, sick leave, pension programs, health insurance, and payroll deduction of union dues” (Estes, 2000, p. 158). Civil Rights advocates, like Dr. King, saw pensions and the organization of Black labor as one of many ways to improve the lives of Black workers and a method to level the economic playing field (Schmitt, 2008). So, believe it or not, Black pensions matter, and have for a long time.

Jobs and civil rights. The issues haven’t changed (Library of Congress, 28th August 1963).

I don’t wade into the subject of race and pensions lightly. But, up to this point, my work on the Golden Albatross worth vs. worth it decision framework has focused solely on the issues a generic pensionable worker would need to consider. And, since I’m a White-guy, it’s reasonable to assume that my vision of that generic worker was White … and a guy.

My lack of consideration for how the Golden Albatross decision framework might need to adapt based on either sex or race seems myopic. It looks incredibly myopic when considering the global re-emergence of the Black Lives Matter movement in 2020, as well as the unequal devastation caused by the COVID-19 along racial and socioeconomic lines. As a result, this article marks my first effort to correct my mistake. Continue reading →

The Pension Series (Part 22): Analyzing Public Pension Plan Safety

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How Safe Is My Pension?

Pension plan safety is one of the most popular and relevant topics among the potential pensioners who read my blog. It’s popular because much like Social Security, chronic underfunding of certain types of pensions receives a lot of bad press in the U.S. As a result, many people think that all pension plans are circling the drain. While that isn’t true, as with most things in life, determining the truth about your pension plan’s safety is a somewhat subjective and complicated journey. However, that doesn’t mean you shouldn’t strive to answer the question, especially if the Golden Albatross has trapped you in its maw.

Pension plan safety

Instead of a circling the drain, how about a black hole sun?

There’s a reason why I started the Pension Series with the topic of pension safety. I said it then, and restated it more recently in my book; no issue cuts straight to the chase quicker than pension plan safety. That’s especially true when trying to determine if staying for a pension is worth it. If you are facing the gut-wrenching stay or leave decision at your pensionable job, and you decide there’s a high probability the pension won’t be there at retirement, then you may not require any further analysis. In other words, the realization that the pension won’t be there as promised effectively ends the internal debate. Continue reading →

The Pension Series (Part 21): Lump-Sum Buyout Offers

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Grumpus the Prognosticator

Considering that I’m publishing this article during the COVID-19 Pandemic, I want to take a few paragraphs to acknowledge that these are troubled times without turning this into an article exclusively about the pandemic. As COVID-19 causes mass lock-downs and lay-offs all over the world, it’s forcing people to examine what their jobs and careers mean, especially if they no longer have one. Looking past the immediate onset of events, many are also questioning what employment will look like in a post-pandemic world with no vaccine close at hand. On the surface, then, it seems like an awkward time to publish an academic study of pension lump-sum buyout offers, which many people associate with the retirement end of a pensionable career.

Lump-sum buyout

Let me look into my crystal ball. I hope we can look back in a year and say I was wrong.

However, if the economic impact of the pandemic continues to suppress interest rates and cause significant amounts of market volatility, or a prolonged bear market, it will weaken many pension funds, similar to 2008 and 2009. Some will even enter the dreaded death spiral that I covered in Part 20 of the Pension Series. Under these circumstances, I’d expect lump-sum buyout offers to proliferate as pension funds de-risk to shore-up their finances. The two main methods for de-risking are lump-sum buyout offers and the same sort of Pension Risk Transfers (PRTs) I examined in Part 14 of the Pension Series. Therefore, it’s reasonable to assume that with more lump sums on offer more employees will take them, especially if they believe their pension funds are in the type of trouble I outline in Part 1 of the Pension Series.

Continue reading →