Offset pension loss
Hi Terry, when my company switches to the corporate rate my pension is projected to lost between $120k to $200k.currently pension is $700k. My base is $91k but usually make between $101- $120k. Only 50 yrs old and 30yrs at work and can leave at any time. Planning on staying another 5-10 years where I’m at. If I retired to protect the pension loss , next job would be $41k a year less to start.
How would I calculate how long to stay to recoup the pension loss?
Thanks
Terry Says
That is such an interesting question! First, please read this article (and anyone else who has a corporate or public pension should read it too!)
https://www.ai-cio.com/news/average-public-pension-assumed-rate-of-return-hits-40-year-low/
Basically, this issue is that as interest rates have remained relatively low, almost every pension has adjusted downward its estimate of future returns. It’s the prudent thing to do. Again, the article above explains it perfectly.
The choice you asked about would require an actuary to do the math. First thing, we don’t know what the actual rate of return will be that impacts your pension. The “assumed rate” is done just for projections. And I doubt that the “next” company would offer a comparable pension, or that you would be “vested” in it for sure, in order to make a comparison.
It’s great that you would be so forward-thinking to let this impact your job decision. BUT HERE’S MY SUGGESTION:
Stick with your current job, where you have accumulated not only a pension, but seniority and (presumably) respect. INSTEAD of jumping jobs, start saving in a ROTH IRA. Over the future years of tax-free growth it should more than make up for an lowered growth in your current pension promise!
