Pensions (are they safe?)

[Doctor Money Matters]

For those of you at Kaiser, Mayo, universities, and government jobs, do you feel your pensions are safe for the long run. If you are in your early career, would you be betting on the financial stability of these organizations to fund you in your later years?

I served in the Air Force but didn't want to take the risk of decreased income now for the promise of a pension later, so I left before being pension eligible. Many reasons factored into my leaving but military pension for physicians is not great at all compared to the other orgs I listed above (even though I think the military pension would be the most safe in comparison to others).

Many pensions are at risk even with a rising stock market.

https://www.wsj.com/articles/why-a-good-year-for-pensions-wont-ease-their-troubles-1502201118

Thoughts?

 

[StarTrekDoc]

Depends on the financial stability. Dod and federal would be last to go off all pensions-- which aren't bad overall.

States like Cali are pretty safe too as reforms continue to take affect to manage the debt obligation, which is huge, but so are my taxes. So not losing sleep over it.

Kaiser is relatively safe too at this time, they have a nearly fully funded pension plan for the medical group....that is rare to see.

[notadoc]

The oncoming wave of public pension debt is even bigger than it seems. The purpose of this website is to provide an overview of the multiple pension crises that are about to drown America's taxpayers. Our primary focus is on California, but we also track other states, corporate pensions, social security and international trends.

http://www.pensiontsunami.com/

 

[DMFA]

I beg your pardon, but is anything really "safe" and if so, what are your objective metrics for determining such?

[nolamd84]

We are having this internal debate as well. My wife is an Ophthalmologist - academic job with the state of Louisiana. The pension plan as it currently sits would pay out 50% of her salary for the rest of her life with spousal benefits after 20 years of service. The other option is a 6% salary match into a 401a. We're leaning towards the ORP (the other option) because it would be more portable but if the pension stands as is and if she sticks around that long, its a ton of money.

If you sign up for the pension and leave before 20 years, you lose a ton of the money.

[StarTrekDoc]

Most programs have a 5 yr vesting, so you don't lose the entire pension between 5-20 years if you separate.  Check into that---there's a middle ground usually and depends there's a MRA (Min Retirement Age) and years of service table for gradating the pension too as some systems have that too to back load longevity careers.

Edit -- eg:  we left VA and Kaiser after 14 years and scheduled to have decent sized pensions from them once we hit retirement age .  At the same time, I would get another pension from UC after another 10-20 years here, depending on how fast we hit that -RE button.  

[Doctor Money Matters]

Unfortunately no so such provision with the military at the time I was in.

My 8 years were equal to zero for pension purposes. Even 19 would be not eligible. Only 20 or more got pension.

Also in the military only your base salary goes to pension calculations, which at the time was 80k, so you would get 50% of that. Most military docs get a large amount of their govnt salary as additional supplements and bonuses. Housing allowance, specialty bonus, board certification bonus.

As a radiologist, I was already making about 35% of my private practice counterparts and about 50% of my VA colleagues. Add to that the relatively inflexible low pension and lack of 401k employer contributions, my financial decision to leave was easy.

For those with true 50% pensions in state jobs or Kaiser/Mayo models, it would be tougher to leave.

[StarTrekDoc]

Doctor Money Matters wrote:

Unfortunately no so such provision with the military at the time I was in.

My 8 years were equal to zero for pension purposes. Even 19 would be not eligible. Only 20 or more got pension.

Also in the military only your base salary goes to pension calculations, which at the time was 80k, so you would get 50% of that. Most military docs get a large amount of their govnt salary as additional supplements and bonuses. Housing allowance, specialty bonus, board certification bonus.

As a radiologist, I was already making about 35% of my private practice counterparts and about 50% of my VA colleagues. Add to that the relatively inflexible low pension and lack of 401k employer contributions, my financial decision to leave was easy.

For those with true 50% pensions in state jobs or Kaiser/Mayo models, it would be tougher to leave.

Click to expand...

IIRC, you can convert some of those YOS if you go to other governmental job, like VA.   With 8 years, something to consider.

[Craigy]

nolamd84 wrote:

We are having this internal debate as well. My wife is an Ophthalmologist – academic job with the state of Louisiana. The pension plan as it currently sits would pay out 50% of her salary for the rest of her life with spousal benefits after 20 years of service. The other option is a 6% salary match into a 401a. We’re leaning towards the ORP (the other option) because it would be more portable but if the pension stands as is and if she sticks around that long, its a ton of money.

If you sign up for the pension and leave before 20 years, you lose a ton of the money.

Click to expand...

My brother-in-law works for the state (dotd) and my sister-in-law works for St. Bernard Parish and they both had told me recently that they can walk away with pension benefits after 5 years.  Not a full benefit, but they will, upon retirement age, receive some reduced benefit for the rest of their life.  Of course these might be different than your wife's plan, but like StarTrekDoc mentioned, definitely worth looking into.

On the other hand, 6% match is pretty nice, if it's a true 6% match.

[Craigy]

Doctor Money Matters wrote:

Unfortunately no so such provision with the military at the time I was in.

My 8 years were equal to zero for pension purposes. Even 19 would be not eligible. Only 20 or more got pension.

Also in the military only your base salary goes to pension calculations, which at the time was 80k, so you would get 50% of that. Most military docs get a large amount of their govnt salary as additional supplements and bonuses. Housing allowance, specialty bonus, board certification bonus.

As a radiologist, I was already making about 35% of my private practice counterparts and about 50% of my VA colleagues. Add to that the relatively inflexible low pension and lack of 401k employer contributions, my financial decision to leave was easy.

For those with true 50% pensions in state jobs or Kaiser/Mayo models, it would be tougher to leave.

Click to expand...

Even for a grunt, the pay can be so low that it's not worth holding out vs what you can find as a civilian. Brain drain is tremendous.

The beauty of the military pension is that it's paid out at retirement, period, doesn't matter how old you are.  In theory you could retire at 37 with full benefits.  For a doc, this is pushed back substantially, and like you said, the pay is a fraction of market, so it's not really an incentive.

[q-school]

state pension feels pretty safe

however, we are older (for this board) and our benefits were set a long time ago.  I'm not sure recent hires would feel as safe.

[notadoc]

• St. Joseph Health Services of Rhode Island Pension Fund Files for Bankruptcy (GoLocalProv)

[Hank]

Five years of civilian service with the VA or as a GS employee with DoD would let you buy back your 8 years with the military for 3% of base pay (not including BAH, BAS, incentive and special pays, etc.).  While I wouldn't base my entire medical career on that incentive, it might be worthwhile for your last five years working in your 50s in a city where you want to retire.

I'd place a fair degree of confidence in a federal pension, especially for the active duty military.  A promise of a pension from Puerto Rico or the state of Illinois, not so much.

[q-school]

Hank wrote:

Five years of civilian service with the VA or as a GS employee with DoD would let you buy back your 8 years with the military for 3% of base pay (not including BAH, BAS, incentive and special pays, etc.).  While I wouldn’t base my entire medical career on that incentive, it might be worthwhile for your last five years working in your 50s in a city where you want to retire.

I’d place a fair degree of confidence in a federal pension, especially for the active duty military.  A promise of a pension from Puerto Rico or the state of Illinois, not so much.

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Why not illinois?  Pension has survived multiple challenges as protection written into state constitution.

Just curious if there is more to it than state is broke so probably can't meet obligations.

[Hank]

q-school wrote:

Hank wrote:

Five years of civilian service with the VA or as a GS employee with DoD would let you buy back your 8 years with the military for 3% of base pay (not including BAH, BAS, incentive and special pays, etc.).  While I wouldn’t base my entire medical career on that incentive, it might be worthwhile for your last five years working in your 50s in a city where you want to retire.

I’d place a fair degree of confidence in a federal pension, especially for the active duty military.  A promise of a pension from Puerto Rico or the state of Illinois, not so much.

Click to expand…

Why not illinois?  Pension has survived multiple challenges as protection written into state constitution.

Just curious if there is more to it than state is broke so probably can’t meet obligations.

Click to expand...

A promise in the state constitution cannot overcome a basic math problem.  The state constitution could define 2 + 2 = 7, but that doesn't make it so.

Moreover, the federal government can run the printing presses to meet its obligations (at least in nominal terms).  Illinois, not so much.