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April 27, 2011

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I have a pension because I worked for the company that provides it from 1960-1992. They no longer give pensions. If I were a young engineer today my job searches would concentrate on City, County, State, and Federal organizations that still provide pensions to engineers in their employ. My wife receives a pension from a part time job as a teacher for 16 years.

My wife and I could easily manage without our pensions but we would be drawing down our IRAs to do so. Fortunately I had a great period in the market after I retired but that required LUCK much more than saving and sound investing on my part.


Only about 15-20% of the current labor force is covered with a traditional defined benefit pension.

I bet the numbers you list are probably the % of retired people receiving pension benefits. Your previous article said : "In 2009, 34% of private-sector retirees received income from an employer plan..."

Also make sure they're just talking about the "defined benefit" pensions and not the "defined contribution pensions". A defined contribution pension is like an IRA or 401k. They technically call those pensions too. When most people think of pensions they mean a defined benefit pension which is the old style (%pay) x (years worked) formula style.

More retirees get pension benefits than current workers covered under pension since the retirees they still have older pensions or retired long ago.

Theres only about 20 million active working participants in pensions out of about 150M total workers.

I'd be curious to know how many of those 20M active workers are in government jobs. My impression is that there are virtually no defined-benefit pensions left in private business for the newly or recently hired. We can all feel proud in knowing that we're not only contributing to our own retirements but also patriotically doing our part for our government-employed brethren. I feel especially patriotic when I view my property tax rates consistently increase on those pension categories.

Thank you for mentioning that not everyone had a pension back in the 50s, 60s, & 70s. Another trick employers used to pull was they'd have very long vesting periods (20 years or more) to qualify for the pension and then they'd lay people off just before they qualified. The ERISA legislation in 1974 took care of those abuses by shortening the vesting periods.

I think this is a good example of the good old days not being as good as people make them out to be.

My employer has a defined benefit pension plan which I am fortunate in which to participate. However, I am grandfathered in. A couple years ago, my employer started a new "cash balance" pension plan for new hires. Instead of getting a defined benefit in retirement based upon a formula, people in the new plan get money deposited into an account on their behalf, which earns interest every year. Those of us hired before the cutoff still get the participate in the old plan.

BTW, this is a private employer; not a government job.

I don't see anything in either article regarding whether these employment statistics are strictly non-farming jobs.

If they do include agriculture, I think you'd find eliminating them would skew the percentages of non-farming jobs with pensions upward significantly in the 50s and 60s.

I'd also be interested to learn what percentage of jobs in the 50s - 70s were military (pensioned) jobs compared to today (I suspect civilian consultancy in the military has increased more than enlistment in the past few decades as well).

I think there is also a fallacy that everyone has a 401k / IRA type of retirement at work currently. I would love to see the numbers on that as well..

Many people who are currently working will get a pension when they retire because of when they started their jobs, however most of those companies have long since stopped offering it to new employees.

@Jim - if an employee must contribute X% (no choice to the percentage) to a pension, that is a defined contribution pension, correct? Its my understanding that those are what most pensions are, however they still work very differently than a 401k or IRA, in that everything goes into one pot - you don't have an individual account.

@ Old Limey. I think it's a bad idea to concentrate on looking for jobs that provide pensions. I work for a city here in Silicon Valley and there is serious talk of freezing the pension plan not just for new employees, but existing ones as well (eg..you get credit for the years you've put in, but no more pension credit going forward).

Jeff,

In private non-government jobs about 19% of private workers have some form of traditional pension. Union jobs are 67% and non-union is 13%.

Another detail though is that some % of the plans are 'frozen' and not available to new employees. In private industry 22% of the people in plans are in frozen plans. In non-union its 28% and union is only 11%.

So add that up and non-union private jobs only 13% of people have a pension and about 9% of them are unfrozen.

About 85% of government jobs have access to a traditional pension. Most traditional pensions in private companies are from large corporations. Only 10% of private employers offer a pension and the rate is much higher for large companies who employ more people.

I happen to be in a large private company that is non-union with a pension that has recently been frozen and no longer available to new hires. The pension was only kick in if our defined contribution cash account wasn't large enough, so my pension is not really worth much anyway. But I do technically have a traditional. pension.


All those #'s are found in the tables here:
http://www.bls.gov/ncs/ebs/benefits/2010/benefits_retirement.htm

Sarah asked :
"@Jim - if an employee must contribute X% (no choice to the percentage) to a pension, that is a defined contribution pension, correct? Its my understanding that those are what most pensions are, however they still work very differently than a 401k or IRA, in that everything goes into one pot - you don't have an individual account."

Defined benefit = traditional pension
Defined contribution = 401k / iRA style

Employees may be required to contribute to either style of pension and an employee contribution doesn't define the style of pension. Normally employees fund the bulk, of a defined contribution pension plus get hte employeer match. Normally defined benefit pensions are funded primarily by the employer

Defined benefit pension is the type where you get a pension that is based on a % of your pay for ht # of years you work. The benefit is defined by a formula. For example a pension may say that if you work at least 20 years you'll get 2% of your pay for each year worked. So if you work from age 25 to age 55 then retire then you get 2% of your pay x 30 years = 60%. There is no stock account or cash amount involved and all there is to hte pension is that simple formula.

Defined contribution pension is where the employer contributes money of a fixed amount. They may put 3% of your pay into a 401k. The 3% is the contribution and the 3% is fixed. Thats all there is to this kidn of pension. Its a pile of money in an account that you can invest in stocks/bonds or cash.

Jim, I've got both a defined contribution pension and a 401k. They are distinct accounts and not the same.

For my pension, my employer credits me with a percentage of my salary and interest (based on 10-year Treasury). I have no control over the investments.

For my 401k, they also match my contributions, but I have control over the investments.

Jeff said : "We can all feel proud in knowing that we're not only contributing to our own retirements but also patriotically doing our part for our government-employed brethren. I feel especially patriotic when I view my property tax rates consistently increase on those pension categories."

Sounds like sarcasm on your part there.

Keep in mind that pension costs are really only a small % of the cost of labor. And the cost of labor is a fraction of the cost of government. If you totally wiped out the pension benefits entirely then that wouldn't even drop ongoing government costs 10%. And its not like this cost just occurred over night, it has existed for many decades.

Some states have bigger pension problems that are of their own making. Some states neglected to properly fund their pensions in previous years or gave too generous benefits and they are now having to pay that bill. That is the fault of the state government.

My state doesn't have those problems.

I work at an accounting firm. We still have a defined benefit plan, open to all employees. I am 26 and started at the firm 4 years ago, and I was fully vested after 3 years. If you leave the firm prior to retirement, they give you the option to take the cash value. They also sponsor a 401k plan, where they match up to 6%. But since it is a private company and not the government, I save for retirement as if I couldn't depend on the pension being there.

MikeS,

Yes. 401ks are just one very common style of defined contribution pension. But not all defined contribution pensions are 401k.

I also actually have both a 401k and a cash account contribution pension like you PLUS a traditional defined contribution pension.


I have a pension and a 503b. I was not able to save a lot in the 503b, but it is used only for home repair &/or other major expenses. My pension is a traditional one from the state, as is the one I get for my deceased husband. (We took smaller pensions so it would be 100% for surviving spouse.)

I also get a guaranteed 4% COLA each year until 2016 and then I get what any other state retiree gets. I had the choice of 2 pension plans and chose the right one. This year the state is starting a plan where all employees must contribute a percentage. I don't remember the percentage - about 4% I think.

The good news is that the pension plans for the state of MO are in very good shape. And also, MO must balance their budget each year. It makes it tough in years like now, but it is better in the long run to not schedule debt as though it were normal.

@ Jim. I work in the public sector and my pension was an additional 25%+ cost on top of my gross pay last year. My public employer doesn't participate in Social Security...so even if you subtract out the 6.2%, plus the 3% which is the typical 401K match, that's still a premium of about 16% of gross pay. Costs are projected to go higher in the future and they have risen significatntly for the last 3 years.

As much as I don't like it, I can see why they want to get rid of pensions.

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