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How to value a state pension?

Old 03-14-2018, 07:58 PM
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Default How to value a state pension?

I interviewed for a new position today that would take me out of the chemical industry and into administration at a state university. The job would pay $20k less salary.

How much value does a pension provide? Enough to cover the salary gap?
Old 03-14-2018, 08:01 PM
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How about the pension details?
Old 03-14-2018, 08:07 PM
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How many years till you retire?
How is the pension calculated? 2% / year service * highest year salary
COLA’s or once you retire it’s the same amount till you die
Can your spouse receive the pension after you die if you reduce your payout?

What’s your current tax bracket. If you figure 28% + state local tax that 20k is more like $12k.
403b plan also?

Most important is how solvent is the entity paying the pension.
Old 03-14-2018, 08:25 PM
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Tht braintrust is working tonight!

I do not have all the details on the pension, but its a State of Florida pension. I do not know if there is a subdivision for state university employees.

From what I gathered in the interview the state of Florida requires employees to pay 3% in to the plan. This university covers the employee portion. No clue on surviving spouse and I do not know the calculation/basis on payout. I am in the 28% bracket...
Old 03-14-2018, 08:40 PM
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If you have a pension where you're currently at, you want to value the difference in pension. Also, a 20k hit on a 500k salary is much different then a 20k hit on a 100k salary.
Old 03-14-2018, 08:40 PM
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Not to get personal but it would also help to know how large a % $20k Is to your salary. I’m
guessing being in FL you aren’t making the crazy money those up north are.

Dumb it down and over simplify things I like to use 4% so if your getting a 40k pension you would need a million in the bank to generate that return.
Old 03-15-2018, 01:44 AM
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I believe he will make 1.8 percent a year and have to do 30 years for retirement or attain 60 years of age if he gets the same as a regular state of Florida employee. High risk get 3 percent a year..

Probably making around 80k to maybe 90k salary

Yes they have 4 options for payout on pension. Three of them.involve spouse money

One is after your death same benefit for you and wife but only for 10 years after your death a only a slightly lower initial payout.

Two, spouse gets reduced pension after your death (like 25 percent) till her death ...but you start out a little lower on payout initially.

Third, You both get the same pension, after your death but you start out even lower initial money to help pay for it


Forth, only you get paid full benefits..

Last edited by Cracker; 03-15-2018 at 03:55 AM.
Old 03-15-2018, 02:25 AM
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I think Cracker is about right-on with his explanation of options. Very, very similar to my pension.

The only thing I would be weary of is the sustainability of the states ability to pay pensions. Wondering how long it takes to become vested into the plan? I'd also worry if pensions will be froze in the future which is an unknown factor (you never know until it happens).
Old 03-15-2018, 03:51 AM
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Originally Posted by Walleye Guy View Post
I think Cracker is about right-on with his explanation of options. Very, very similar to my pension.

The only thing I would be weary of is the sustainability of the states ability to pay pensions. Wondering how long it takes to become vested into the plan? I'd also worry if pensions will be froze in the future which is an unknown factor (you never know until it happens).
Florida FRS is one of the best funded in the state...I would NOT be concerned about it at all.... Very well managed..
Old 03-15-2018, 04:34 AM
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I understand that specifically asked about pension, but healthcare is another consideration.

In addition to the pension, is there a retiree healthcare benefit, which could be very valuable, if you have any intentions of an early retirement.
Old 03-15-2018, 04:38 AM
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Do you have kids? If you work at a university you usually get tuition remission.
Old 03-15-2018, 04:43 AM
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From my perspective they are HUGE

LIFETIME INCOME plus HEALTH INSURANCE


Most that have State or Federal pensions make more retired than when they were working when you ad SS on top of them
Old 03-15-2018, 04:44 AM
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Originally Posted by sinjun View Post
Do you have kids? If you work at a university you usually get tuition remission.

This is HUGE, especially if they allow for attendance at other institutions.
Old 03-15-2018, 04:51 AM
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It is of considerable value if it is a defined benefit (DB) pension.

OTOH, perhaps not as much if it is a 401K type funded pension that is worth what its worth at retirement time and its net worth is a function of investment gains or losses over time.

A huge difference between the two. If it a DB pension, it is nearly risk free from a large & growing state like Florida.
Old 03-15-2018, 05:12 AM
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Originally Posted by sinjun View Post
Do you have kids? If you work at a university you usually get tuition remission.
I have 3 kids and have not thought about this yet, but will be sure to ask!
Old 03-15-2018, 05:12 AM
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Originally Posted by tprice View Post
From my perspective they are HUGE

LIFETIME INCOME plus HEALTH INSURANCE


Most that have State or Federal pensions make more retired than when they were working when you ad SS on top of them
Would tend to agree, my father retired from a relatively high pay grade federal job and was is also a retired reserve officer. We figured out that he made 95% of his pay with those combined plus free healthcare for life (Tricare) with COLAs every year. He lives very comfortably.
Old 03-15-2018, 05:22 AM
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Nice deal
Old 03-15-2018, 06:17 AM
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How old are you now? Is working another 30-years to qualify for the full pension realistic? If not do the math and see what the expected reduced amount would be should you do less service years. You may be shocked at how much the full number is reduced.

As example I am 53 and presently have 13-years into my local/state pension. Our full is also 30-years. I have no intention of working FT until I am 70-yro, more likely until I am 60. At that point the amount I will collect is dramatically reduced and I wouldn't be eligeable for health benefits. Thankfully I run a very good side business and my wife who is 8 -yrs younger than me also is a local/state employee so we switch benefits to her at that time.
Old 03-15-2018, 07:03 AM
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In FRS a non high risk employee has a rate of 1.6 per year; sometime around 2012 FRS changed its parameters to where full retirement equals 30 years or age 60. In other words you start at 40 and work 20 years and retire, your pension would be 32% of your highest five years, not necessarily your last five. I believe you vest after 8 (might be wrong). You also have the option of the “Investment Plan”, where the employer still contributes to your pension, but when you terminate the money is given to you lump sum to manage how you see fit. Do yourself a favor and google FRS and call the 1 800 number and speak to a rep, they are very helpful. Good luck
Old 03-15-2018, 07:09 AM
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Some state employees don't pay into SS, so you might lose that. Check on that. My sister has a university pension but no SS.

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