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rated:
Hi All,

I am a lurker on this forum for a long time. I recently started a new job at a public university in Georgia, and should pick my retirement benefits, and wanted to seek your inputs. Broadly speaking, there are two plans.

Defined Benefits:
I contribute 6% annually, and my employer contributes 14.24%
At retirement, my monthly pension is going to be 2% of my retirement salary, per every year of my service. The retirement salary is the average of the salary over the last two years. This benefit lasts until my death independent of what my and my employer contributions were.
There is a ten year vesting period. If I leave before ten years, I can only take my contributions with me. If I leave after 10 years, I can take my contributions as well as the employer contributions with me.

Defined contributions:
I contribute 6% annually, and my employer contributes 9.24%. There is no vesting period. This is similar to 401k for all practical purposes.

Ten years is a long time and I am not sure if I will stick around for that long. However, there is a very good chance that I will be around. So, I want to weigh this risk against the retirement benefits of both the plans. What are your thoughts?

Thanks.

 

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rated:
defined benefits are by far the best.  most places other than government jobs don't offer it any more because of hoe much more they pay out to employees of defined contributions

rated:
With defined benefits, the state/business takes on the risk of underfunding and asking the taxpayers/shareholders for more money.
With defined contributions, the employee takes on the risk of not saving enough and eats cat food to make ends meet.

I'd go defined benefits pension, making sure the state constitution guarantees the payout.
Then I'd treat it as the bond portion of my portfolio, and invest the rest of my salary in higher risk/higher reward assets. (Real estate/stocks)
Just make sure to get tenure and have a pulse for the next 10 years. (In the private sector, management would try to lay you off in year 9.)

If you have a spouse and die, they will get roughly half of what you would have made for the rest of their life, and your children get no remainder.

rated:
The plans can't be directly compared without knowing your current age, the age at which you will retire, and if you expect your longevity to be significantly greater or less than average. Also relevant would be whether the defined benefits plan offers the survivorship benefits alluded to above.

rated:
The defined benefit is better. Its easy to do the math: businesses stopped doing them = it cost them more = its a better deal for you.

But 10 years vesting is pretty long. If you're fairly sure you'll be there that long then I'd go the defined benefit.

rated:
If you are pretty sure you'd like to put in at least ten years, the defined benefit choice is the obvious choice. There are some mitigating factors where the defined contribution plan might make more sense, but all would mean you'd leave the job after just a couple years and therefore miss out on 9%/yr 401k benefits...or have a relatively short life expectancy for whatever reason...definitely look at the survivor benefits as isn't 100% clear on what the beneficiaries get...I think this is your plan, http://employees.hr.gsu.edu/benefits/active-employees/financial-...

In addition, once you've worked 6-7 years, you'd be hard pressed to leave that job in order to make the vesting period. A lot of people in the military, police, etc. who are close to making it to the vesting year often get some pretty rough job assignments...since the higher-ups know they aren't going to just quit. Might not be much of a factor at a university though...

Good luck. If that was me, I'd do what you were doing and compare the plans, but ultimately you're choosing between the state carrying a nontrivial investment risk (and thereby getting a fairly secure income stream for life) and you carrying the risk in exchange for flexibility. I'd choose the former 99/100 times.

Also, the investment 401k options are with your choice of Fidelity (fine, higher fees that I'd like what pretty good broker/administrator), TIAA (pretty good with some unique investment options like their Real Estate fund), and Valic (run away, terrible reputation from what several colleagues tell me).

rated:
The difference in contributions is 5%. Assuming 100k starting salary and 3% annual increment, the extra 5% will grow to $75k in 10 years assuming a 5% return.
That 75k is worth $55k in today's dollars assuming a 3% inflation.
In a normal situation, I would not like to be stuck in a job (that I may or may not like) for 10 years in exchange for one time sign on bonus of approx half of my starting salary.

BUT
The DB plan is materially different. You get state guarantee and that is worth a lot. I will go with DB.

If you quit after 11th year, what do they use as retirement salary for calculations?

rated:
It surprises me seeing so many saying defined benefit must be better for the employee because few in the private sector offer it anymore. You have to do the math on the specific numbers involved to know.

The dearth of pensions in the marketplace, in my estimation, is more a factor of companies disliking carrying long-term liabilities, similar to the loss of uncapped vacation time.

rated:
Ok- so can someone recommend who I should talk to about retirement options? My wife and I are pretty high earners- she has multiple retirement options at her university setting. I also have a fair number in my job- although I suspect some of mine are pretty poorly structured. Insurance/retirement advisors are frankly either often unethical or if they are ethical- often uniformed. Is there someone that can REALLY look at my options and explain which one is likely better in a scientific/mathematic way?

rated:
Defined benefit isn't necessarily better and it's actually possible to have both although having one affects contribution limits to the other.

In a nutshell with defined benefit the company is promising a specific payout. With defined contribution the company isn't promising any return but some contribution to your account. How the market performs will determine how much money you get. Assuming no changes in either plan and that in both cases the company "contributes" the same then you have to decide if you want to bear the risk for returns or take what the company is backing which is typically a little conservative. In general though if you plan to change jobs soon, take defined contribution.

rated:
I wouldn't trust a state like GA not to shiv you on pensions. They shivved the hs students who expected lottery scholarships.
 Students here at the University of Georgia have a name for some of the fancy cars parked in the lots around campus. They call them Hopemobiles. But there may soon be fewer of them.

The cars are gifts from parents who find themselves with extra cash because their children decided to take advantage of a cherished state perk — the Hope scholarship. The largest merit-based college scholarship program in the United States it offers any Georgia high school student with a B-average four years of free college tuition.

But the Hope scholarship program is about to be cut by a new governor and Legislature facing staggering financial troubles.The lingering effects of the recession and the end of federal stimulus funds have sunk many states into a fiscal quagmire. The seriousness of the problem, and a growing concern over how much worse it might become, have many states struggling to find ways to trim services or raise revenues.Continue reading the main story  In Georgia, that means taking a slice out of the Hope scholarship. 

http://www.nytimes.com/2011/01/07/us/07hope.html 

you better hope thats FAKE NEWS

rated:
Defined benefit is best, but take the defined contribution; here's why (and this is coming from someone who works at a state university in IL):

1. 10 years to be vested is a long, long time (we have 6 in IL)... with salary compression at university jobs you may not stick around that long

2. Even if you stay, do you know what the financial solvency of GA will be in the future? IL is in the tank... I took the defined contribution plan when I came in 2008 and, boy am I glad I did. Since that time IL has raised the retirement age for state workers in the defined benefit plan from 60 to 67 - even if you were in the system! Is there any reason why GA cannot do something like this, change the retirement formula, or reduce their contribution?

3. You have control with a defined contribution. I would much rather have the state pay me 9% today (and choose how that money is invested) than take a promise of 14% in the future based on a formula.

rated:
Faculty tend to move from school to school throughout their career.

What if there is a tenured job available at Emory in your 8th year in the GA system? What will you do?

That's the one plus I can think of for the defined contribution plan.

rated:
To the OP: Take the defined contribution plan. I was in a similar situation when I took a job in local government. My defined benefit option was a more traditional pension than you are describing (with mine you didn't take it with you when you leave, you just get whatever you earned based on salary and time served when you hit retirement age). I did some calculations back then and figured out that the break even point was around 10-11 years. I stayed for 7 years, so I got a nice chunk of change to roll over into an IRA when I left. My vesting period for both plans was 5 years though. I can't imagine doing a plan where the vesting period is 10 years. It really messes with you psychologically after a certain period of time. I had guys I worked with that took the pension plan (almost all did) and if they were 13 years into their career and they hated it, they would say, "oh well, I only have 12 years left," because they would lose so much if they didn't ride out the pension plan until 25 years. You'll be in the same situation if you're 6 years in and want to move. You'll feel like you've got to go the whole 10 or you'll be missing out on that retirement money. I say take the defined contribution for multiple reasons.
rufflesinc said:   I wouldn't trust a state like GA not to shiv you on pensions. They shivved the hs students who expected lottery scholarships.
 Students here at the University of Georgia have a name for some of the fancy cars parked in the lots around campus. They call them Hopemobiles. But there may soon be fewer of them.

The cars are gifts from parents who find themselves with extra cash because their children decided to take advantage of a cherished state perk — the Hope scholarship. The largest merit-based college scholarship program in the United States it offers any Georgia high school student with a B-average four years of free college tuition.

But the Hope scholarship program is about to be cut by a new governor and Legislature facing staggering financial troubles.The lingering effects of the recession and the end of federal stimulus funds have sunk many states into a fiscal quagmire. The seriousness of the problem, and a growing concern over how much worse it might become, have many states struggling to find ways to trim services or raise revenues.Continue reading the main story  In Georgia, that means taking a slice out of the Hope scholarship. 

http://www.nytimes.com/2011/01/07/us/07hope.html 

you better hope thats FAKE NEWS

  
Huge difference between a promised benefit based on an employment contract where both sides are paying into the account and an entitlement program that is completely one-sided that was never guaranteed to anyone.

rated:
meade18 said:   
rufflesinc said:   I wouldn't trust a state like GA not to shiv you on pensions. They shivved the hs students who expected lottery scholarships.
 Students here at the University of Georgia have a name for some of the fancy cars parked in the lots around campus. They call them Hopemobiles. But there may soon be fewer of them.

The cars are gifts from parents who find themselves with extra cash because their children decided to take advantage of a cherished state perk — the Hope scholarship. The largest merit-based college scholarship program in the United States it offers any Georgia high school student with a B-average four years of free college tuition.

But the Hope scholarship program is about to be cut by a new governor and Legislature facing staggering financial troubles.The lingering effects of the recession and the end of federal stimulus funds have sunk many states into a fiscal quagmire. The seriousness of the problem, and a growing concern over how much worse it might become, have many states struggling to find ways to trim services or raise revenues.Continue reading the main story  In Georgia, that means taking a slice out of the Hope scholarship. 

http://www.nytimes.com/2011/01/07/us/07hope.html 

you better hope thats FAKE NEWS

  
Huge difference between a promised benefit based on an employment contract where both sides are paying into the account and an entitlement program that is completely one-sided that was never guaranteed to anyone.

  Tell that to all the states and munis that shiived their pensions. The pension is only as good as how much you can rely on it actually being there when you retire.

rated:
I have a defined benefit pension right now, and the benefit is far greater than what I would have been able to do with a defined contribution plan. So, I'd say opt for the defined benefit.

I think public pensions are in better shape than is generally realized.  Here's an good article about that issue:

Public pensions are in better shape than you think

rated:
rufflesinc said:   
meade18 said:   
rufflesinc said:   I wouldn't trust a state like GA not to shiv you on pensions. They shivved the hs students who expected lottery scholarships.
 Students here at the University of Georgia have a name for some of the fancy cars parked in the lots around campus. They call them Hopemobiles. But there may soon be fewer of them.

The cars are gifts from parents who find themselves with extra cash because their children decided to take advantage of a cherished state perk — the Hope scholarship. The largest merit-based college scholarship program in the United States it offers any Georgia high school student with a B-average four years of free college tuition.

But the Hope scholarship program is about to be cut by a new governor and Legislature facing staggering financial troubles.The lingering effects of the recession and the end of federal stimulus funds have sunk many states into a fiscal quagmire. The seriousness of the problem, and a growing concern over how much worse it might become, have many states struggling to find ways to trim services or raise revenues.Continue reading the main story  In Georgia, that means taking a slice out of the Hope scholarship. 

http://www.nytimes.com/2011/01/07/us/07hope.html 

you better hope thats FAKE NEWS

  
Huge difference between a promised benefit based on an employment contract where both sides are paying into the account and an entitlement program that is completely one-sided that was never guaranteed to anyone.

  Tell that to all the states and munis that shiived their pensions. The pension is only as good as how much you can rely on it actually being there when you retire.

  
But haven't they all been bailed out?

rated:
Potential con for DB option:

Can your required contribution to the pension option go up in future (it can and does in other DB plans that I am aware of)?

How well funded is the pension trust fund. You will need to dig deeper in the GA retirement system website to get the documents. If it is not well funded (current assets vs. future/promised liabilities), your contribution rate could go up.

rated:
meade18 said:   
rufflesinc said:   
meade18 said:   
rufflesinc said:   I wouldn't trust a state like GA not to shiv you on pensions. They shivved the hs students who expected lottery scholarships.
 Students here at the University of Georgia have a name for some of the fancy cars parked in the lots around campus. They call them Hopemobiles. But there may soon be fewer of them.

The cars are gifts from parents who find themselves with extra cash because their children decided to take advantage of a cherished state perk — the Hope scholarship. The largest merit-based college scholarship program in the United States it offers any Georgia high school student with a B-average four years of free college tuition.

But the Hope scholarship program is about to be cut by a new governor and Legislature facing staggering financial troubles.The lingering effects of the recession and the end of federal stimulus funds have sunk many states into a fiscal quagmire. The seriousness of the problem, and a growing concern over how much worse it might become, have many states struggling to find ways to trim services or raise revenues.Continue reading the main story  In Georgia, that means taking a slice out of the Hope scholarship. 

http://www.nytimes.com/2011/01/07/us/07hope.html 

you better hope thats FAKE NEWS

  
Huge difference between a promised benefit based on an employment contract where both sides are paying into the account and an entitlement program that is completely one-sided that was never guaranteed to anyone.

  Tell that to all the states and munis that shiived their pensions. The pension is only as good as how much you can rely on it actually being there when you retire.

  
But haven't they all been bailed out?

  http://www.foxbusiness.com/politics/2016/12/20/calpers-cuts-pens... 
The unthinkable just happened in Loyalton, California, a small remote city nestled high in the Sierra Nevada Mountains. For the first time in its 85-year history, the California Public Employees Retirement System, CalPERS, is drastically cutting benefits for public retirees. Starting January 1=inheritst, four retired City of Loyalton public employees will have their pensions cut 60 percent.  For 71-year-old Patsy Jardin, that means her pension will drop from about $49,000 a year to a little more than $19,000.In an interview with the FOX Business Network, Patsy asked, “How am I going to make it now? What am I going to do?”

rated:
On a side note, I like that the lack of defined benefit pensions has made it much easier to change jobs/leave bad employment situations.

That being said, employers should contribute more to 401k matches. The large professional companies I've worked for have had complete jokes of matching contributions.

rated:
ArmchairArchitect said:   
That being said, employers should contribute more to 401k matches. The large professional companies I've worked for have had complete jokes of matching contributions.

  they are all in percents 

rated:
rufflesinc said:   
meade18 said:   
rufflesinc said:   
meade18 said:   
rufflesinc said:   I wouldn't trust a state like GA not to shiv you on pensions. They shivved the hs students who expected lottery scholarships.
 Students here at the University of Georgia have a name for some of the fancy cars parked in the lots around campus. They call them Hopemobiles. But there may soon be fewer of them.

The cars are gifts from parents who find themselves with extra cash because their children decided to take advantage of a cherished state perk — the Hope scholarship. The largest merit-based college scholarship program in the United States it offers any Georgia high school student with a B-average four years of free college tuition.

But the Hope scholarship program is about to be cut by a new governor and Legislature facing staggering financial troubles.The lingering effects of the recession and the end of federal stimulus funds have sunk many states into a fiscal quagmire. The seriousness of the problem, and a growing concern over how much worse it might become, have many states struggling to find ways to trim services or raise revenues.Continue reading the main story  In Georgia, that means taking a slice out of the Hope scholarship. 

http://www.nytimes.com/2011/01/07/us/07hope.html 

you better hope thats FAKE NEWS

  
Huge difference between a promised benefit based on an employment contract where both sides are paying into the account and an entitlement program that is completely one-sided that was never guaranteed to anyone.

  Tell that to all the states and munis that shiived their pensions. The pension is only as good as how much you can rely on it actually being there when you retire.

  
But haven't they all been bailed out?

  http://www.foxbusiness.com/politics/2016/12/20/calpers-cuts-pens... 
The unthinkable just happened in Loyalton, California, a small remote city nestled high in the Sierra Nevada Mountains. For the first time in its 85-year history, the California Public Employees Retirement System, CalPERS, is drastically cutting benefits for public retirees. Starting January 1=inheritst, four retired City of Loyalton public employees will have their pensions cut 60 percent.  For 71-year-old Patsy Jardin, that means her pension will drop from about $49,000 a year to a little more than $19,000.In an interview with the FOX Business Network, Patsy asked, “How am I going to make it now? What am I going to do?”

  
I agree with the fact that big gov't pensions are essentially taxpayer backed ponzi schemes, but I still feel like we should be accurate when describing them. I still don't see the equivalency between no longer telling B- kids they can have "free" tuition and reneging on thousands of pension payments. Loyalton, CA is a teeny tiny town who's whole population is several thousand fewer people in than the OP's employer has employees.

rated:
meade18 said:   
rufflesinc said:   
meade18 said:   
rufflesinc said:   
meade18 said:   
rufflesinc said:   I wouldn't trust a state like GA not to shiv you on pensions. They shivved the hs students who expected lottery scholarships.
 Students here at the University of Georgia have a name for some of the fancy cars parked in the lots around campus. They call them Hopemobiles. But there may soon be fewer of them.

The cars are gifts from parents who find themselves with extra cash because their children decided to take advantage of a cherished state perk — the Hope scholarship. The largest merit-based college scholarship program in the United States it offers any Georgia high school student with a B-average four years of free college tuition.

But the Hope scholarship program is about to be cut by a new governor and Legislature facing staggering financial troubles.The lingering effects of the recession and the end of federal stimulus funds have sunk many states into a fiscal quagmire. The seriousness of the problem, and a growing concern over how much worse it might become, have many states struggling to find ways to trim services or raise revenues.Continue reading the main story  In Georgia, that means taking a slice out of the Hope scholarship. 

http://www.nytimes.com/2011/01/07/us/07hope.html 

you better hope thats FAKE NEWS

  
Huge difference between a promised benefit based on an employment contract where both sides are paying into the account and an entitlement program that is completely one-sided that was never guaranteed to anyone.

  Tell that to all the states and munis that shiived their pensions. The pension is only as good as how much you can rely on it actually being there when you retire.

  
But haven't they all been bailed out?

  http://www.foxbusiness.com/politics/2016/12/20/calpers-cuts-pens... 
The unthinkable just happened in Loyalton, California, a small remote city nestled high in the Sierra Nevada Mountains. For the first time in its 85-year history, the California Public Employees Retirement System, CalPERS, is drastically cutting benefits for public retirees. Starting January 1=inheritst, four retired City of Loyalton public employees will have their pensions cut 60 percent.  For 71-year-old Patsy Jardin, that means her pension will drop from about $49,000 a year to a little more than $19,000.In an interview with the FOX Business Network, Patsy asked, “How am I going to make it now? What am I going to do?”

  
I agree with the fact that big gov't pensions are essentially taxpayer backed ponzi schemes, but I still feel like we should be accurate when describing them. I still don't see the equivalency between no longer telling B- kids they can have "free" tuition and reneging on thousands of pension payments. Loyalton, CA is a teeny tiny town who's whole population is several thousand fewer people in than the OP's employer has employees.

  its actually a lot worse than that. they are talking casinos in GA to prop it up

rated:
rufflesinc said:   
meade18 said:   
rufflesinc said:     http://www.foxbusiness.com/politics/2016/12/20/calpers-cuts-pens... 
The unthinkable just happened in Loyalton, California, a small remote city nestled high in the Sierra Nevada Mountains. For the first time in its 85-year history, the California Public Employees Retirement System, CalPERS, is drastically cutting benefits for public retirees. Starting January 1=inheritst, four retired City of Loyalton public employees will have their pensions cut 60 percent.  For 71-year-old Patsy Jardin, that means her pension will drop from about $49,000 a year to a little more than $19,000.In an interview with the FOX Business Network, Patsy asked, “How am I going to make it now? What am I going to do?”

  
I agree with the fact that big gov't pensions are essentially taxpayer backed ponzi schemes, but I still feel like we should be accurate when describing them. I still don't see the equivalency between no longer telling B- kids they can have "free" tuition and reneging on thousands of pension payments. Loyalton, CA is a teeny tiny town who's whole population is several thousand fewer people in than the OP's employer has employees.

  its actually a lot worse than that. they are talking casinos in GA to prop it up

  
Oh, I agree. And one of the reasons I didn't pick the defined benefit option with my last employer was because I didn't want to wonder if they were properly funding their retirement system. It wasn't the main reason, but it was in the back of my mind the whole time. It should be one of the reasons for the OP not to pick the DB option too, but the main reason should be that ridiculous 10 year vesting schedule.

rated:
IMBoring25 said:   The plans can't be directly compared without knowing your current age, the age at which you will retire, and if you expect your longevity to be significantly greater or less than average. Also relevant would be whether the defined benefits plan offers the survivorship benefits alluded to above.
  

This is a good point.

We really do need to know OP"s age to do a comparison here.

That 9% defined contribution rate is pretty generous and might be comparable to the DB pay out depending on the details.

Generally I think the DB is going to win, but it would depend on the details.

 

rated:
The most important question for OP is how long does he planning on staying there.

I would take DC, there are just too much variables in DB. 10 years is a LONG time in today's work world, this is even if you think you got a stable government job.

rated:
When I was hired, I could have taken the a defined benefit or a defined contribution neither of which required a contribution from me. The DC plan would have given me flexibility, but forced me to rely on the market which was poor at the time (2007-8). The DB seemed like a much better choice and it required 5 years to vest which I have completed at this point.

I have felt like the DB traps me a little bit since I know I will lose somewhat if I decide to leave. That said, I have been able to move around in our university organization to keep things interesting.

Now I just assume I will retire from this organization (15 years to make it to the minimum age/time in service point to qualify). Our pension is based on a formula using the 5 highest years of salary and years of service. Should replace about 40% of my salary at the time I retire (assuming those are my highest 5 years) or more if I could somehow get an easier job sometime before I retire and they have to use the high 5 from a different employment period.

Edit: our employer now provides a system similar to OP, 5% salary contributions from employee with something like 14% DB and 9% DC contributions from employer.

rated:
UncaMikey said:   I have a defined benefit pension right now, and the benefit is far greater than what I would have been able to do with a defined contribution plan. So, I'd say opt for the defined benefit.

I think public pensions are in better shape than is generally realized.  Here's an good article about that issue:

Public pensions are in better shape than you think

  
Don't we basically call this a Ponzi scheme?
Article said: Indeed, one could easily run a pension scheme on a pay-as-you-go basis, without any fund at all (this used be common).

rated:
For the federal government the FERS pension is fully funded. We only get 1% per year worked during retirement. I contribute .8% and the govt contributes 13.2% for total of 14%. So for your pension plan to pay out 2% per year worked I would expect it to cost closer to 28% to fully fund it. Some of that 8% shortfall is probably covered by the contributions they made for people who drop out before meeting 10 year vesting period (FERS only has 5 year vesting) but some of it is likely because they are under funding the plan which is a concern.

At first I was thinking at 5% difference the DC plan might be better choice due to lower risks but you're actually getting more than 14% under the DB plan if you end up collecting. It is really 20+ percent.

rated:
One big factor is retirement age. If you can begin collecting on the defined benefit pension after say 30 years, and will be significantly below normal retirement age, that's a big plus to the pension. I chose a DB pension, I'll have just turned 54 with 30 years of creditable service. Can start collecting benefits at 54.

A DC plan would have to be substantially higher to start paying benefits that soon.

Also, is there a COLA in retirement?

rated:
UncaMikey said:   I have a defined benefit pension right now, and the benefit is far greater than what I would have been able to do with a defined contribution plan. So, I'd say opt for the defined benefit.

I think public pensions are in better shape than is generally realized.  Here's an good article about that issue:

Public pensions are in better shape than you think


That depends on age and type of D.C. Plan

For older individuals, definitely you can stuff more in there and thus get a larger benefit.

rated:
One question to ask is what happens if the Defined Benefits plan is terminated before the end of your vesting period. A lot of organizations, including non-profits switched from Defined Benefits (in which they assume investment risk) to Defined Contributions (in which employee assumes investment risk) to make their benefits (labor) costs more predictable.

That happened for us 6 years ago. I was vested so when the DB plan was terminated, the formula just stopped in terms of years of employment at the time of plan termination. But those who were not vested basically only got their contributions back as if they had left the organization. So a risk with the defined benefits plan is that you could risk missing the employer contribution for a good number of years.

To determine how likely they are to terminate the DB plan, ask around to see if the choice of DB vs. DC was recently introduced. If it has been, that shows efforts to control costs of retirement plan. They basically hope that enough employees would switch voluntarily to the DC plan. For all those vested, DB should be better so few older employees will switch. At the next recession/state budget cuts, you bet termination of DB plan is gonna be the first thing they'll look at.

rated:
OP,
While many people have given good advice, one piece of information that we need to get a better idea of your pension benefits is how healthy is the plan itself. Most public pension plans are regulated by the state or the state appoints an independent agency responsible for this. You need to look up the health of your specific pension plan and find out at least two key indicators: amortization period and funding ratio.

The amortization period defines a period of years that it takes the plan, on average, to build up enough assets to fully fund an average employee's retirement pay. So in this case the lower the number, the better. Some of the worst public plans I've ever seen have a period of INFINITY! Yeah that's not good at all. Some of the best ones I've seen were around 15 years and the worst ones were around 50 years or so. I've found that once they hit 50 years, some actuaries, if it gets worse, will then rate it at infinity. This may depend on how your state wants it accounted for though.

The funding ratio tells you how much assets the plan has to actually fund an average retiree's salary. So in this case, the higher the number the better. Typically I've found that most plans are pretty healthy if they maintain at least 80% funding. Once it starts dropping below this number, it's time to really begin evaluating if you think it's safe or not since you have a choice. If it drops anywhere into the 60% range, that's going to signal some serious problems.

Please get back to us with this info or perhaps some other members could dig it up.

rated:
http://www.ers.ga.gov/Docs/Formsandpubs/CAFR2016.pdf

Georgia state general pension (ERS) is at 74% funding as of FY2015. Not great but not too bad as far as public pensions go.
It says 'amortization method' is 'level dollar, closed'.

I'm assuming OP is looking at ERS since it seems to match the benefits described.

rated:
jerosen said:   http://www.ers.ga.gov/Docs/Formsandpubs/CAFR2016.pdf 

Georgia state general pension (ERS) is at 74% funding as of FY2015. Not great but not too bad as far as public pensions go.
It says 'amortization method' is 'level dollar, closed'.

I'm assuming OP is looking at ERS since it seems to match the benefits described.
 

  
If this is indeed the plan the OP has available to him, this is already cause for concern in my opinion.  They list the amortization period of 19.4 years for ERS, 22.9 years for PSERS; 19 years for GJRS and 18.2 years for GMPF.  LRS and SEAD has infinity (BAD!).  So if it is ERS, we have 74.1% funded and 19.4 years amortization.

To me, this ranks somewhere between a C and B grade if we were to score based on letter grades used in school.  I would want to take a look at past history for at least the last 5 years, 10 if possible and see what those numbers look like and what the trend is.  If it seems that they are actively trying to improve the plan, I'd say it's worth a shot.

rated:
FrankDooley said:   
jerosen said:   http://www.ers.ga.gov/Docs/Formsandpubs/CAFR2016.pdf 

Georgia state general pension (ERS) is at 74% funding as of FY2015. Not great but not too bad as far as public pensions go.
It says 'amortization method' is 'level dollar, closed'.

I'm assuming OP is looking at ERS since it seems to match the benefits described.

  
If this is indeed the plan the OP has available to him, this is already cause for concern in my opinion.  They list the amortization period of 19.4 years for ERS, 22.9 years for PSERS; 19 years for GJRS and 18.2 years for GMPF.  LRS and SEAD has infinity (BAD!).  So if it is ERS, we have 74.1% funded and 19.4 years amortization.

To me, this ranks somewhere between a C and B grade if we were to score based on letter grades used in school.  I would want to take a look at past history for at least the last 5 years, 10 if possible and see what those numbers look like and what the trend is.  If it seems that they are actively trying to improve the plan, I'd say it's worth a shot.

  
Previous annual reports going back to 2000 are available here : http://www.ers.ga.gov/formspubs/formspubs.html

The funding % is down in recent years.    

Personally I don't think theres significant risk of any state pension plan defaulting.   But funding issues are more likely to lead to future benefit cuts.   

 

rated:
Possible factors:
1. Where you have worked in your career to date - public sector or private sector.
2. Where you expect to work later in your career - public sector or private sector.

Why?

If you have been or will be in the public sector, you might not pay into Social Security.
If this is the case, AND if you have worked or will work in the private sector or in a public-sector
job in which you have paid into Social Security, be aware that your Social Security benefits may
be affected by such "traps" known as the Windfall Elimination Provision and the Government Pension Offset
 

rated:
jerosen said:   
FrankDooley said:   
jerosen said:   http://www.ers.ga.gov/Docs/Formsandpubs/CAFR2016.pdf 

Georgia state general pension (ERS) is at 74% funding as of FY2015. Not great but not too bad as far as public pensions go.
It says 'amortization method' is 'level dollar, closed'.

I'm assuming OP is looking at ERS since it seems to match the benefits described.

  
If this is indeed the plan the OP has available to him, this is already cause for concern in my opinion.  They list the amortization period of 19.4 years for ERS, 22.9 years for PSERS; 19 years for GJRS and 18.2 years for GMPF.  LRS and SEAD has infinity (BAD!).  So if it is ERS, we have 74.1% funded and 19.4 years amortization.

To me, this ranks somewhere between a C and B grade if we were to score based on letter grades used in school.  I would want to take a look at past history for at least the last 5 years, 10 if possible and see what those numbers look like and what the trend is.  If it seems that they are actively trying to improve the plan, I'd say it's worth a shot.

  
Previous annual reports going back to 2000 are available here : http://www.ers.ga.gov/formspubs/formspubs.html 

The funding % is down in recent years.    

Personally I don't think theres significant risk of any state pension plan defaulting.   But funding issues are more likely to lead to future benefit cuts.   

 

  
I agree that public pension plans typically dont see a lot of excessively bad things happen to them, but it is still possible.  Would you want your pension plan to be one of those?  As an example, Dallas was recently in the news over their plan.  Dallas runs their own pension plan still, but still has to report to the state.  Their plan is in really bad shape and my understanding of how the city is funded, it can either increase sales taxes or property taxes to make up the costs or cut benefits.   Well they are already maxed on the sales tax part, and for property tax increases, they can only increase taxable appraised values by 10% per year I believe.  So that means the appraised value can be increased by any percentage, but the portion that is taxed can only increase a certain amount.

I believe recently though they have been talking about some heavy cuts to benefits to try and get it back in shape.  Still, would you as a public employee who has some vested interest in this enjoy being told your benefit won't be as high as you thought or you have to retire later?  If you are like in your 50s or later, that's a hard one to swallow.

rated:
nymgiants said:   defined benefits are by far the best.  most places other than government jobs don't offer it any more because of hoe much more they pay out to employees of defined contributions
  only good if the company stays in business a long time ... and when you are retired.

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