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...and any sizable employer offers healthcare and a 401(k). So at best you could say they're betting on an inflation-adjusted pension? That's not going to sell
by jelling 9y ago
...and any sizable employer offers healthcare and a 401(k). So at best you could say they're betting on an inflation-adjusted pension? That's not going to sell many candidates.
- soVeryTired 9y agoI'm not from the US, but I'm guessing a 401(k) pension scheme is defined contribution: you pay in cash in a tax advantaged way, and the risk that the pension scheme loses money or doesn't make enough of a return to support you in retirement is borne by you. I'm also guessing that the government's pension scheme is defined benefit: the risk that the scheme loses money is borne by the government, and you get your pre-determined payout unless the government goes bankrupt. Defined contribution pensions are typically much more valuable, since they can obviate the need to save for retirement (or at least part of that need). In the UK, it's extremely competitive to become a civil servant despite the mediocre pay. The reason is security, both in your job and in retirement.
- arglebarnacle 9y agoYes that's right, but you've got the terms reversed. Defined contribution is the one where you bear the risk, and defined benefit is where the government bears the risk.
- soVeryTired 9y agoWhoops! My bad - edited.
- gbacon 9y agoA portion of the risk. PBGC pays out at a significant discount.
- maxxxxx 9y agoI would take a government guaranteed pension and lifetime health care over 401k any day.
- vkou 9y agoThey are only guaranteed until some elected official decides to give you a haircut on your deferred paychecks (Which is what a pension is), right as you're about to retire. (Or shortly after you do.) I'd hedge, and prefer splitting my money between both.
- maxxxxx 9y agoYou still can do both if you work for the government.
- woolvalley 9y agoBut you exchange a lower salary for that government job, which makes saving for your 401k & co less effective. There is also the entire calculation of the expected value of money now vs 30 years from now.
- sjg007 9y agoGovt salaries aren’t that low.
- abtinf 9y agoAttempting such a cut would result in a protracted legal battle with some of the most powerful organizations in the country.
- vkou 9y agoUnions? Government employees? They aren't even on the top ten of 'most powerful organizations in the country.' Not for the past four decades - Ronald Reagan fixed that glitch. What's going to happen is that paid shills will start publishing op-eds citing a handfull of executives and upper managers who gamed the pension payments system with overtime, resulting in massive payouts for themselves, drum up public outrage about lazy government workers, and pass an across-the-board haircut. It will, as always, be turned into a red vs blue issue - and half the time, red's in charge.
- DonHopkins 9y agoThe tax benefits of being an IRS programmer who writes critical code that nobody else can understand are incalculable.
- erodommoc 9y agoI see what you did there...
- abtinf 9y agoThe inflation adjusted pension, which roughly works out to 33% of your final salary, is in addition to the federal 401k program and social security. The fact that it is inflation adjusted is critical. To calculate the value of the pension plan, you would need to compute the NPV of an infinite series (assuming advancing healthcare). The medical benefits are also quite significant and, for lower grade workers, will dwarf the value of the pension.
- gbacon 9y agoGovernment employees tend to be highly risk averse. This was the insight behind the founding of GEICO, the Government Employees Insurance Company, which used to write policies for public employees only.