Thread: State Pension Funds

Coolhand,

Sorry, I have to read this one because I'm deep into the state pension plan that Florida offers. My wife changed from the defined benefits plan to the defined contribution plan and continues to make progressive gains. I'll read and offer my humble perspective. But first I have to read and comprehend the other article about business or credit cycles. Thanx

Dennis

Coolhand,

Some light on defined pension plans first. No matter how the monthly check is computed eg: 1% times average 3 highest years salary times years of service, or others eg: 1.6% (sometimes 3% for risk category) times 5 highest average compensation years times years in service. The bottom line is you are betting against the employer with your life - will you live long enough to fully exercise all the money that was accumulated in your account? If not, depending on your payout options, the money is returned to the employer. In most defined benefit plans the only beneficiary you can have is your spouse. For example, if you select an option where your spouse remains a covered beneficiary for ten years after retirement and you reman in retirement for only 5 years before the train hits you, the spouse will be covered for 5 more years- the remaining funds then revert back to the employer. If you select an option where the spouse is covered for life - your amount will be markedly reduced. That's why TSP can be a good supplemental program to bolster your income along with social security and other sources of income. Rental property for example, farming, part-time work, etc. I think DaveM has this fairly well figured out-care to offer some input. We can discuss point by point - and perhaps offer some guidane to others. This whole area of pensions is in flux.