The Incredible Shrinking Retirement Benefits

[livingdeb]

Today I went to the meeting the local state employee union held to discuss the fact that a state legislative committee is discussing the possibility of switching our retirement plan from a defined benefit plan to a defined contribution plan.

There were many things about this meeting to hate, such as spending way too much time at the beginning discussing why you should join the union and such as emphasizing that the solution to this discussion of pension changes is to join the union.

I had two questions, one of which I hoped would be answered at the meeting. (The other question, what the details of this new defined contribution plan would look like, are, I assume, not yet decided.) I wanted to know who would benefit from the proposed change.

They had one answer: the stock brokerages that are hoping to get our business. They hinted at another possible answer: people who are worried that the market will plummet as the boomers retire leaving the state without enough funds to make the promised payout. Supposedly twenty percent of people in my state are participating in this pension plan. I'm sure many of them accumulated just a few years of savings and don't expect the plan to cover their retirement, but it's still a shockingly huge number.

I also learned something much more concerning to me. Our retirement health coverage is not mandated by law or by any kind of promise at all and it is generally assumed that this will disappear soon. This is assumed not just by the union members, but also by other, less excitable folks I talked to. And I didn't even get any hint that joining the union would help with that.

Suddenly, my salary feels lower, my retirement savings feel minuscule, and I feel like a sucker.

**

In other news, my jewelry making supplies are now stored in Robin's old sewing kit (a small fishing tackle box). I'm not sure it's better than my old system (a big plastic bag). Certainly it's less malleable and takes more space. And most of my stuff is still in smaller plastic bags at the bottom of the box. Advantages are that I can now get to my pliers and tweezers more easily and that it's now easier to stack things on top of it. Which means I'm moving it from a drawer to a shelf.

Comments

[sallini.livejournal.com]

When I started working for the state in 2001, under the current rules, I would be allowed to retire at the age of 54 with full (and generous) benefits. That seemed insane to me and unlikely to obtain in reality - the rules would have to change in some way. Nobody gets that kind of deal. The defined benefit plan sticking around also seemed implausible.

Are you on the same state retirement plan as state agencies in general or is there a separate one for education employees?

[livingdeb.livejournal.com]

I'm in the one for education employees, which has the same sort of unbelievable deal.

[sallini.livejournal.com]

Ah, OK. Well, if I recall correctly, you started working in the education system quite a bit before 2001, when that deal probably seemed more believable than it does now. (After all, there was a period in which many people did get to take advantage of this sweet deal.) And you are closer to retirement than I am, so the deal didn't have to hold for quite so long. In any event, I hope this doesn't screw up your retirement plans too badly. :/ And here's hoping that the Rule of 80 survives your retirement date!

[livingdeb.livejournal.com]

Yep, I started in 1989.

All the last changes were grandfathered for people retiring within five years. So maybe I only have to cross my fingers for one more legislative session.

Or just get a job I really like and do it for a long time.

Ideally, some of both.

transition?

[mac-the-mike.livejournal.com]

When my company switched from defined benefit to defined contribution (many years ago), they allowed individual employees to choose which system to use. In general, those employees who had many years with the company at the time of the transition were better off with the defined benefit plan; whereas, new employees (such as me, at the time) were better off with the defined contribution plan. The company provided a web page with a calculation and a set of assumptions you could change to help make the choice.