I get it - but I figured anyone that’s a niece did not :).
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Yeah, I’m not THAT old.
Though I am old. She is working for local government, I guess, city, not federal.
While 12% sounds like a very nice number, no social security and no pension sounds bad. 12% is not good when you consider they’re not contributing 6.7% to social security for her, the city is actually getting quite a deal.
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Some teacher retirement account pensions do not allow them to receive social security.
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Some states have this. But @busdriver11 says that the niece isn’t getting a pension AND isn’t getting SS taken out…but has 12% contributed to a 401k if they contribute 10%.
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There was initially a confusion about being a government employee. Is there also other confusion still going on regarding other details?
My previous employer only gave me a 3% 401k match with a 6% contribution from me. No pension either.
I might actually take a 12% match on a 10% contribution and give up those years of SS input. With market returns that could work out much better in the end.
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I’m asking her the details now. What division she is in the govt, under this or that agency, it is very confusing. But it’s definitely worth her understanding her benefits. If she’s not getting SS or pension, she’d better save like crazy now, or get a better job.
Just looking into this, it is eye opening to me how many people are not eligible for social security. I assumed everyone who had worked long enough was, unless they had a govt pension. Man!
Edit to add, they do pay into SS, thank God, I was confused about who she worked for.
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Absolutely she needs to understand her benefit situation.
If she’s able to save 22% of her salary, her 10% plus the 12% match, that could very well prove to be lucrative later in life if she invests it wisely, especially if she is younger (more time for interest to compound).
I’d certainly be interested in hearing more details about her employment and if this is actually the case.
Well, in that case, she is making out like a bandit with that 401k matching.
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Oh good…so what you thought was an issue…isn’t one!
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It turns out I don’t understand her benefits at all, as she works for a different agency than I thought she did. I don’t know what her matching benefit is. She says it’s hard to get benefit help at work but she knows someone who is knowledgeable. At my company, we had so much information, everyone knew what our basic benefits were at least. Very important to know.
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When I retired, I had friends retire with no SS but quite high pension.I retired from 1986 which included SS. I contributed to the pension and SS.
I get a fed pension (much lower than above) but also SS. Some people are caught in a hybrid situation.
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She doesn’t have a booklet (hard copy or digital) of all the benefits? Most companies/govt should have that for open enrollment time or when they’re hired.
Pre covid, I thought my employer did a really good job with benefits. We had one hour info sessions where all the reps would go over everything and you could ask questions. Now it’s just a zoom meeting or call if you have a question.
But I’m the go to person in our office for benefits since I study all the ins and outs of that. We have no match for our equivalent of a 401K but we do have small pensions - that don’t have any COL increases.
Younger S works for a private company and his 401K offering made my head spin. So many levels that added on from the previous. Each one has a different employer contribution and rules about if you could do Roth or regular. But if you maxed it out, if you put in 10%, they match 12%.
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This right here. There should be documentation available, especially if it is any type of government entity (federal, state, local). If it is government, I would actually expect that to be public information available online too.
That’s a GREAT match. Hopefully he takes full advantage of that “free” money.
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Yep! He sure does. His company has a video describing his retirement policy. They have two categories of employees based on salary - different from the typical exempt/non-exempt. Then each group has 3 different tiers. And each tier has an employee contribution and either a flat or formula percentage employer contribution. Or no employer contribution. The top tier has none. And then each piece of each contribution has rules whether it can go into either mandatory regular pre-tax, or you have a choice between Roth/regular.
I was like woah. H and I have only worked for employers with zero matches.
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I am like you - a much smaller pension than the “CSRS” retirement system people, but I get SS, and could save in the TSP (tax deferred savings option). The government matched up to 5%. More recently, the federal retirement has changed multiple times, each time to be less beneficial to employees (in my opinion).
If someone who worked prior to 1984 left the federal govt and then went back, they would likely be in a plan called which I think is called “CSRS Offset” (could be wrong name) where for some years they get the “old” retirement calculation, and for some years they get the new.
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This is true.
I’m not positive if the calculation is based on FERS formulae, the amount of time away, or the SS earnings during the time away.
The offset reduces the pension amount for the returned time of service.
In my DH’s case, it was only 3 years returned before his death, which had minimal (<$200) impact on the monthly pension.
And that reduction started at MY age 60, once I was eligible to collect on his SS, whether I did or did not opt to take it then (I did not).
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I think there is likely plenty of information out there about my nieces pension, she just has to figure out how to find it. I’m seeing plenty of info online, but I don’t know what plan she’s in. It looks like she likely has pension, social security and can contribute some of her own funds to a 457 plan. I glad that at least she’s showing interest, but you gotta find it on your own sometimes.
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This is true.
I’m always amazed when I speak to people I know from varying backgrounds and see how differently many approach their future in retirement. I’m not sure what some are thinking, or maybe not thinking.
Personally I grew up getting free lunch at school and with parents that ended up solely relying on SS in their old age. I guess it was a big motivator for me to do more to prepare. I am thankful for that.
I try to talk to others about retirement and saving. I guess sometimes I get through to them, other times not so much. We each do have to take some personal responsibility in the end. I’m sure your niece will figure it out.
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I will make sure she figures it out. I wouldn’t have gotten involved if she hadn’t asked me what “vested” meant and seemed confused about her retirement benefits. So now she’s getting help whether she wants it or not.
I wish I’d pushed my parents on this, they were so clueless. The only reason my mom has a boatload of money now is because they never stopped living as if they were impoverished. No vacations, eating out, shopping at secondhand stores, no heat. Crazy, but turns out if you spend very little, you end up with a lot, even if your salary was low and you didn’t know how to invest.
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Anyone who wants to help younger folks understand a little more about things like their budgets and retirement planning…please recommend that they take a personal finance course. Our kids both had this…one in undergrad AND in grad school, and the other in professional school. Both said it was the best course they ever took.
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It seems like when we have looked into converting in the past, it hasn’t really made sense for us. Or, at least we didn’t think so.
I think we are holding out hope that our marginal rates will be lower in the future. My dh still works.