Tag Archives: pensions

Put Your (Pension) Money Where Your (House) Mouth Is

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Permanence and Pension Money

Greetings, long-lost readers! It’s been over a year since I published my last post about my return to work to qualify for a New Zealand residence visa. A lot happened over that time, so much so that a separate update is warranted. However, for this article, the easiest thing to say is that my return-to-work plan … worked! My family and I obtained NZ residence based on my employment in April 2023, I transitioned to part-time work in August 2023, and we bought and moved into a house in December 2023. It was a hectic but ultimately successful year, with few setbacks and much growth. As a result, my family and I feel truly blessed when we wake up to the stunning views each morning at our New Zealand home and are comforted by the permanence it provides. Couple that with the financial stability afforded through our monthly defined benefit (DB) pension money, and we are sitting well indeed.

Pension Money

The view from our new back yard.

The remainder of this post is about some of the concepts I put into action to purchase our house and achieve that permanence. As you may have deduced from the play-on-words in my title, the money from my DB pension played, and will continue to play, a key role in making that happen. As such, there are potential lessons to be learned for anyone with a DB pension playing a central role in their retirement who might also wish to purchase a house.

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The Pension Couch: Replacing Pension Income

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Back in Action

I’m back with another edition of the Pension Couch. I produce Pension Couch articles from edited and sanitized exchanges with readers who ask me defined benefit (DB) pension questions. It’s a way for me to create posts with useful pension-related information without the additional work required to write one from scratch. In this edition, I answer a reader’s “what if” question about replacing lost pension income by taking a higher-paying non-pensionable job. As a question, it fits well with this blog’s stay-or-go Golden Albatross theme. Therefore, I believe it’s worth your time.

This article’s request came from a reader who I called Kai. He specifically asked how much he’d need to save and invest at a new non-pensionable job to replace lost annual pension income from his current pensionable job… if he decided to leave six years earlier than planned. On the face of it, that’s a straightforward question. The answer, however, required modeling his retirement savings and investment options and then determining if they could replace the potential lost pension income.

Readers ask me some form of the “replacing pension income” question a lot, which tells me two things. First, many readers have contemplated leaving their often lower-salaried pensionable jobs for higher salaried non-pensionable jobs. Second, many readers also understand these scenarios involve trade-offs connected to their pension’s ultimate value in retirement. But, as just mentioned, mathematically modeling these “what if” questions can be complicated. Fortunately, in this article, I demonstrate how to determine if replacing pension income is feasible without resorting to complex math formulas. Instead, I use a free website and free retirement planning software, which you can easily replicate, should you need to answer the same question. Continue reading →

The Pension Series (Part 30): Pension Maximization

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Pension Maximization

Helping pensionable workers determine the value of their defined benefit (DB) pension to make well-informed Golden Albatross decisions is the raison d’être for this website. Thus, I write most of my articles for pensionable workers trying to determine whether staying for their DB pension is worth it. However, those aren’t the only articles I write. Although much smaller in number, I also publish articles for pensionable workers who decide to stay. If a unifying theme to those articles exists, it’s pension maximization.

What’s pension maximization? In practical terms, pension maximization ensures your pension’s positive impact in retirement is as significant as possible. You maximize your pension by taking active steps during your pensionable career. My Gap Number, Roth vs. Traditional, buying back years, and pension geoarbitrage articles provide examples of actionable steps pensioners can take. That said, unlike my Golden Albatross-themed articles, I never laid out a framework for pension maximization. In other words, after a worker decides to stay, I never answered the simple “now what?” question.

The remainder of this article, and its follow-on, layout my framework for answering “now what?” I call this framework Grumpus Maximization.

Yes, it’s a somewhat cheesy metaphor. But, Grumpus Maximization is a catchphrase designed to stick, much like the Golden Albatross. Who knows? It might even aid future marketing attempts like printing t-shirts with “Got Pension?” on the front and “Get Maximized @ grumpusmaximus.com” on the back …

That’s not helping, is it? Fine, I’ll sidebar the marketing discussion for now. Continue reading →

The Pension Series (Part 6): Valuing Pension Subsidized Healthcare (Updated)

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A Much-Needed Overhaul

Not every blog post I publish stands the test of time. While I always aim to produce “evergreen” articles, meaning they stand on their merits regardless of age, I don’t always succeed. My original pension subsidized healthcare post was a great example of this shortcoming.

When I published the article, the US’s Affordable Care Act (ACA), also known as Obamacare, appeared on its way to the scrap heap due to domestic US politics. This made estimating the value of healthcare attached to a US-defined benefit (DB) pension even tougher. It also led me to rant about how overly complex and unfair the system was for those going through their Golden Albatross decision. As a result, I concluded that it was an invaluable benefit for those lucky enough to have healthcare attached to their pension, especially if they intended to retire before Medicare eligibility at age 65. Therefore, it should weigh heavily in their Golden Albatross decision.

That was it. I didn’t develop any complex formulas or provide helpful suggestions on accomplishing the seemingly impossible. Nor did I provide many links to others who had tried. So much for value-added, huh?

Absolutely none of that!

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The Pension Series (Part 29): The Golden Albatross vs. Women’s Pensions

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Recent History

In Part 28 of the Pension Series, I stated that age, tenure, and (in some cases) gender mattered more than any singular pension design element during a pensionable worker’s Golden Albatross pension decision. I based that statement on the evidence from my master’s thesis research. For my thesis, I ran a survey for pensioners and pensionable workers which I called the Golden Albatross survey. To complete the thesis I statistically analyzed the results of the survey, which I discussed in Pension Series Part 28. This post expands on the gender portion of those findings by focusing on the impact of defined benefit pensions for women in retirement.

Much like Pension Series Part 24 (Black Pensions), for this article I examine if and how the Golden Albatross decision-making framework should be modified for a specific sub-set of pensionable workers. In this case, that sub-set is women. In doing so, I specifically focus on the disparities in retirement savings between men and women and the impact of defined benefit (DB) pensions on women’s retirement outcomes. I conclude that the Golden Albatross calculation is different for female versus male pensionable workers. Continue reading →

The Pension Couch: Pension Roll-Over Questions

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What should pensionable employees who leave their job before normal retirement age (NRA) do with their pension at their former employer? Should they roll the pension over into a self-directed retirement account like an IRA? Or, should they wait until NRA and collect the annuity?

These are simple enough questions, but not ones I ever had to deal with personally since my pension never accrued a value while I worked. That said, there are ways to determine the answers to these questions. But, as with many things connected to pensions, such as the Golden Albatross inflection point, it often involves a mix of math and emotion. It certainly did for one reader who had a pension roll-over question, so I made it the topic of this Pension Couch post.

For those that don’t remember, Pension Couch articles are created from lightly edited and sanitized email/message exchanges in which I answer readers’ pension questions. Names and some details have been sanitized to protect the innocent. Also, don’t forget that I speak in general about pensions throughout this post because every pension plan is different. So, make sure you research your specific plan before taking any action! Continue reading →

The Pension Couch: Pension Buyback or Freedom Buyback?

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Based on the title of this post, can you guess which article on the Golden Albatross blog has the most views? If you said The Pension Series (Part 17): Buying Years – A Case Study, then have a beer on me. I promise I’ll pay you back when I get my next US $20 royalty check from my publisher! In any case, the contest isn’t even close. Part 17 has triple the number of views than the second most-viewed post, The Pension Series (Part 3): What Is Your Pension Worth?. It’s probably as close to viral as one of my pension-related posts will ever get. Although, it did this over two years instead of two weeks. I guess that means a lot of readers have access to a pension buyback.

As I describe in Part 17, a pension buyback (aka buying back years) is a process through which pensionable workers can transfer the number of years they worked in a former pension plan into their current pension plan through a cash purchase. This allows the pensionable employee to increase tenure (in the eyes of their current pension system) when the value from their previous pension doesn’t transfer over. Therefore, it makes a pending pension annuity from the current pension plan more valuable. As a result, buying back years isn’t typically cheap. Pensionable employees with this option need to determine if the purchase is worth it.

The option to buy back years isn’t offered universally by pension plans. If you want to know more about the basics of a pension buyback, and how to calculate if it’s worth it, I encourage you to read Pension Series Part 17 if you haven’t already. Doing so will boost your understanding for the remainder of this article … and increase those view numbers even further! Continue reading →

The Pension Series (Part 28): The Golden Albatross Vs. Age, Tenure, and Gender

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To justify studying Golden Albatross (i.e., stay-or-go) pensionable job decisions for my master’s program, I made an argument. I’m not talking about a Facebook or Twitter argument where everyone types in CAPITAL LETTERS and no one changes their mind. I’m talking about an academic argument. That’s right, I moved beyond my typical ranting via the interwebs and masqueraded as a social scientist for a few months. Let me tell ya, white lab coats for hairy knuckle draggers are hard to come by!

age tenure gender

I’ll let you guess which one is me.

My thesis argued that human resources (HR) managers needed to know which pension design elements made their pensionable workers most likely to stay. Reasons they might need to know this included if pension plan re-design was required after a fiscal crisis — like the dot-com crash in the early 2000s. Since the main reason for offering a pension is to create worker retention, I reasoned that pensionable employers would want to avoid cutting design elements that most attracted workers towards staying.

Of course, the argument was hypothetical. I have neither the ear of HR managers anywhere nor the nerve to advocate cutting design elements from pensions. I simply made the argument to convince my advisor and those (un)lucky enough to grade my thesis. However, after collecting and analyzing the results from my pension survey, I was ready to declare ‘Don’t mess with healthcare!’ to any HR manager that would listen.

If you’ve read Pension Series Part 27, then you know why. Survey participants ranked ‘pension subsidized healthcare’ as the design element that made them consider staying at their job the most during their Golden Albatross decision. In fact, the final weighted score for healthcare was ten percentage points higher than the second-place design element, ‘immediate annuity.’ Therefore, the results appeared to support a ‘keep your money grubbing hands off of healthcare’ declaration.

That said, I’m glad I didn’t declare this straight away. As you’re about to find out, age, tenure, and gender are far more powerful elements during a Golden Albatross decision than any singular pension design element — even one as popular as healthcare. Continue reading →

The Pension Couch: Early Retirement Penalties

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I run a Facebook group for pensioners, pensionable workers, and/or their significant others called Golden Albatross/Golden Handcuffs. The group relies on the wisdom of the crowd to answer members’ pension-related questions and/or discuss pension-related topics. From time to time, the group serves up good topics to write about. For instance, I recently exchanged comments about the early retirement penalties built into their pension with a group member. It didn’t appear that the group member understood the reason for these penalties. As a result, I provided a short explanation as to why they did.

Fortunately, the Facebook exchange reminded me of a more in-depth email exchange I had with a reader a few months ago on the topic of early retirement penalties. Since the email conversation was far better organized (and researched) than my Facebook exchange, it seemed like a good candidate for a Pension Couch post. For those that don’t remember, Pension Couch articles are posts created from lightly edited and sanitized email exchanges in which I answer readers’ pension questions. In this instance, I answer McGruff’s (the crime dog from Public Service Announcements in my childhood) questions about the early retirement penalties built into his/her law enforcement pension plan.

Do early retirement penalties spell death for pensioners’ early retirement hopes?

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The Pension Series (Part 27): The Golden Albatross Pension Survey

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Would You Like To Take A Pension Survey?

I loved the Animaniacs cartoon when I was a teenager, especially one episode called “Survey Ladies.” In it, two ladies run around a shopping mall hounding the Animaniacs screaming, “would you like to take a survey?” and asking crazy questions like, “would you eat beans with George Wendt?” For those of you who don’t know, George Wendt was Norm in the sitcom Cheers.

That’s how I felt in March 2021 as I administered a pension survey to US-based pensionable workers and retirees from several personal finance Facebook groups and my blog’s email distribution list. I ran around (virtually) trying to convince pensionable workers and retirees to take my survey and answer many seemingly crazy pension-related questions. Sadly, I couldn’t figure out a way to work George Wendt or beans into it. Continue reading →