Finance, Boats, Retirement how do you decide?

[socalrider]

I flat love that thinking.

My company still provides an old fashioned defined benefit pension plan.

Pretty much every other company has killed those off. My reasoning to keep it going is identical to yours.

Pension plans are a real bear to manage in every sense. The admin burden is substantial. The GAAP accounting impacts have amazing complexity. It requires expensive outside consultants. It is quite expensive. Quite. I keep it going anyway.

That's impressive, and commendable - not many defined benefit plans out there in the private sector. I remember looking at annuities a few years back - wow, not very appealing. My brother-in-law is a teacher; I stepped him through the value of his retirement & health care benefit vs. annuity cost to cover the same - he's a multi-millionaire!

I'm still in the middle of my career; I'm keeping things simple & following Buffet's advice for his heirs: 80% in S&P 500 index fund, 20% in short term gov't bonds. I'll get more sophisticated over time, but it's surprising how hard it is to beat such a simple allocation & I think it's a good recommendation to get started with & avoid analysis paralysis.

 

[FWT]

We terminated for three reasons.
1-The administrative and financial reporting burden. Out income could vary by millions due to plan performance.
2-Lack of portability and the fact of how many employees who would never receive anything or would receive relatively little. One benefit some believed in was it helped to keep employees. I felt we needed better reasons for them to stay than just holding a huge financial penalty over their heads.
3-Lack of perceived value by new hires. They didn't feel like they owned the funds so not like they were really getting a benefit. They were asking for 401-K's.

Portability: correct, they are not portable. But assuming they vested under the plan they still receive value upon retirement. I have several, from several employers, and will enjoy each in retirement.

One was a "cash value pension plan". I have never operated one so some details are fuzzy. But that is one I never expected to see much value at retirement. Wrong. Material, especially since I was not at that company for a lengthy period.

Absolutely pensions are not valued in the hiring process by the kids. At the young ages they are struggling to get going, earn enough for a decent life, get married, buy homes, etc. The size of the paycheck today matters. On the other hand, one of my senior guys took a pay cut to come because of the pension. He understood the economic value. Like so many other things, its hard to generalize about people seeing or not seeing the value.

What I do struggle with is seeing retiring staff seek advice about retirement and making pension payout decisions, and being preyed upon by scum taking advantage of them for commissions.

Edited to add: pension vesting. It is the long term committed employee I feel most deserve the expensive reward. The ones who come and go like the wind don't vest, and have not earned it.

 

[klee wyck]

We are on a bit of a drift now, but delayed gratification is also an aspect of a quality retirement.

FWT said: Edited to add: pension vesting. It is the long term committed employee I feel most deserve the expensive reward. The ones who come and go like the wind don't vest, and have not earned it.


Yes, to that. I thought for a long time that it was my responsibility to provide for the long-term care of every employee. For many, that had no value. They wanted all the value that they were creating in the next paycheck and that is how we were being evaluated as an employer for many of our employees. Eventually we learned not to make decisions for others that did not fit their worldview.
For others with a longer view, those that made our company their careers, different story. Deferred compensation worked for them, and it has been my mission to make sure they retire wealthy, and they will.

 

[Seevee]

All these 401K, defined benefit things, etc are fine, but I could argue to get yourself a Self Directed Roth IRA, and throw every dime into it. It's the best thing for tax free income in retirement, and the ability to grow tax free.

 

[socalrider]

All these 401K, defined benefit things, etc are fine, but I could argue to get yourself a Self Directed Roth IRA, and throw every dime into it. It's the best thing for tax free income in retirement, and the ability to grow tax free.

Yeah but pretty low contribution and max income limits.

 

[BandB]

We are on a bit of a drift now, but delayed gratification is also an aspect of a quality retirement.

FWT said: Edited to add: pension vesting. It is the long term committed employee I feel most deserve the expensive reward. The ones who come and go like the wind don't vest, and have not earned it.


Yes, to that. I thought for a long time that it was my responsibility to provide for the long-term care of every employee. For many, that had no value. They wanted all the value that they were creating in the next paycheck and that is how we were being evaluated as an employer for many of our employees. Eventually we learned not to make decisions for others that did not fit their worldview.
For others with a longer view, those that made our company their careers, different story. Deferred compensation worked for them, and it has been my mission to make sure they retire wealthy, and they will.

Instant gratification. Now that's very much back on target. How to weigh gratification today vs. future. I won't argue against all instant gratification. Don't hold back and save and deprive yourself for a time that may never come. At the same time, however, don't go wild enjoying the present and doom your retirement. As in most things, find a balance. When we lived in NC, we bought a small house on the lake and finished the lower level and had a great home and a dock. However, amazing how many kept asking why we didn't buy a house costing 10 or 15 or 20 times as much in the country club resort type property on the lake. Well, we didn't because we had what we needed and we enjoyed it but we also had long term retirement goals.

Now, one thing I've found in dealing with a lot of young people and we've found in our company. It's not the youngest who are failing to consider and plan. No, it's those my age and my wife's age. It's Gen X and it's some of the early Gen Y or Millennials, but most of the Millennials and the Centennials of Gen Z are thinking of their futures, in financial and other ways. We asked a bit out of curiosity. Well, the reason was they'd observed their parents and their parents' generation and they don't want to end up like their parents have. They're not running out buying the fanciest new cars and not rushing to the luxury condos. I recall one talking about her parents even with her out of school always stressing about finances because they had to have a 3000 sq ft home and a Lexus and Acura but she drove her used Civic and paid $1100 a month rent so made maximum contribution to her 401K and still saved more. She asked her parents whey they didn't downsize, sell and buy something smaller. Question back was "We can't. What would we do with all our things?" She said when she said "Maybe get rid of some" she got daggers from her mom's eyes. We do also educate in finances and budgeting and that helps I believe. Young people are not taught these things by their parents or in school so left to learn on their own. We require a certain amount of professional development and personal development classes. I think of so many basics I was taught that kids are not. I had bedtime and school nights and those concepts long left. So we actually teach responsible behavior and not going out partying the night before a work day and getting enough sleep. It benefits us but also the employees.

So to the question of weighing costs and investing and saving and boats, balance while keeping the multiple goals in mind.