Posted by Mike (WA) on November 21, 2008 at 08:57:04 from (69.10.198.224):
In Reply to: Re: Retirement! posted by Buzzman72 on November 20, 2008 at 18:49:22:
I worked for the Farm Credit System from 1974 to 1984, and again from 1990 to 1995- we had a "defined benefit" retirement program (your retirement payment was based on salary and years of service, by a set formula). Long about 1995, they started pushing us to convert to a "defined contribution" plan- basically, a 401k to which we contributed, and they partially matched. In the process, we would also cash out our defined benefit program. They calculated the cash payout, and I was surprised by how small the payout would be, compared to what I could normally expect to draw from the defined benefit program. Of course, they were using wildly optimistic projections on return, which turned out to be false. The pressure was there to convert- letters from the "big guy" (he was about 5'6" tall, as I recall), etc. One day our local manager called me in- when he started talking about the retirement conversion, I figured, here comes some more pressure, because he was always a pretty good "company man". Surprisingly, he opined that with all that pressure, conversion must be a pretty good thing for them, but not so hot for us. He didn't convert, and neither did I.
Looking back, those who converted really got hosed. Looking at what I've made on other stock investments since, their cash-out would have lasted me about 7 years, at the same monthly payout as I'm getting from the defined benefit pension. I started drawing it when I was 56, so now at 60, I'd be more than half way through my retirement money! And that's assuuming I'd been smart enough to get out of the market last spring, before it imploded.
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