Why People With Pension Jobs Still Need To Invest For Retirement

investing when you have a pensionBack in the day, workers could count on putting in 20-30 years on the job and scoring the coveted gold watch AND a lifetime pension. Sure you might be too old and broken down to enjoy it, but by golly, there was a check every month. With that sort of guarantee, there was really no need to save for retirement. Nowadays, pension eligible jobs are few and far between, but if you can score a position with the federal, state or some municipal governments, pensions do still exist. Does that mean people with government jobs don’t have to worry about their golden years? Maybe, but I believe even employees with pension jobs still need to invest for retirement.

How Do I Get A Pension Job?

Well, it’s fairly simple. You’ll need to become a teacher, police officer, sanitation worker, or one of the roughly 21 million government employees in the United States. You could also join the military and put in the the years to get a pension if you don’t get blown up or become discharged due to PTSD.

I think lots of people assume pension eligible jobs are low paying, but that’s not the case. I know doctors, judges, pharmacists, even surgeons who work for the government and make high salaries plus great benefits. If you’re willing to live in the Washington DC area, the doors are open wide for all types of government employment.

Pensions Mean I Won’t Have To Save For Retirement

Because Jim works in education, we know tons of teachers. Some of them are great with money and invest in stocks, small businesses, or real estate. Most of them don’t invest and are limited to putting in the time required to get a fully vested pension. I guess it works, but it’s also a bit risky.

Golden Handcuffs Anyone?

One huge problem with pension jobs is that they generally require 20+ years before workers are eligible for retirement benefits. I’m sure there are people who claim to love their job for that many years, but I’ve never met one. I have met lots of burnouts. You know the type. They show up for work, do the minimum required to get through the day, all the while bemoaning and complaining about how much they hate their jobs.

The problem is that once you have a certain number of years, you feel the need to finish out your sentence. I’ve talked to tons of people who were “just holding out for a few more years.”  You don’t see many who walk away, even though they are miserable every day.

When starting out, people feel they are ready to work forever, but from experience, 10 years is about all most of us can handle before we need a change. If you’ve put all your eggs in the pension basket, it’s hard to do anything different.

People Get Sick, Disabled, and Die

The unknown is a huge reason everyone should invest outside of a pension plan. According to the US Social Security Administation, twenty year olds have a one in four chance of becoming disabled before they retire. You can’t count on it not happening to you. Even with federal disability benefits, the future does not look bright if there are no outside investments.

Also, if you are the sole income for your family and you die, what happens to your pension? If you aren’t sure, it’s time to find out and make back up plans.

Couples Split Up

Hopefully no one gets married thinking they will end up divorced, but 50% of marriages end that way. I have a cousin who was married to a government employee. She did not save anything for her own retirement because he was eligible for a pension. You can probably see where this is heading, but they went through a nasty divorce where the judge granted my cousin half of her ex’s pension. Now they both have to keep working or try to support two households on a pension that would have been tight for just one.

The Government Could Go Broke

We’ve already seen this in places like Stockton, CA. While it’s doubtful that the federal or state government would abandon all pension plans, they certainly could change the rules or apply more taxes to pensions. I would hate to put my retirement hopes in the hands of any type of government.

What Can I Do To Make Sure I Retire With Enough Money?

I think the key to having the retirement you want is being diversified. We are planning on Jim’s pension as a part of our retirement income, but it’s not the only ship we’re sailing. It’s not even the main part of our planned income. We sort of view it like social security. Whatever we get will be icing on the cake to top off our own investments.

Even if you don’t make much money, it’s important to try and invest a percentage of your income toward retirement. The key is to do it from the beginning so you don’t miss it, but it’s never too late. If you can manage to cut expenses or make some extra money, every dollar invested today will compound for tomorrow.

  • Maxing out an IRA every year for 20 years at 6% would provide an additional $233,956 for retirement.
  • Investing in a non-retirement account, like those at Betterment, could provide a source of income if you decide to change careers or start your own business before you’ve come due for your pension.
  • Investing money in real estate could provide semi-passive income if you want to enjoy life more instead of work until you’re old and broken.
  • Spending every dollar you make because you plan on a pension means very little choice.

Also, whether you have a pension job or not, everyone needs disability insurance and anyone with dependents needs life insurance. It’s cheap if you’re fairly young and healthy.

I guess you might call me a glass half empty person because I will never assume that one vehicle will support retirement. I believe I’m a glass half full because I want to have all the bases covered in case of the unknown. That’s why we’re working so hard to invest, even with the potential of a pension.

Would you take a job for the pension? Do you think the government would ever stop paying pension benefits?





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  1. My sister is a teacher and she said that she is lucky to have chosen this field because it’s really a high-paying job here in our country. Actually she could retire as early as 45 because of her contribution to 401(k) and other benefits. But, I am gonna encourage her to invest like those at Betterment. Thanks for the advice Kim.

  2. I know a lot of my friends (and significant other) who are teachers still want to save for retirement in other ways. If I had a pension, I’d still save independently so I’d have plenty of money to life the lifestyle I want to when I’m ready to leave the workforce. I’d hate to get a pension and suddenly realize — whoops — this isn’t going to be enough.

    1. I think that happens more than you think. People assume their pensions will be more than they actually are. I think people also don’t fully realize how much insurance costs will be if they retire before Medicare age. That takes a large chunk of any income, especially a fixed one.

  3. The government is too leaky of a vessel for me to rely on for something as important as retirement savings. In our future projections, we don’t even consider social security as a source of income. Should we get any money, it will be a nice bonus, but we will be able to support ourselves otherwise. No one else cares as much about my financial success as me (oh and Mr. Maroon too ;)). Why on earth would I trust a large organization that is trying to serve so many masters, which are certainly not limited to just the beneficiaries of those pension plans?!

  4. This is the typical “Don’t put all your eggs in one basket”. Too many times, I’ve seen people relying on their pensions (Enron, anyone?) and then being totally screwed when the company went belly up. It’s a sad shame, but it’s part of life, and we have to protect ourselves by using the tips you’ve referenced to above. Great post, my friend.

  5. I’m a federal employee too so should get 1% of my average pay over 3-5 years for every year of service but also contribute the max to TSP. I can retire at 57 but can’t draw the pension until 62 without penalty so I need other forms of savings if I want to retire then. I will have 31 years at that point. I’m lucky I started when I was 27! I don’t think it will go away but diversification is always smart.

    1. Thanks for the comment. I think government pensions probably won’t ever go away, but you are certainly right about diversification.

  6. I have a client who is a New York teacher and despite the fact that she has a good pension, we are still saving for retirement. I think the last few years of watching State governments challenged with meeting pension obligations woke me up to the reality that there are no guarantees no matter how strong you feel about it and you can never be over prepared where retirement is concerned (at least in my mind).

    1. My mind also thinks you can never be overprepared. I plan for the worst but expect the best. I think if you do that, you’ll be prepared for whatever happens, good or bad.

    1. More than you need certainly sounds better than not quite enough. I’m trying to copy your retirement strategy!

  7. These are all excellent points. I am already feeling burned out and I’ve only been at my job 3 years. (Actually, it’s more that I don’t enjoy my work than true burnout, but the symptoms are similar.) I’m glad I’ve been saving for retirement since age 19.

  8. Diversification is definitely the big takeaway here. No one should depend on any one source for retirement, because who knows what can happen. I guess you could say the “simpler” days are gone but the world will leave you behind if you don’t change your investment habits.

  9. People with pensions should absolutely still invest for retirement. Pensions are a lovely perk but it something you have little control over. Sadly, there is a large group of people whose parents lived off of a pension and social security and they assume they can too, but times are also very different now. Not to mention that people also live longer too. As macabre as it may sound people weren’t living in retirement for 20+ years.

    1. How true! People retired and kicked the bucket a few years later. Pensions were never meant for people to live into their 90’s.

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