Hey everyone, I'm enrolled in OPERs. OPERs has three independent retirement plans that you can contribute to. You can change plans exactly once in your life, and when you do change none of your previous service credits (years of work) transfer, and none of your contributions transfer either. They just stay in your old plan, and you start from zero in your new plan.
I was reviewing the different plans, and the pension plan seems like a total rip off. So much so that I'm sure I'm misunderstanding something. So I wanted some help trying to figure it out.
I make $40k and I intend to leave my job about 6 years from now.
Traditional Plan: This is what I'm currently enrolled in. I have 4.1 service credits and 9k contributed. I contribute a mandatory 10% of paycheck, pre-tax.
6 years from now, when I want to leave, I have two options: 1) I can refund the account (I will receive only MY contributions, multiplied by 1.33 for 5 service credits, or 1.66 for 10 service credits). I will not receive ANY employer contributions. 2) I can leave the account on deposit. In which case I will receive approximately $750 pension, starting at 67 years old.
Member-Directed Plan: If I were to switch to this plan, I would start with 0 contributed, and 0 service credits (all my old stuff stays in my traditional plan). For this plan, i would contribute 10% of my paycheck, my employer matches me 7.5%. I then take that 10% from me, 7.5% from my employer and invest directly. In addition, my employer will match ANOTHER 4% into a medical account (but I won't be able to vest into this, so I'm not counting this).
From what I understand, this would mean an immediate 75% return, and that's not counting any returns from actual investments that I do. When I go to leave this job 6 years from now, I will be fully vested in my employers contributions.
The way I see it, if I switch to the member-directed plan, not only will I get the 7.5% match from my employer, I will be able to rollover all of this money and be able to invest the rest of my life (compared to the pension plan, which would stay at a static amount for my entire life after I leave my job).
Can someone show me what I'm missing? It seems to be a question of what's better: $750 a month starting at 67 years old. or leaving my job with (17.5% of my salary x 6 years + $9k) available to invest for the rest of my life. And when I put it like this, the traditional pension plan seems really REALLY really REALLY bad.
Submitted May 26, 2019 at 11:44AM by rollingstonehill http://bit.ly/2X77ZO1
