Choosing between a defined benefit (pension) or define contribution plan?

[~bs]

What? His deferred comp is HIS MONEY that he is deducting out of his pay and putting in a plan, kinda like a 401k plan but no match. How can HIS MONEY be means tested? That would cause all kinds of an uproar with people. He doesn't have to deposit money in his deferred comp account, he could just take that money in his pay check, lots do. Are you thinking of something else?

They would face an extreme uphill battle in attempting to means test current/past employees, as the pension obligations for both parties is contractual. They can't just say "you withheld 8% of your income for 30 years, we mismanaged or under contributed, sorry, we can only pay you a fraction of what you put in and what we agreed to pay you". And as I mentioned before, bankruptcy by states is currently not on the table. If federal law changes to allow state bankruptcy, it would allow them to modify current agreements. This is one big danger of paying into a pension plan, but not also social security. You could end up like detroit workers that took severe cuts to pension, and didn't have social security to fall back on either.

What they can do is change the agreement for future employees, whether it be forcing them into a 401k style plan only or modifying the pension arrangement for employees that start after X/XX/20XX. Then the state can work to pay off the existing employees and retirees, freeing them of their obligation. Alternatively, they can offer buyouts to employees to terminate any contractual pension obligation. Say if a worker is 50 years old with 20 years of service and would make $2000/month of pension in retirement. An offer of $100,000 right now is made to relieve the state of the future obligation.

[~bs]

I'm thinking because he has a pension he will have to pay taxes on his SS income thereby reducing it??

There is a certain income thresh hold that once you go over you have to pay taxes on your SS income, off the top of my head I don't know that amount.

I believe it's on earned income, and the reason why retirees normally don't work in retirement for more than part time income. It's counterproductive when social security income is heavily taxed per dollar above the threshold.

[LivingAlmostLarge]

I hope my SS is taxed then I make quite a bit!

My vote is pension and then save into 457/401k. Well worth the risk especially you stay in job.

[Thrif-t]

They would face an extreme uphill battle in attempting to means test current/past employees, as the pension obligations for both parties is contractual. They can't just say "you withheld 8% of your income for 30 years, we mismanaged or under contributed, sorry, we can only pay you a fraction of what you put in and what we agreed to pay you". And as I mentioned before, bankruptcy by states is currently not on the table. If federal law changes to allow state bankruptcy, it would allow them to modify current agreements. This is one big danger of paying into a pension plan, but not also social security. You could end up like detroit workers that took severe cuts to pension, and didn't have social security to fall back on either.

What they can do is change the agreement for future employees, whether it be forcing them into a 401k style plan only or modifying the pension arrangement for employees that start after X/XX/20XX. Then the state can work to pay off the existing employees and retirees, freeing them of their obligation. Alternatively, they can offer buyouts to employees to terminate any contractual pension obligation. Say if a worker is 50 years old with 20 years of service and would make $2000/month of pension in retirement. An offer of $100,000 right now is made to relieve the state of the future obligation.

I can see that happening with his pension, in fact changes have already been enacted. But the deferred comp is a separate entity and the reason we got into it was for a safety net if anything happened ti the pension. But you're right anything can happen, we can only plan the best we can.I'm not worried about the deferred comp account I feel thats our money like if we took it and opened a mutual fund with it.

[bennkar]

I believe it's on earned income, and the reason why retirees normally don't work in retirement for more than part time income. It's counterproductive when social security income is heavily taxed per dollar above the threshold.

Yes, I was talking about how SSI gets taxed if your earned income (and a pension is considered deferred earned income) is above a certain amount, basically saying you don't need the money (i.e. means testing). Also, for an extra kicker, there are charts out there describing how much you get based on what you contribute. If you contribute less, you get a generous payout with SSI. If you contribute more, your marginal payout becomes less and less. After a certain point on contributions you get no more benefit. All this can be considered means testing as well.

Could this be made worse? Sure they could start looking at your savings as well, but face it, SSI is already means tested a lot.