Pension plan versus 401k/403b

[TBH]

I'm thinking about changing jobs. I've always had 403b plans at work, but I'm thinking of going to work for the city, in which case I'd have a pension plan instead.

Now, everybody says if you can get a traditional pension, snap it up, because they're getting more rare.

But I'm a Gen Xer, and I can't see myself in this job for more than 2-3 years. You have to be in the program 5 years to be even partially vested, that is, to keep any of your employer's contributions. (I assume I can keep my own contributions no matter when I leave).

I don't know the details of the plan yet, but I'm loathe to give up my employer 403b contributions.

Anybody have thoughts about how pensions compare with 403bs and 401ks?

[sweeps]

Heh -- the last time this topic came up it became a war over 3-legged stools.

I'll just say this... I too thought that I would stay at my current job for just a couple years. That was almost 5 years ago. I'll be fully vested in my pension in a little over a month. How time flies.

[jmjj215]

Um, city pensions are also drastically underfunded. They just don't have to fess up to it as quickly as private sector companies do (not saying private sector does it fast, just faster). Either they'll fund the pensions by taking your money through taxes, or they'll cut the pensions, but the money will have to come from somewhere. There was an interesting article in "Time" about it a few months back. Some city officials line their pockets with fat payouts - no wonder it's underfunded.

[lrjohnson]

I work for a County and have a pension, CalPERS. I also have available to me a 457 plan, deferred compensation. From my limited knowledge, a 457 is similar in some respects to a 401k/403b, but is not required to be offered. You may want to see if your employer offers a 457 plan as an option.

[CRFSaver]

Some of the State Pension plans are in better shape then others. California's pensions (CAPLERS and CALSTRS) are actually quite well done. Illinois for example is in terrible shape. I do believe that GASB is going to require Municipal Pensions to start accruing future liabilities (something Illinois does not do while Californias do) which will put many of them in a world of hurt. It also depends if you are part of a large pension or something local. For example in California, not all the County's participate in Calpers but are considered 1937 counties and run their own pensions. While Stanislaus county is in good shape, San Diegos in terrible shape.

A 457 plan is very similar to 401K/401B plans but have certain advantages. 457 plans were designed for municipal employees. As most municipal employees retire long before 59 1/2 (think fireman and policeman) 457 plans allow for withdrawal before hitting that 59 1/2 mark. What I dont like about the 457 plans is that they are controlled by the insurance companies (Nationwide and VALIC) and have crap investment options with high cost funds and charge the participant an "administration fee" that can be as high as 40 basis points a year. They also use it to lock people into whole and universal life programs so they love it as well.

Just my two cents...

[sweeps]

Update: Money in 401(k)s Outstrips Pension Totals