Anonymously contributed:
It appears that for some current LLNL and LANL employees the elimination of merit salary increases for the next two years has altered the financial calculus, hastening the optimum time of retirement. This observation may apply to TCP1 folks who have been in the system for a long time, probably over 25 years.
As an TCP-1 employee approaches 60, the year- to-year pension benefit increases by the change in HAPC * change in age factor * change in YOS. After age 60, the change in age factor is zero, so only the change in YOS and change in HAPC apply.
Prior to 60, the change in age factor is 0.14% per year, which works out to a 6.6% in lifetime pension benefits in the year from age 59 to age 60.
At age 60, each year of service adds 2.5%. It does not increase after age 60.
Generally a 2% salary increase every year boost the HAPC by 2% each year.
So up to age 60, a TCP-1 beneficiary should see the monthly pension benefit increase by about 9% plus the % value of his/her average merit wage increase.
Under a wage freeze the HAPC still rises a little as it approaches the frozen wage, (it will be assumed to be zero)
After 60, the only increases that apply for delaying retirement are a YOS increase which will be 2.5% plus the average wage increase (which under a salary freeze is zero). Notice if the average merit increase is frozen at zero, the increase in pension benefit barely exceeds that which will be given by a yearly TCP-1 COLA for a retiree, which will average 1-2%, (though it is probably lower this year as inflation is very low).
Note importantly, that each month that a person delays retirement beyond age 60, results in one less lifetime monthly pension payment, which could be $5 -$10k per month. Though I haven’t done a general net present value calculation for the two alternatives, it is unlikely that a retiree can recover the lost income of a few months delay with an effective 0.5-1.0% increase in the subsequent pension payments over his remaining life.
So who might this general analysis apply to? It is a limited subset of the current TCP-1 population. Some financial advisors recommend that a retiree have 70% of past income that grows with COLA to provide a satisfactory retirement. If this is so, an TCP-1 retiree will need to have about 80% of HAPC, because there is about a 3% reduction between HAPC and current wages and an additional 5-8% hidden reduction to select the now mandatory 50% spousal continuance. 80% /2.5% per year = 32 years. If a person is part of social security, and at age 62 this provides 15% of former income, the breakeven drops to 26 years of service.
It may be worthwhile to examine your specific information to see what is the difference in pension for retirement ages, 58 though 62.
12 comments:
Perhaps the DOE's "wage freeze" is being used as a means of age discrimination to get older employees to leave the labs. If they laid these people off in mass, they would likely be charged with breaking employment law. Instead, they'll get them to leave on their own accord and they can be replaced with much cheaper employees who receive much lower benefits. It's been clear for some time that this is what DOE/NNSA really wants to see with their contract workforce.
Is the real purpose of this illegal "wage freeze" exercise an attempt at age discrimination, Dr. Chu? Shame on you!
Problem is how will they attract adequate replacements witha freeze?
Oh! I know how: there is a loophole, remember: new hires are get a high salary to begin with and will not acre if they are frozen for 5 years!
Impact of your freeze Mr Chu is long-term exodus of 30 and 40 somethings! You are saving nothing with this freeze!
Is it time to go?
Yes! even Anastasio has said enough and is leaving LANL as of June 2011.
So long and thanks for the fish!
good ridance!
It may not be time to "togo" but it is certainly time to go (or have a "togo" party).
I ran the net present value calculation today.
For those who would turn age 60 during the next 24 months, unless the two-year wage freeze is followed by two years each of 5% or better raises, it is likely that a TCP -1 beneficiary will receive more cash by age 82 by retiring at 60 than by delaying. The small increase in the future income stream does not offset the lesser number of total payments unto death. In the specific cases considered, the differences were lower by 3-7% by age 82 and 1-4% by age 88. (Did not consider spousal continuance)
It is hard to generalize this for other specific situations, but those who are now near age 60 in TCP-1 should run the numbers for their specific case. The wrong decision is could be worth a half a years salary.
Others, should do what we did in 1994, which is be pissed, take a few days for "mental health", reconsider the cost/benefits of collective bargaining, cuss the memory of b***h Hazel and get on with life's many alternatives, jaded by place.
hey jan 7th 10:34PM:
SO, you are saying retire at 60. You know there will be no 2013-14 5% back to back raises for anyone (except management).
After leaving this shell of what used to be a great institution run into the ground by incompetent, feckless management, I have received promotions, bonuses and my salary now exceeds that of my former division leader. LLNS is the pits and its leadership holds scientists and engineers in contempt. Do some research into moving to better job this year instead of complaining.
January 8, 2011 9:13 PM:
Bravo! You have accomplished what all should attempt. It is the only rational response to what the DOE/NNSA is doing to you. Get out of the crapper and avoid the next load coming down.
Job market is bad unless you have rare (and usually hot) skills!
LLNL does not have to try hard to keep us! We are captive.
It is all market-driven. Soon, when people start leaving in droves, then LLNL will react (scramble) by offering decent raises!
They wont do it unless they have to, do you understand!!!
The Washington Post had so many listings for engineers in California, that I got tired of reading after 11 pages....
this is hard to read, can you put it in 140 characters?
Obama
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