Friday, December 1, 2017
TCP1 or TCP2?
Any Thoughts about the UC and TCP1 Pension Plans and The Decision now? It’s been about 10 years since LLNL changed management and employees were given the choice between staying with a UC pension (TCP 2) or going to the “equivalent” TCP1 pension plan. It was a difficult choice for many. Seems now that depending on the point that one was in one’s career, either option could have been a good choice. Any thoughts on TCP1 / TCP2 looking back on the decision now with 20/20 hindsight?
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16 comments:
Thanks to TCP2 and lately Donald Trump, my retirement is looking pretty nice. I'm glad I didn't get suckered into going with TCP1, that is now costing people a lot of money out of every pay check.
TCP2 is a great deal, but you can find comparable employer 401K match in corporate America. TCP1 is an amazing deal, the Rolls-Royce of retirement plans. They do not make them like that anymore. Individual circumstances vary by age, salary band, and retirement age. By my crude estimate, those on TCP1 have increased their retirement portfolio by more than 25% to 50% compared with those on TCP2. Both LANL and LLNL TCP1 are very well funded. It is ironic that UC significantly worsened the terms of their retirement plan in 2013. Those on TCP1 fared better than UC employees. Most lab employees are not aware of this very important fact.
Obviously a pension is always better and the Lab's is a good one.
I went with TCP2 and have the benefit of not paying 7% after tax (10%) into the plan but also getting the 11.5% match. A 21.5% swing.
Tough choice for sure.
(Had to stop ...trouble with very creeky text editor..)
I retired in 2011 and promptly forgot about this stuff.
Now, getting about 100% of my last salary between TCP-1 and social security. Collected about 6 years so far, wife gets 1/2 when I breathe my last. Inflation adjusted. Well or overfunded funded. Good system.
Was a very long sometimes redundant career that perhaps could have accomplished more had I not opted mid career to forget the lure of greener pastures for the certainty of collecting my earned compensation UC deferred into the UCRS/TCP1 pension.
Very fortunate that UC had the foresight to set up this mandatory relatively inexpensive deferred compensation vehicle . (~ 12 -15% of wages deferred annually and well invested for 35'40 years will do this for anyone). I take credit for doing the maths to see the value.
Back On topic, too lazy to go back and work out the differing actual results of the two options,
Wait 'til you see how the market responds Monday morning to the Donald's threats to raise corporate taxes!
Thanks to TCP2 and lately Donald Trump, my retirement is looking pretty nice.
December 1, 2017 at 10:08 PM
Just wait for the next crash, that is when your TCP2 will take a bit hit. Why do companies not offer pensions anymore? Simple answer:it is more expensive. Who is paying for it? the workers. I always find it interesting though, that all the CEOs still get a pension:
https://www.washingtonpost.com/news/get-there/wp/2017/10/09/platinum-pensions-rich-ceos-arent-like-you-and-me-they-get-multimillion-dollar-pensions-even-when-theyre-forced-out-of-their-jobs/?utm_term=.574065ade6ec
And BTW, what exactly has Trump done so far to help the economy?
I sure am glad that I chose TCP1, and I think December 2, 2017 at 10:01 PM is also a happy camper.
Is a pension more expensive? For the same contributions?
For example the lab contributes 11.5% to a senior person in TCP-2 when the person contributes 6%. If a new pension plan did this, absent previous liabilities, if would be fully funded with a very attractive payout. The key is psying it current, not letting the company write a promissary note to pay later. It's more about long term management discipline, not contribution rates.
It is true pensions are percieved as more expensive. But it is a bad rap based on LAZY or delayed contributions, that is historical errors, rather than a poor system.
Pensions even at much lower max payout rates may have a place in the future.
Because I have a substantial TCP-1 pension, I was able to keep 60 -70% of other investments in equities, benefiting well from the 2008 - 2017 rebound. If personal investments were my primary pension source, I probsbly would have stayed with 30% in equities, losing about 1/2 of the 2011 -2017 appreciation, as a risk reuction as hedge against a large late in life market loss.
In my particular situation, I think my 85% pension in TCP-1 gives me more payout than the 75% payout that I would have frozen into UCRS TCP-2, plus 4 years of LLNS TCP-2 401k deferred compensation about, 45% of final salary, growing at the invested capital rate. Over the six years that have been retired, I would have likely exhausted the 401k account making up the difference in the two pension payouts.
It is not appropriate to generalize this retrospective. Each conclusion depends on the details of each particular situation.
The one huge advantage to TCP -2 is that some senior folks who would otherwise age out of TCP-1 benefits at 100% and been " forced" into an earlier retirement they did not want. I might still be working and double dipping ( salary and TCP-1) at 66 if I selected TCP -2. But I was tired,and ready for a much deserved break. No regrets.
I sincerely thank the UC financial wizards who setup UCRS early in the last
Is a pension more expensive? For the same contributions? For example the lab contributes 11.5% ....
December 4, 2017 at 8:00 PM
Doing a little google search about the typical employer contributions, I found
the following website: http://www.foxbusiness.com/features/2017/07/17/u-s-companies-have-new-401-k-fix-spend-more.html
where the average contribution is shown as 4.7%, less than half of what you quote. (BTW I stopped there, that was the first one which came up)
I certainly agree with your statement about companies having to pay in and not writing some promissory notes
It all depends on your situation. I chose TCP-2 and double dipped for 2 years and put $100,000 into my emergency fund. Parlayed my 11.5% matching funds over 8 years into a $500,000 nest egg in my 401k to supplement my TCP-2 retirement and still have my $1,500,000 in my 403b account. TCP-2 retirement plus $60,000 a year from investments = $120,000 a year with no debt. Life is sweet, thanks UC.
Played correctly, TCP2 can meet the retirement returns of TCP1 and has the strong added bonus that it is your money so you can pass anything left after your die as inheritance to your kids. Giving the declining wages and higher taxes that will be needed in the future, that's a mighty big plus to help out your family.
There is one small thing you guys are missing on TCP-2. It all hinges on the stock market. I knew someone who took a lump sum ($1.5M) just before the last stock market dip and he lost 80% of his money....overnight. He's still working today. I sleep better not have my eggs in the stock market. You can leave your money to your kids, if there is money there to leave.
Life is sweet, thanks UC.
December 7, 2017 at 6:47 AM
I wouldn't give too much accolades to UC, especially those managing the UC pension. It has an unfunded liability of $16B. That right $16,000,000,000. Folks living off the UC pension have blinders on. That pension is near collapse.
I wouldn't give too much accolades to UC, especially those managing the UC pension. It has an unfunded liability of $16B. That right $16,000,000,000. Folks living off the UC pension have blinders on. That pension is near collapse.
December 9, 2017 at 8:58 PM
Ah, no not even close. Your hate for UC is starting to distort reality for you. What is wrong with you?
The California population will keep on growing, and they will keep on adding UC campuses to accommodate, and the contributors to the UC pension will keep on multiplying, and all will be good!
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