Pensions 101: Are Pensions Worth It? w/ Grumpus Maximus

Mindy:
Hey there. As the BiggerPockets Podcast network grows, we’re always on the lookout for talented people who think they have what it takes to co-host a show. Is that you? Do you want to be just like me? Well, you can make a submission to our system at biggerpockets.com/talent so we can get to know you. That’s biggerpockets.com/talent. You’ll see a few questions and a place to submit a video reel. Again, that’s biggerpockets.com/talent if you’d like to lend your voice to the growing BiggerPockets Podcast network. Welcome to the BiggerPockets Money Podcast show number 259, where we interview Grumpus Maximus and talk about the oh so exciting topic of pensions.

Grumpus:
But the fact of the matter is there are still pension systems today that are not very well run and they don’t have enough money to meet all future obligations as the actuarial scientists have determined what those future obligations are.

Mindy:
Hello, hello, hello. My name is Mindy Jensen and joining me today at guest host is Joe Saul-Sehy, author of Stacked: Your Super-Serious Guide to Modern Money Management, and creator and co-host of the Stacking Benjamins podcast. Joe, thank you for having nothing better to do today.

Joe:
You kidding me? Hang out with you, Mindy, an opportunity like that? I threw everything aside. I of course have lots to do, but when you take Mindy Jensen plus pensions equals true love, I’m in.

Mindy:
Awesome. I’m so glad. Joe and I are here to make financial independence less scary, less just for somebody else to introduce you to every money story, because we truly believe financial freedom is attainable for everyone, no matter when or where you are starting.

Joe:
And whether you want to retire early and travel the world, go on to make big time investments in assets like real estate, or start your own business, or figure out your pension, we’ll help you reach your financial goals and get money out of the way so you can launch yourself towards that dream.

Mindy:
Joe, I have been wanting to get Grumpus Maximus on the show for a long time to talk about pensions because as is very evident in the next five minutes or so, I don’t really know anything about them, but I know that they exist. I know that people have to kind navigate them as they’re considering their financial independence and their retirement in general. And Grumpus Maximus is I’m going to go with the leading authority on all things pensions.

Joe:
He certainly had written the book on it, right? Not even so to speak, he literally has written the book on it. But also even though pensions, Mindy, are this thing that some of us consider archaic stuff, the average person stays in a job for not that long anymore. I think the labor department said something like 4.5 years. So there’s a chance that you’re going to stumble upon in your job search a job that has a pension and pensions, well here have lots of math involved. There’s lots of things around vesting and about how much you get, depending on how long you’re there. So clearly knowing how a pension works whether you have one today or not is going to be something that’ll be great to have in your wheelhouse.

Mindy:
I agree, Joe. I think that right now, I don’t have a pension, but I could potentially get a job with a pension. Maybe BiggerPockets is going to listen to this show and say, “We should have a pension.” They’re not going to. But it’s nice to understand this and I would like to say if you are listening to this show and you’re like, “Oh, I don’t have a pension, maybe I don’t need to listen.” First of all, you do need to listen because Joe Saul-Sehy is here. Grumpus Maximus is here. But if this is not something that pertains to you, but you know somebody who could benefit from this information, please share this episode with them because Grumpus comes in and shares just an absolute boatload of information in fairly easy to understand terms with regards to how a pension works and things to consider when you are considering separating from your job that has a pension.

Joe:
I’ve known Grumpus online for a long time so I’m excited to meet him finally. And I know that when Grumpus talks, people listen so I can’t wait to listen.

Mindy:
He’s like [Iya Platon 00:04:19]. Grumpus Maximus, welcome to the BiggerPockets Money Podcast. I’m so excited to talk to you today, because I don’t know anything about pensions.

Grumpus:
Thank you, Mindy. I’m excited too. I got my excited face on.

Joe:
I was wondering how that was different than your normal face, Grumpus.

Grumpus:
Yep. It’s the same. I have a coffee mug that has all my different emotions and it’s all the same picture that my wife gave me.

Joe:
Which is good by the way when you’re evaluating pensions, you got to have that same face on because, I mean, I’m sure you’re going to talk about it, but don’t fall in love with it, right?

Grumpus:
Don’t fall in love with it and don’t fall asleep by trying to analyze it either so it’s good to be able to mask the fact that I fell asleep.

Mindy:
Yeah. Too late because sometimes reading all that paperwork is boring. You know what? I said sometimes it’s actually kind of most of the time reading all that paperwork is boring, but not reading all that paperwork can cost you a lot in terms of money, in terms of lifestyle, in terms of time. So something you said to me when I first reached out to you, you said not every defined benefit pension is worth it or worth staying for. Isn’t the pension the best thing ever?

Grumpus:
It can be. It depends on the person. So a defined benefit pension is the pension you get paid after you’ve worked at a place an employer for so long. So that might be government work these days or it might be one of the few private industry jobs that still have a defined benefit pension. In the US, there’s only about 8% of them that still offer one. But on the public side, at state local government level, it’s still fairly common. So you work at a place for so long, you earn a certain amount of money. And then what happens at the end of that career is that they run that through typically some kind of calculation to determine how much you’re going to get paid in retirement. So that’s what a defined benefit pension is.
And every pension is different, every pension system is different, almost by design that way because they’re designed to keep people at jobs to create worker retention. So depending om who’s offering the pension and what issues they’re trying to overcome to keep people out of job, depends on how generous the pension and that’s where really where you get into the is it worth it? The generosity of a pension and also the pension safety helps determine whether or not staying for a pension is worth it because not everybody wants to stay the 20, 30, 40 years that it takes to qualify for a defined benefit pension.

Mindy:
Okay. So I have a question from an I don’t have a pension position, if I am working for a job and they have a pension option, is that always a mandatory contribution?

Grumpus:
Employer by employer.

Mindy:
Okay.

Grumpus:
So this is one of those things where again, every pension is a little bit different from each other. So some employers have it mandatory like many teaching jobs because they’re state or local government jobs, it’s mandatory. So you would contribute a certain percentage of your pension. I’m sorry, a certain percentage of your paycheck each month into that pension system. Others is optional. Others don’t require any contribution at all. So for me, for instance, I’m retired US military, we don’t set aside any money out of our paycheck. The government just does that automatically. So it’s part of the reduced pay you get compared to the private sector.

Mindy:
Okay. And if it is mandatory, how do I get that money if I haven’t worked there for 20 years?

Grumpus:
So again, pension by pension, but many pensions let you cash out if you want to leave the job. So they’ll at least cash out what you provided or put in as contributions, depending on how long you’ve been there. Some may actually allow you to cash out the full value. Some pensions don’t run a cash value though. So that again, pension by pension, the newer ones actually run a cash value. The older ones do not run cash value. So they may let you take it when you leave and they may not.

Joe:
That’s a question that I have because as you know, a big decision for a lot of people when they take their pension, if they will let them have it as a lump sum is whether I take it as a lump sum or I take it in monthly payments that last my guaranteed in lifetime and maybe sometimes the lifetime of people around me, a spouse or somebody. You mentioned the word safety, right? And obviously whether I take that guaranteed lifetime income or not, I would imagine has a lot to do with safety. How do I determine whether my pension is safe and why wouldn’t my pension be safe? Is a pension, I’m assuming based on what you said about safety, my pension might not be guaranteed?

Grumpus:
Correct. In an ideal world, they are supposed to be super safe, but we don’t live in an ideal world. Many pension systems are not well managed or well run, both on the government side and the private sector side. And there are plenty of horror stories, especially from the 1960s and ’70s of companies going bankrupt and their pension fund either being raided or going bankrupt as well, and therefore not being able to pay out. Now that has subsided because the US government put certain rules and laws into action to counteract that. But the fact of the matter is there are still pension systems today that are not very well run and they don’t have enough money to meet all future obligations as the actuarial scientists have determined what those future obligations are. So there are states like Illinois, it is awful well-known.
Kentucky’s another one, well-known for their public state run pensions or an awful fiscal shape. They have around 30% of the funds they need to meet all future obligations. So when you come to determine a pension safety, you have to look at how well it’s funded and that’s the big thing. The society of actuarialists actually recommend you look at the trend. So is it on a upward trend of having more and more funds each year? Or is it on a downward trend or has it gone across and just kind of maintained its funding percentage over the years?

Joe:
Does this have to be public record? I mean, am I allowed to get the information?

Grumpus:
Yes, correct. And if nothing else, most of that information’s online these days. But if nothing else, if you are a member of a pension system, you should be getting an annual mailing about the health of your pension system. And from there, you can start to determine how well it’s funded. Most of the state and local government-run pension systems exist within a database that Boston College runs. It’s called the Public Pension Database, the PPD. So if you’re in a public pension system in the US, there’s a good chance it’s all that information is stored on that database. But if you’re in a private pension system, then you’re going to have to do some extra legwork and research then.

Mindy:
Okay. So what can I do as let’s say a teacher in Illinois where you just said that my pension isn’t fully funded? And this is actually kind of a personal question because my sister is a teacher in Illinois, how does she protect herself? She has 20 years in but she’s still working as well. Can she cash out before she ends work?

Grumpus:
Probably not unless she wanted to leave. And again, I don’t know which exact Illinois pension system she is in, each one has kind of different rules. But some do allow you to take a lump sum if you want to leave and go elsewhere. And that’s really one of the only ways you can get the money that you feel you are owed. Now that’s going to be highly reduced, because it’s going to be a present day value for what would’ve been a pension in the future. So therefore they’re going to assume, “Hey, if you cash out, you’re going to take that money, you’re going to invest it and earn up, grow it to the amount you need to pay yourself in the future the same level that you would get for working 10 years, 20 years, whatever it is when you decide to leave and or retire.”
That’s the other thing. Many pension systems just allow you to take it as lump sum when you retire. And some people prefer to do that because maybe they either don’t trust the system to be there or the pension plan to be there. Or they want to leave a legacy beyond just their immediate family, which all pension systems in the US have to at least provide that option. You can leave it to a spouse or underage children if you have children under the age of 18. So the lump sum is the best way to get the money out if you don’t believe the pension system is safe, the pension plan is safe.
It’s not necessarily offered at every time and every level you go along the way. So sometimes there isn’t a way to get it out unfortunately. Now, even in a state like Illinois with badly managed pensions, they have state worker laws and state contract laws that protect the pensions. In fact, it’s written into the state constitution of Illinois that the pension state system is protected. So really in reality, the question that becomes well, how much does your sister need to worry if ultimately the Illinois’s taxpayers are on the hook? Maybe that’s more of a taxpayer issue and a political issue than it is a pension safety issue. But that’s just one more complexity to add to this process you have to go to determine if staying for your pension at a job is worth it.

Joe:
It’s interesting. I want to get a little nerdy on Mindy’s question, which at the next level that I’m thinking, Grumpus, that, I mean, if you don’t think that your pension’s safe, what I hear you basically saying is who cares about the calculation? You probably want to take the lump sum just to make sure that you get something out of it, right? Forget about the monthly payments.

Grumpus:
Yeah. Yeah, in my book, that’s the very first step of analyzing your pension I teach people is analyzing pension safety because if you don’t think your pension is safe, then either you’re going to leave if you’re a caught on this mid career crisis where you don’t know if you want to stay or you want to leave. You leave because you don’t believe the pension’s going to be there or at the end of your career, if you don’t believe the pension plan is going to last, then you take that lump sum if it’s on offer. [crosstalk 00:15:22] Now that’s not a requirement.

Joe:
Yeah. I think we just made the math easy for some people like, okay, if I get a lump sum, I will take it. But for the other people, when you’re calculating, because you talked about, if you take the lump sum, you’re going to get a present value number of what those payments would equal over what actuarily I’m sure is your lifetime. But I’m thinking there’s got to be some multiplier on that. Right? There’s got to be some assumption of what that money they think is that money would earn if it were invested.

Grumpus:
Correct.

Joe:
Versus today. Is that a set number for everybody? Or is that just a number that varies from pension to pension that I’ll have to ask about?

Grumpus:
So, again, it varies. There are federal rules about how high of an assumed return you can use, but they are very generous towards the employer offering the lump sum, meaning it makes the lump sum smaller and smaller.

Joe:
I was going to say that for everybody listening, what that means by generous, what Grumpus I think means is they can’t say 15% you were going to get on your money so they offer you only $4 instead of $400,000, right?

Grumpus:
Right. Right. But from my research and my understanding, they get to use a very generous rate of return when assuming those lump sum values. And I don’t know if you follow the reports, there’s annual reports that come out on how well just the individual investor does over time and they’re nowhere near those assumptions.

Joe:
Yeah.

Mindy:
Of course, they’re not. Okay. So let’s say I’m listening to this episode because I’m excited because I know I have a pension and this is going to be the best thing ever. And I just heard you tell me that maybe this isn’t going to be so great and I don’t have a public job. I have one of those private employers, one of those 8% that still offers a pension. And I never read any of the stuff that they sent me in the mail because I have a pension and everything’s great because that’s what they sold me. Where do I go to find out about this information? Is this an HR question? I guess I would have to go to HR and ask them, bobspension.com. What’s the name of the pension company and then go research that? Do you just type it in Google?

Joe:
And by the way, before you answer that, Grumpus, if the name of your pension company is bobspension.com, you probably want out.

Mindy:
Yeah.

Grumpus:
That might be an indicator. I will put that in the next version of my book as an indicator to look for poorly run pension system.

Joe:
V2, right?

Grumpus:
So Mindy, yes. You go to HR, especially if you’re in a private firm that offers them. Now the good news is you’re still in a private firm that still offers them. That means the firm’s probably been offering it for some time and they know what they’re doing because all the other ones have gotten out of the business of providing them. But a pension is a human resource tool. It is a tool that employers use for retention. So therefore it is run through the benefits portion of employment which typically runs through HR. Right?
So a visit to HR is always a good first step if you have more questions about a pension. There will maybe also pension reps within the employer. So those would be workers who have volunteered to sit though the pension meetings and try and ensure that the pension system is being well run and the employee’s best interests are being looked after. So those might be other people you might want to approach if you have questions about your pension, but ultimately it is probably going to come down to the individual employee needs to do their own research. Hopefully they’ve been pointed the way towards where those resources are so they can start going through those resources.

Joe:
You mentioned the word generous earlier about whether a pension’s worth it or not, it depends on how generous companies are. What are some of the metrics that help me know whether a company’s being generous with a pension or if they’re being stingy?

Grumpus:
So that’s a great question because up to this point, we made it sound like pensions are all bad and they’re not. There are some great things about pensions and the guaranteed income in retirement is one of them. But some pensions also have other benefits out of loan, they have a cost of living adjustment. So in a year like this year where you have 5% annual inflation, then your pension next year is going to adjust upwards based off inflation. So like my military pension, we found out just recently, I think we’re getting 4.9 or 5.0 increase in our pensions next year because of inflation. Right? So a COLA is one extremely generous benefit that would mark a pension that’s more worth it than others. Healthcare is another one. Now not all healthcare is provided through the pension system, but some are, and then many are also packaged into the greater defined benefits packaged that you get at the end of your career.

Joe:
But just as an aside, Grumpus, to stop right there for just a second, because I think this is key. If you take it as a lump sum that also for some of these companies might mean you forfeit that health insurance that you’re talking about.

Grumpus:
Yes, correct. Correct. Or if you leave early, that’s the other one. Right? So, determining if you’re a midway through a career and you don’t know if you have the stamina, the ability or even the heart to want to do this for the next 10, 20, 15 years, whatever it is, leaving that healthcare on the table, it is potentially costly. And in fact, I just in April finished my master’s thesis for which I ran a pension survey. Yeah. Yeah. I’m a total nerd now. Right? Total pension nerd now. But in my survey, so my survey asked, “Hey, for those who went through a stay or go decision somewhere in their pensionable career, what were the added features within your pension system that made you think the most about staying?”
Healthcare was the number one added feature and it was number one by more than 10 percentage points over number two and three. So healthcare is always on the top of the list for American US based pensioners or pensionable workers where it may not be so much in other countries like Canada that has a nationalized healthcare system. But definitely if you’re in a US pension and healthcare is tied to your us pension, that is a more generous pension than ones that don’t have healthcare tied to it.

Mindy:
Yeah. For sure. That’s one of the number one questions that I get. Usually, the show is focused on the journey of an early retiree and that’s one of the number one questions is what do I do for healthcare in the US once I’m retired because your healthcare is tied to your job, which is so stupid.

Grumpus:
Yeah, absolutely.

Mindy:
What are some other things? You said healthcare is number one, 10% over numbers two and three. What else? What other options are there?

Grumpus:
There’s the immediate payout. So many pension systems will not pay you until you reach a certain age. Some pension systems will pay you upon reaching a certain tenure or reaching a combination of tenure and age, often known as the 80 rule of four for the pension systems that use that. So it’s a combination of tenure plus your age, if they add up to over 80, or 80 or over, then you can take your pension right away. But for instance, again, US military, or even the federal government, sometimes if you… Like I hit 20 years and retired, my pension started the next month. So that’s an immediate pay and it pays me for the rest of my life. So therefore that is far more valuable of a pension than a pension where I would have to wait till 65 to start collecting the money because A, I’m just going to get more payments over time.
And B, that just provides me a greater flexibility within retirement instead of having to rely on my investments or other things to get me through to the point where the pension starts paying. So immediate payout was the number two pension feature that made people consider staying the most from my analysis. I’ve already mentioned COLA, again, a very costly but generous feature to provide for employers. It’s costly for them because they keep having to pay more and more money each year because inflation typically, always goes up. Let me think of some other ones. I’m trying to remember number three. I’m blanking now, this is great. The pension expert.
Oh, so a generous multiplier would be another one. So I mentioned the formula earlier. So typically, it’s the number of years you worked multiplied by a calculation of your final salary. That final salary may have been your last three years averaged, your last five years averaged, your last 10 years averaged. And then all of that is then again multiplied by what they call a multiplier, which is a percentage. So in my case, the multiplier was 2.5. So for every year you got 2.5% and then that add when you retire all that’s calculated out and your pension, what you get paid is that value. So for instance, I did 20 years, you multiply that by 2.5, you get 50%, right? So I got 50% of my final three years of salary average together.

Joe:
And obviously for most people this last three year is way better than five or seven or whatever it might be.

Grumpus:
Correct. So that’s called backloading, right? So when the pension is tied to final salary, again, another way to incentivize people to stay in a job longer is the promise of more money in retirement by having a higher salary when you retire. Well, not all multipliers are as high as 2.5, some are much lower. So therefore you have to work much longer in order to earn a decent percentage for payment in retirement.

Joe:
I’m wondering if most of those more backloaded pensions also have a healthier vesting schedule, meaning they make it harder to get money in the early years because I think the more they backload it, the harder it would be for the people managing the pension fund money to make enough to make sure that it continues well.

Grumpus:
True. So I think on the public side, most pensions have to vest within five years. You can either partial vest up to 10, I think as well. But after vesting, that means you’re going to get some money in retirement. You won’t necessarily to get a lot because you only worked five years, you vested and then you quit and went to another job. A, you shouldn’t expect a large pay out of that. And B, inflation’s going to be working against you until you actually reach the age where you can take that pension. Right? So, backloading has works in multiple ways in order to entice people to stay longer and longer and longer at the pension. It’s not only the salary issue, it’s how close you get to the payout year when you can actually start drawing your pension.

Joe:
But on a private side, can that be whatever the hell they want it to be?

Grumpus:
Yeah. It can be. As long as they meet the very few federal requirements again, like offering survivorship, there isn’t much governing how little or how much those percentage multipliers can be.

Mindy:
Okay. You just said survivorship and that leads to my next question before you said this pays me for the rest of my life. So what happens when you pass but your spouse is still living or you pass and you still have living children? Is that what you mean by survivorship? And do they continue? And is there a point where let’s say you pass, God forbid, very soon and your spouse lives to be 150 years old. Is there a point where the money runs out or the payout runs out?

Grumpus:
Yes, there could be. So again, every pension system’s a little bit different, but a lot of the especially state or local public pension funds have the slew of options for payouts, right? Anywhere from total lump sum and cashing it all out to partial lump sum and then continuing for 20 years on up and up. And then when you start throwing survivorship on top of it, they also offer different options. But kind of generically, if, for instance, in the US federal system, you elect survivorship and then that survivorship takes over, you elect at a certain percentage. So for us military, the highest percentage we can elect to pass on to our spouses is 55% of our pension payments. So, the thing is when you elect survivorship, that means you are electing a smaller amount while you are still alive because they’re skimming some off the top as an insurance payment, right? Because essentially what you’re signing up for is insurance to be able to transfer that value over to your spouse or your underage children.

Joe:
Which brings up a good question, which is let’s say that you lose 10% of your pension to have survivorship. I’m just making these numbers up, Grumpus, so just stick with me, even if they… Let’s say we give up 10% of my full payout so that my spouse can also have some coverage, but then she dies first. I know on some pensions it pops up, but let’s say that it doesn’t, meaning that I could go back to my full amount but on the vast majority, they don’t.
Instead of giving that up for the insurance, does it make sense to actually look at my own insurance policy? Where maybe I have that for X amount of time, and then let’s say I get to the age that I got enough money and I don’t even need it anymore, I just dump the insurance. And of course, because we’re talking long term, this has to be a permanent policy. I can’t imagine trying to do this with a term policy. So if we do this with a permanent policy, I take it out, I take whatever cash value there is, and we just live on the whole thing.

Grumpus:
Yeah. So that is always the option is that you could go… For survivorship specifically, you could go and seek a private insurance policy to cover the difference. Now it gets a little bit complicated if your pension has a COLA and that COLA is transferred in the survivorship. So therefore, it’s inflation protected because it’s not a lot of life insurance policies are inflation protected and you’re going to pay more for an inflation protected life insurance policy.

Joe:
And [crosstalk 00:30:42] I also just thought of the health insurance by the way as well.

Grumpus:
Yeah, yeah. True. Right. So there’s the other thing now. Now healthcare, if it’s provided to the family and the pensioner dies, often is the family is allowed to continue for a certain length of time in the healthcare and for the spouse that may be for the rest of their life as long as they continue to pay whatever insurance premiums are required. But that’s not written in law anywhere. So again, that could be pension system the pension system. That’s something you need to ask and research. But going back to kind of the larger question, could I just take a lump sum and buy an insurance annuity instead of relying on the pension annuity? Certainly you could. There isn’t a lot of research on it, but there has been some, and I can’t remember which branch of the federal government tried to figure it out about 10 years ago. And it turned out that the insurance annuity was 1.5 times more costly than what it was to just stick within your pension system if you wanted to take the pension annuity.

Joe:
Wait, I wasn’t even talking about taking the whole thing as a lump sum. I was just talking about taking that difference between the survivorship number. Let’s say it’s a thousand dollars and it’s $900 if I take the survivorship. I take that a hundred dollars instead I take that a hundred dollars and which I would’ve lost anyway, and I buy my own life insurance with it. Right? Which will then cover it.

Grumpus:
Yeah. You could do that. You could do that. Again, you’re going to have to run the calculations on whether or not that’s cost effective.

Joe:
And I think to your point, the healthcare kills it immediately for me, I don’t know that… I mean, how do I justify getting rid of healthcare for my spouse?

Grumpus:
Yeah. That’s if it’s tied to transferring the pension over through survivorship. If it’s not, so for instance, again, the military system, just because I did 20 years, my spouse is now eligible as a spouse of retiree for life as long as we don’t get divorced or she knocks me off and she would get it. I don’t have Grumpus Maximus as a moniker for no reason at all. Right? It is kind of tough to live with me from time to time.

Mindy:
Do pensions typically have an end date? Let’s say that in this situation I shared where your wife lives to be 150, let’s say you live to be 150. You said they pay you for the rest of your life. Are they just assuming that the end of your life is 80 whatever the average is or will they continue on and on and on?

Grumpus:
Generically speaking, they’re going to continue on and on and on. So that is not true of every pension system. Again, going back to the types of pensions that offer a menu of different payout options, some of those options are timed. So, they’ll pay you for 20 years or they’ll pay you for 30 years. The advantage is you’re going to get more each payment than you would otherwise, right? So if you just let it run till the end of your life, they’re just going to use the actuarial assumptions of you being a white female, certain age, on average you’re going to live this length of time. And then obviously some people are going to live longer and some people are going to live shorter and just like insurance works, you kind of average out the group and that’s how you continue to have money in the pot to be able to pay out because some people die early, some people die late, right? But again, it goes back to the individual pension system and what they offer is payout options over time.

Mindy:
Okay. So what I keep hearing you say, and I’m not trying to say… You just keep saying it depends, it depends, but it really does depend and it’s all specific to the pension that you’re part of. So what I’m hearing you suggest to all of our listeners who have pensions is this is a research opportunity. And if you have a pension and you want to be able to take any part of that pension as a payout, as a lump sum, whatever, you need to do your research, you need to dive into your pension specifics and talk to HR, talk to your pension reps and get all the information that you need about your specific plan. But the health insurance thing is that’s huge [crosstalk 00:35:15].

Joe:
Well, and also Mindy to add on to what you’re saying, what I’m hearing too from Grumpus is that, I mean, these are irrevocable decisions. It’s not like whether I’m choosing 6% or 8% to go into my 401(k) and I can go back and change it tomorrow. When you say need to do your research, this is a you got one shot. So this isn’t something you pick up the day before or 15 minutes before and just casually check a box. There’s some decent math here.

Grumpus:
There is. And I don’t want people to be put off or intimidated by it. I’ve tried to make it simple on my website because I’m not the smartest cookie, but other people are smarter than me so I’ve provided a bunch of different ways to try and help people do all that research and figure out all their various options, especially if they’re considered leaving the career, the pensionable career behind for greener pastures, but also as they prepare for retirement as well because you’re right, Joe, there is no undoing a survivorship election and the risk of getting survivorship wrong is that you die early and then your dependents don’t have enough money in what would’ve been retirement. And maybe a spouse has to return to work or a teenage offspring son or daughter to go and get a job just to help support the family or something like that.
That would be the worst situation you could leave behind. And again, you’re right. It’s you make this decision once and you live with the consequences. So again and Mindy, I am saying you have to do the research. Some pension systems are a lot easier to research than others, like the federal government. The FERS system is fairly well known. I mean, there are a lot of people in that system and you don’t have to worry about pension safety with FERS, unless you really think the US federal government is just going to stop paying people at some point in the future. If that happens, I think the world is going to have larger economic problems than your pension get being paid or not. But for the other person, for the non-federal employee in the US who earns a pension, there is going to be some research involved and some educational guesswork as to what you think the future entails, which could be anything from the inflation rates when you retire, what age you think you’re going to die or how likely it is that your pension system will pay out the amount that’s promised.
Now Mindy, I want to circle back. So healthcare is huge for people who are trying to FIRE. So people who are trying to reach financial independence and retire early, healthcare is huge in the US because oftentimes they don’t have another way to pay for it for those intervening years. So you assume the standard retirement age is 65. Well, Medicare kicks in right around that time, right? So if you have a pension and even if it doesn’t have healthcare, but you plan to retire at 65, healthcare is going to be used… You’re going to have the healthcare through Medicare. But if you’re retiring at 55 or 45 and the healthcare doesn’t kick in until the pension payments start at 60, 62 or 65, healthcare is huge because your other option is you go and fund it yourself probably.
This is a conundrum I see a lot of FERS. So again, back to the US federal government pension system, there are very few loopholes to earn your medical insurance early. So it is very much tied up into reaching a certain age in a certain amount of time that you work for the US federal government. And so if you try and retire at 45 or 55, and FERS healthcare doesn’t kick in until much later down the line, then trying to figure out what your other options are huge. And I’m sure you’ve talked about it on your podcast before just trying to plan for healthcare and retirement, if you don’t know what the costs are going to be from year to year, is extremely hard.

Mindy:
Yeah. You don’t even know what the costs are going to be from year to year now. How can you possibly plan for potential inflation? Potential inflation, like there’s not going to be a bunch of inflation coming our way.

Grumpus:
Right.

Mindy:
All the money that we’ve been [riving 00:39:45]. Potential inflation and potential increases. I’d really love to see the healthcare system overhauled, but I’ve wanted to see the healthcare system overhauled since 1986 when that HMO made it so hard to go and see the doctor and it hasn’t gotten any better. I can’t imagine trying to plan for that right now. I just keep working because then I can-

Grumpus:
Yeah. And so having pension subsidized healthcare helps you know what the costs are going to be or helps you kind of plan for a range of costs well into the future because depending on again, how generous the pension system is, they may be covering a large amount of those costs as far as deductibles and stuff like that go too. So, not to brag, not to make people jealous, but again, the US military, you get access to Tricare for the rest of your life. Well, the premiums I pay right now as a retiree for a family of four are a small percentage of what most people who are using the open market for health insurance pay for a family of four. It’s a little bit more than what I paid for when I was active duty, but not much. I mean, it’s very, very easy to plan for those costs.

Joe:
If somebody’s hung out with us this far Grumpus and-

Grumpus:
And not asleep.

Joe:
No. Well, no.

Grumpus:
They’re not drooling on their keyboard at this point.

Joe:
Actually. Maybe it’s that I’m a nerd about this stuff, but I’ve loved every minute of this. But if they followed us so far and they don’t have a pension, right? Yu say things and people that don’t have a pension might be drooling over this lifetime guaranteed income. That’s a pretty kick-ass notion for people. Is it worth it for somebody without a pension to go chase this idea themself to figure out a way to get it on their own?

Grumpus:
Another great question, Joe. And I have academic research that can back up this question. So it turns out that a large percentage of people who work in pensionable jobs were attracted by the long term guarantees of both employment and retirement income.

Joe:
I can imagine. Yeah.

Grumpus:
Academic researchers have termed a coin for those people. They’re called stayers because they’re going to find that long term employment and they’re going to stay. And the ideal lifetime income on the backside in the form of a pension is just yet another reason that would make them stay. Now, that’s not everybody who works in a pensionable job, but it is a large percentage. So what that tells you is there’s a certain type of worker or employee out there that is attracted to this type of incentive. And therefore they would seek out those jobs because it’s going to help them…
The job itself probably is going to help them achieve some standard of living that they want to live, typically that’s middle class. And therefore the standard in retirement is going to stay fairly consistent as well. Now that doesn’t necessarily match the bulk of the American workforce today. And there are the trade offs for taking a job that has a pension. You almost guaranteed are electing a job that is going to pay you less in your employment years in order to get that incentive, that pension on the backside in your retirement years. So, you have to be willing to make that trade off as an employee and not everybody is willing. And then a lot of people just aren’t willing to let other people manage their financial future. So again, it kind of goes back to what your personality is, but certainly there are people who will be salivating over the idea of a pension and all the safety and security that that provides in retirement.

Joe:
Boy, it seems like those people you’re talking about those stayers, Grumpus, are the more conservative investors, right? They kind of, I would imagine, have a conservative lifestyle. I feel better if I can have the same job, it gives me lifetime income, gives me all these things, which leads me to ask that thing because whenever we talk about lifetime guaranteed income and we say pension, people go, “Oh, that’s great.” But then you say the other word, the nasty A word, you say annuity, people are like, “Nope, forget it. Not going to do it.” Is there such a thing as a good annuity? Is there such a thing?

Grumpus:
Well, I think within the modern day pension plans, they have started providing more flexibility for people like that. Right? So there are these hybrid pensions that allow you kind of to direct… You have to contribute, but then you can direct your contributions to how they’re invested, kind of more 401(k) style. Right?

Joe:
Oh, wow. Okay.

Grumpus:
Now that isn’t widespread.

Joe:
Yeah.

Grumpus:
Those are newer within from roughly 2000 onwards being offered a little bit more and more each year within the US because A, they’re cheaper for employers to provide and B, they’re more flexible and certain employees like them more. But going back to your question about, is there a good annuity? Well, I certainly think there is a great reason, or I would rate the annuity I receive every month from the US Department of Defense as a good annuity.
I mean, even though I struggled towards the end of my career with staying and having health issues and stuff like that, I certainly now that I’m two years into retirement and I get that steady paycheck month after month, no matter what happens, despite COVID, despite the stock market spiking and crashing, that money just keeps coming in no matter what, there’s a lot of goodness to that. I mean, that makes life planning a lot easier, even in a FIRE lifestyle than many others who are just relying on their investments would have. So yes, there is some goodness to an annuity. You, as the individuals, just have to determine if you know the amount of life you give up in order to work in a pensionable career is worth that guaranteed annuity on the back end.

Joe:
Which by the way, Grumpus, is specifically my soapbox, Mindy, which is the annuity company is effing this up. There are people that want to buy them, but the way that annuities get sold, the way that they’re loaded with all these unnecessary fees so people… So the annuity company rolls in. It doesn’t have to be like that. It doesn’t have to be like that. There are plenty of people, like Grumpus is talking about, that would buy the thing if the annuity companies would just do the right thing. Not enough annuity companies out there that make this not a minefield and I don’t know. If anybody in the financial industry listening or can change something, please God do it.

Grumpus:
Again, did some academic research from a masters and I came across what economists call the annuity puzzle. And the puzzle is why more people don’t buy immediate annuities because from an economic standpoint, assuming the annuity is safe, which economists make a lot of us assumptions. But assuming the annuity is with a company that is a reputable company and everything like that, the odds are, it’s a much better for you to buy an annuity than try and invest your own money. But the puzzle is more people don’t take it up. So, I mean, they we’re talking like Nobel award winning economists have tried to study this over time.

Joe:
I went to a symposium that was a bunch of industry experts and a few of us from the media at MIT. And MIT’s been working on to your point, Grumpus, this exact issue. And the reason that most of us came up with that annuities are sold and not purchased to your point is because the annuity industry has done it to themself. They have totally done it. And by all the stuff like everybody was sitting in a circle and they were talking just based on what some of these company officials were talking about, they don’t freaking get it. They don’t get how distrusted they are by the average person. I feel like if they built it on a more trustful platform, all the math works out to your point. They should be purchased. They should be.

Mindy:
Okay. So this is shocking to me that Joe Saul-Sehy, former financial planner, would say an annuity is not an automatic no way why would you ever. I consider myself [crosstalk 00:48:18].

Joe:
Oh, they’re horrible.

Mindy:
So I consider myself to be fairly well versed in money, and I’m not a CFP level well-versed, but I talk about it on the podcast. So clearly you can’t put it on the internet if it’s not all true, but I have never heard anybody say anything other than an annuity is an absolute garbage thing, except for people who have gone to the presentations and they’re like, “Oh yeah, totally. That’s great.” I’ve never had a good experience with annuity and I don’t have any personal experience, but relatives have had them and it’s just garbage. So this is very interesting that you don’t hate it off the bat, Joe. And Grumpus, he’s got a master’s in being smart so he is not hating on it either.

Grumpus:
[crosstalk 00:49:07] My master’s in pensions.

Mindy:
A master’s in pensions, a master’s in being well verse and money.

Joe:
Well, don’t get me wrong-

Mindy:
How do you start…

Joe:
Don’t give me wrong, Mindy. Annuities are beatable, but I love what Grumpus is saying, which is for a really conservative investor, somebody will give up that upside potential, right? The more conservative people among us will give up that upside potential with being able to sleep at night. There are those people out there, so it’s not ever going to be for everybody. And there’s a few companies that are doing it that are doing a good job, but they’re so hard for the average person to find that it’s easier to just say, “Forget it. I’m not going there.” Sorry. I just turned this into the annuity discussion.

Grumpus:
Yeah. Well, let me steer it a little bit back towards pension.

Joe:
Thank you.

Grumpus:
So yes, the companies may be screwing it up, but the take up rate on lump sums from pensions also indicates that there’s some human behavior element as well. So there have been studies that have shown as high as 50% of people who have the potential to take a lump sum, instead of a pension annuity will take the lump sum. And the number one reason for that is trust. And the second reason for that is because they want to control their own money. So there is some human behavior to this.
And again, so a pension is not for everybody and those people may not realize it until later in life that, hey, I do better with managing my own money. So, even though I’m in this pensionable job, I only got 10 more years, I’m going to stay. But at the end, I’m going to take that lump sum and I’m going to do what I want with that money. Or maybe they’re married to somebody with a pension so their spouse is going to take the annuity and they’re going to take the lump sum.

Joe:
A lot of planning.

Grumpus:
Yeah.

Mindy:
Well, I can understand why somebody wouldn’t want to continue with the minimum payments and go with the lump sum like you said, the trust issue. I keep reading all these stories about, oh, the California teachers union invested in this and lost money, or the Illinois… Let’s just kick Illinois while they’re down. The Illinois teacher’s union invested in this and lost a ton of money. If I’m in a teacher’s union, I’m going to want to know what I’m investing in. It’s the same thing that they just invested in, lost a lot of money. I’m taking my money and running. I can see that that being a huge issue. I wonder what percentage of people who are taking the lump sum because of lack of trust are in these pensions that are being talked about in the news about how they don’t have any funding for… They can’t meet their future obligations for past three years or whatever it was you said earlier versus a regular company. And they’re like, “Oh, I don’t know if they’re going to be around.”

Grumpus:
Yeah. I don’t have any statistics off the top of my heads, but practically speaking or logically speaking, I would say that assuming the employees paying attention to what’s going on with the pension fund, they only typically start to do that later in their career. If they see that the pension fund is struggling, they’re probably going to take the lump sum. The take up rates on lump sums are just too high for me to believe otherwise that people aren’t going to try and cash out of a system that they think is in financial peril. Now, again, not every pension system offers a lump sum. It’s not a requirement. So again, it depends on what pension plan you’re in and what the rules are as to whether or not you would even be offered a lump sum. Now, a lot of companies and pension systems like to offer lump sum because it gets that obligation off their books, right?
That’s a future financial obligation, they don’t necessarily know what’s going to happen in the future. They have these generous discount rates that allow them to calculate these lump sums at a smaller value than what you might otherwise think the person is owed over time. So it’s just easy for them to write a check, and this is actually what it’s called in economics, it’s called pension risk transfer. They transfer the risk to the retiree or to the person taking the lump sum. That risk is running out of money in retirement. So, a pension system, they assume that risk if you take the annuity because they got to continue paying you. The employer or the retiree taking the lump assumes that risk otherwise.

Mindy:
Is there any correlation between pensions that offer the lump sum and employers that have mandatory pension contributions?

Grumpus:
None that I’ve seen. There might be, but yeah, none that I see. Why?

Mindy:
I’m just wondering, let’s say I’m a teacher in Illinois and I am required. I don’t have the option to not contribute to my pension, but then I retire and the pension’s like, “Oh, haha just kidding. We don’t have any money.” What do I do? At that time, I’m 65. I’m planning on my pension carrying me to my sunset and all of a sudden, not only did I have to contribute, it’s not even there anymore.

Grumpus:
Yeah. So again, if you’re in a public system, that’s going to come down to what state and contract laws in your state. So again, if you’re in Illinois where the state constitution says the taxpayers are going to come up with the money somehow, maybe you’re not so poor off. If you’re in a state maybe like Texas that doesn’t have a law like that, then maybe you need to be worried. Then you hopefully have started looking at that as you approach closer and closer to retirement. Now on my website and in my book, I try to teach people different ways you can discount the amount that you technically would be owed based off the pension safety issue. A really simple way is you look at the funding percentage of your pension.
If it’s 40% funded against future obligations and you can go onto your pension calculator, hopefully it’s on a website somewhere and you punch in, “Hey, I’m going to work this long. By the time I’m retired, I’ll be earning this much salary so here’s my estimated pension.” And then you just discount it by 60%. That’s one rough way of trying to reduce the reliance upon your pension within your retirement plan because you definitely, if you are in a pensionable job and you’re not going to quit, you’re not going to go and work elsewhere. You’re going to stay and you know that pension’s in potential safety trouble, then you need to make other plans. You need to start saving money and investing through what other options. Now, hey, the great news is there that a lot of these, especially public pensionable jobs offer other ways to invest like a 403(b) or a 457, right?
So there are other ways. The conundrum is typically you’re getting paid less as a state employee so maybe you don’t have the extra cash, the disposable cash to actually utilize those vehicles. And as the millionaire educator has pointed out a lot of these 403(b)s and 457s, they’re not particularly well stocked with great investment options either. So then maybe you look to some other kind of alternate form of income in retirement, like property from rental income, or you just try and go out in the stock market ad just grow your money on your own through an IRA, or even just through a normal taxable investment account.
So, I listened to the episode you guys had with the teacher. I think it was a couple months ago from New Jersey in which she was trying to decide whether she should stay at a pensionable teaching job within New Jersey, where she wasn’t making much, but she was actually saving and utilizing the other vehicles offered to her or go out into the corporate world and knew somewhere else in the US kind of where it would be more advantageous for her to start the rental income empire that she wanted to start.
That is what I term perfect golden albatross moment. And the golden albatross moment is that point in a pensionable career where someone starts questioning whether or not staying for the long term is really worth it, it’s really within their best interests. And people hit that point at different stages of their life. When I ran my pension survey for my master’s thesis, 50% of the people never even questioned whether or not staying was worth it, but the other 50% did. Right? So, some point in their career, they came to this point where they just started questioning whether or not staying for it in the long term was worth it economically compared to the other things that they had going on in their life.

Joe:
I think sadly to your point, Grumpus, what we discount is that we got one shot, right? I mean, unless reincarnation is the thing, then maybe we do have multiple shots, but if not-

Grumpus:
I’m totally coming back as a fly if that happens.

Joe:
You’re not going to live long then though, that’s the problem.

Grumpus:
Yeah. I’ll reincarnate again.

Joe:
One quick question. When pensions have gone under in the past, General Motors and other ones, the Pension Benefit Guaranty Corporation, PBGC steps in, are all pensions required to have that coverage?

Grumpus:
Private pensions. So the PBGC, so that’s Pension Benefit Guaranty Corporation. If it sounds like an insurance to you, it is. It’s just a US federal government run insurance. So private pension system, so companies as opposed to state local federal pension systems, they don’t have to, but most do pay into the PBGC. Within the PBGC, there are two different insurance schemes, there’s ones for the single employers. So GM, GE, companies that only… A rough way to equate this is they’re not paying unionized members. So if you work for a company, that company’s going to be paying you a pension. And then there’s the multiple employer pension system as well. So that is, let’s say you’re an auto worker and you bounced around from Ford to Chevrolet to different companies.
Well, they’re all paying into the same pension system for the United Auto Workers union or something like that. Right?

Joe:
Yeah.

Grumpus:
The bad news is the single employer payment system is pretty well funded. The multi-employer payment system is awfully funded. In fact, they’re going to run out of money in less than 10 years. So that means even if they step in and your union pension goes bankrupt and they step in, you are still going to get a major, major haircut on your pension. Whereas if you work for a single employer company and your pension is through them, the likelihood is that all the money’s going to be there. Now, the federal government will only guarantee up to a certain amount. So if you are an executive or you’re top management at that company, you probably won’t get your entire pension, but you will at least get a high proportion of it.

Joe:
Which means going back to that 403(b) or 457, and your point about those… I’ll save my rant. I did my annuity rant today. We’ll save our rant about 457s and 403(b)s to next time. But I guess a good point is, is that if you take the lump sum off the pension, and I don’t think we ever made this clear for a lot of people, although it’s considered a taxable event, there’s no tax due if you do it correctly because you are allowed to do a direct rollover from that pension money into an IRA. So there will be zero tax due. You have to show the IRS you did it, but no tax due. So if you’re going to take it as a lump sum, people remember to check that box.

Grumpus:
Yeah. And definitely ensure that that’s the case.

Joe:
Yeah.

Grumpus:
Because again, most pension systems will allow you to do it, but it’s not a guarantee that they will. So check before you make the lump sum decision and yeah, definitely avoid the taxable event and roll it over into an IRA or something like that. It’s interesting, even some international pensions offer that option too for US citizens. So again, check your pension system and find out what their rules are. Another great thing we didn’t talk about for the lump sum and I don’t want to make this a lump sum episode, but if you’re a teacher and you want to move states, those pension systems don’t talk to each other. Right? So what happens is you have a decision, you either leave that money that you invested in the old pension system in your previous state behind.
And then, whenever you reach pension age, it will just pay you out a small pension. You can potentially take out the lump sum depending on the rules. And then when you get to your new state, you can take that lump sum potentially and put it back into the pension system or you can use it to buy back years in your new pension system. So meaning I’ve only worked 10 years, but I buy 10 years, then the pension system treats me like I’ve actually worked for 20, and therefore my pension is going to reflect an increased amount when I retire.
So the lump sum often is the only way for state workers that want to go from one state to another to transfer any kind of remote value from the previous pension system. So yet another calculation they have to make on whether or not that’s worth doing.

Joe:
It’s so fascinating though.

Grumpus:
It is. So in that specific situation, I would advise find an accountant that knows what the hell they’re doing between those two states and their pension and tax laws.

Joe:
Mindy, I wish you’d written a book about this. Do you think maybe we could ask him if he’s written a book about this?

Mindy:
Grumpus, you should write a book about this.

Grumpus:
Well, that’s what ChooseFI thought too. And so they actually took pity on me and published the book that I wrote.

Joe:
[crosstalk 01:03:51] So wait a minute, you’ve written a book about this?

Grumpus:
I have actually. Not only a master’s thesis, but a book as well.

Mindy:
What a great segue, Joe. Totally smooth. So Grumpus, what is the of your book and where can people find it?

Grumpus:
So the name of the book is The Golden Albatross: How to Determine If Your Pension is Worth it, and you can find it at local bookstores and online bookstores in your great place where you live. So it’s available on Amazon, or you can go to the ChooseFI website or my website, grumpusmaximus.com and find links there. So yeah, ChooseFI would be happy if you bought that book.

Mindy:
Well, I hope you would be happy if we bought that book too. Yeah, we love ChooseFI. We’re great friends with Jonathan and Brad. I almost called him Joe because I’m looking at Joe.

Grumpus:
Yeah.

Joe:
Wrong brand, different brand.

Mindy:
Okay. Grumpus Maximus, where can people find out more about you?

Grumpus:
So as I mentioned, I got a website, grumpusmaximus.com. That’s where I blog, everything on there is for free. I don’t even do advertising. So that would be my first stop if you have more pension questions. I also run a Facebook group for pensioners or pensionable employees. So if you’re in a job with a pension or you have a spouse, we allow a spouses in because often it’s a spouse that does the money in the family and the worker just concentrates on working. So you can go to the Facebook group, it’s called Golden Albatross / Golden Handcuffs. Or you can find me on Twitter at MaximusGrumpus or Instagram on grumpusmaximustoo, that’s T-O-O.

Mindy:
Okay. We will league through all of these in our show notes which can be found biggerpockets.com/moneyshow259. Grumpus, thank you so much for your time today. Pensions are kind of a bowl of spaghetti, but I think that just like a bowl of spaghetti, you can pick one strand out and figure it out. You don’t have to worry about all the other ones, just get the one you want, just get the one that pertains to you. And I’m really excited for people who have a pension. We haven’t talked about pensions. I don’t know that much, everybody listening’s like, “Yeah, no kidding.” But I’m glad that you were able to come and share some advice with us and shed a little bit of light on this very confusing topic. I really appreciate you.

Grumpus:
Yeah. You’re welcome and thank you for having me. And this has been a great opportunity. I finally got to meet both of you at least virtually. So it’s been a fun time and hopefully the listeners out there are still awake. If nothing else, maybe your sister can listen to this episode and learn a little something.

Mindy:
I hope so. Okay, Grumpus, we’ll talk to you soon. Okay. That was Grumpus Maximus from grumpusmaximus.com, author of Golden Albatross. And Joe, I really got a lot out of that episode clearly because obviously I didn’t know anything before we started talking to Grumpus. What did you think of the show?

Joe:
I thought it was fantastic. I thought it was comprehensive. I thought that at the very least, if you went away from this not realizing that you got one shot at this, so you should really dig in. If you have a pension, you definitely need to dig in to get it right. Because the fact that it’s an irrevocable decision, that decision you make and it’s going to be so important. Also, the ideas around healthcare, I thought healthcare was this recurring theme that came up. Vesting, how long does it take to vest? This idea of generosity. Right? How many years? And is the pension backloaded? Some of those ideas he was able to make so entertaining, but also valuable at the same time and give us lots and lots of tips that I feel like, man, if you run across a pension at the very least, I feel like you’ve got a little bedrock to work from.

Mindy:
I agree. I think that he had a lot of answers that were variations of it depends on the actual rules of the pension, but what I heard him say is it boils down to you need to read your documents. If you have a pension, you need to know what your benefits are, when you get them, how much you can get and is it even worth staying? And in some cases like he’s got a military pension, oh my goodness. He said the last couple of years, it was kind of tough to stay. You know what? At a military pension and I’m 18 years in, I’m going two more years.

Joe:
Two more years, yeah.

Mindy:
Two more years with 50% of his pay for the rest of his life, even if he lives to be 150, that seems like a no brainer to give two more years to the company. On the other hand, if he’s got to give six more years to get 1% of his salary for 12 months after he retires, that’s a no brainer to not stay.

Joe:
Forget about it, as they said. Absolutely forget about it.

Mindy:
So I thought…

Joe:
No, because you need to finish up that thought because I’ve got a whole nother thought.

Mindy:
Wow, what a surprise. No, I thought it was very, very helpful to hear him explain the different options, but the bottom line is get out your documents, read through them, when they send the annual report read through that, start educating yourself so you know what’s there.

Joe:
Yeah. And then start that math early. When you’re looking at the 20 years like he was looking at, have that math done over and over and over and over and over and over and over and run different scenarios. If I’m married especially with all those spousal options, there’s so many different options. If it’s Cheryl and I, if Cheryl dies first, if I die first, if both of us live for a long time, if neither one of us live for a long time. We talked about maybe using an insurance policy instead, can I do that? Yu could look at some of these more creative things if you start early. But to broaden this out, it’s really interesting and fascinating to me that when I was 20 and 22 years old and I thought about the world of investing, I thought about how complicated it was and then how there were five bajillion different things to think about.
But one thing we made clear today is that a pension is really just another form of annuity, right? So we just took two things and put those two together. And now we kind of know how both of them work, because frankly it is the same stuff just offered to your company versus buying it yourself. But it’s a lot like a mutual fund, an exchange traded fund. We think of those as two big time different things really pretty close to the same thing. So it’s funny how the more you learn, the more you realize you can kind of lump a lot of these investment ideas together and it makes this world that seems so confusing so much less confusing and so much easier a show like today.

Mindy:
Absolutely, Joe. And I want to point out, I want to give you kudos for making what could be possibly the most important point of the entire episode is that when you choose your benefits, do I take it as a lump sum or do I let it write out over time? That’s irrevocable. That was not even something that I knew. I mean, of course it makes sense, but I didn’t know about that before you said that. So I really appreciate you cementing that in people’s minds. If you have a pension, you need to read the documents and you need to make sure that what you are choosing is what you really want.

Joe:
Well, the most thank you for that. And actually the most important thing that I didn’t say is that, of course, you take the lump sum and you put it in [shibooboo 01:11:14] coin. No?

Mindy:
So don’t follow Joe first investment advice in [shibooboo 01:11:23] coin. [crosstalk 01:11:25] Joe, where can people find more about you?

Joe:
Yes. You can find me three days a week at The Stacking Benjamins show. We call it the greatest money show on earth because this Mindy Jensen who’s been on it a lot knows. It’s a circus over there, Mindy. We tend to have a lot of fun and I love being able to hang out with people like Mindy and Paula Pant and Len Penzo. And we have my co-host OG, my neighbor, Doug, we have a good time.

Mindy:
All in mom’s basement.

Joe:
All in the basement.

Mindy:
And your book, when does it come out?

Joe:
December 28th, Stacked: Your Super-Serious Guide to Modern Money Management. It’s a fusion of The Hardy Boys Detective manual and the Cub Scout Wolf guide. Those are fused together in a financial book for adults. So that’s the idea.

Mindy:
That’s going to be a lot of fun. I have a sneak peek and let me tell you, I had an enormous amount of fun reading it.

Joe:
Thank you.

Mindy:
Okay, Joe, should we bounce?

Joe:
Well, already?

Mindy:
Already.

Joe:
Okay. Fine.

Mindy:
Okay. From episode 259 of the BiggerPockets Money Podcast, he is Joe Saul-Sehy and I am Mindy Jensen saying, got to bark, aardvark.