Job tenure and your retirement

Lamenting the demise of the pension plan may be misguided. Even while most Americans never had a pension, many who did never received substantial value from them.

I was surprised to learn long tenure with one employer was never the norm.

A common perception of past generations of American workers was that they held a career job — staying with the same employer for most of their working years and then retiring. In contrast, current American workers are viewed to change jobs more frequently.

However, the data on employee tenure — the amount of time an individual has been with his or her current employer — show that workers of past generations are similar to current workers in terms of tenure. EBRI

Today, both traditional pensions and longer tenure are concentrated in government employment. The bad news is taxpayers are burdened with the costs of benefits they don’t have.

The good news is that workers have 401k and IRAs that, if used properly, can provide greater value.

The bad news is those too often those plans are not used properly, or in too many cases, not at all.

I wonder what life would have been like if I hadn’t worked for the same employer (providing a pension) for nearly fifty years? I know for sure my retirement would be substantially different.

3 comments

  1. No surprise. Median tenure of American workers ages 25 – 64 has been less than 5 years for the past 5+ decades. The myth was always that there was a majority of workers who spent two, three or more decades for the same employer, separated in their 50’s or early 60’s, and received a financially secure retirement from the combination of social security benefits, retirement savings, and a lucrative, non-contributory, final average pay, early retirement subsidized, post-retirement COLA’d defined benefit pension plan – along with employer-sponsored, defined benefit, non-contributory retiree medical coverage to gap fill Medicare.

    That was never was the situation, and it never will be.

    Instead, the obvious requirement for a financially successful retirement is to save all you can in tax-preferred accounts (401(k), HSAs, etc.), defer retirement benefit commencement until age 70 (including Social Security), and consider remaining gainfully employed, on a part time or full time basis doing something you love… just in case you to make it to retirement, survive and live to be 100 (ever more likely these days).

    At the same time, enjoy the journey. Life is not a dress rehearsal for retirement. Start doing all those things you planned on doing today, now.

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  2. If I had had to change jobs, I would have had to settle for what my state calculated the pension’s cash value to be, which was much less than its worth. Traditional pensions would have worked better if there had been a better way to carry your pension from job to job. This is a great advantage of 401k’s.

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    1. Greg, you bet. You may want to reconsider cashing out. It is possible that the value of the benefit you could receive if you deferred until retirement ages would be substantially greater than the cash you will receive – even adjusting for the time difference. That is, the “discount rate” may be significant, and it is possible that they will limit your benefit to your contributions, if any, plus interest earnings on those monies.

      Separately, nothing would likely stop you from rolling over your pension benefit payment into an IRA – which is kind of similar to the portability you have in a 401(k) plan.

      Best to you, stay safe.

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