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Why People With Pension Jobs Still Need To Invest For Retirement

investing when you have a pensionBack in the day, workers could count on putting in 20-30 years on the job and scoring the coveted gold watch AND a lifetime pension. Sure you might be too old and broken down to enjoy it, but by golly, there was a check every month. With that sort of guarantee, there was really no need to save for retirement. Nowadays, pension eligible jobs are few and far between, but if you can score a position with the federal, state or some municipal governments, pensions do still exist. Does that mean people with government jobs don’t have to worry about their golden years? Maybe, but I believe even employees with pension jobs still need to invest for retirement.

How Do I Get A Pension Job?

Well, it’s fairly simple. You’ll need to become a teacher, police officer, sanitation worker, or one of the roughly 21 million government employees in the United States. You could also join the military and put in the the years to get a pension if you don’t get blown up or become discharged due to PTSD.

I think lots of people assume pension eligible jobs are low paying, but that’s not the case. I know doctors, judges, pharmacists, even surgeons who work for the government and make high salaries plus great benefits. If you’re willing to live in the Washington DC area, the doors are open wide for all types of government employment.

Pensions Mean I Won’t Have To Save For Retirement

Because Jim works in education, we know tons of teachers. Some of them are great with money and invest in stocks, small businesses, or real estate. Most of them don’t invest and are limited to putting in the time required to get a fully vested pension. I guess it works, but it’s also a bit risky.

Golden Handcuffs Anyone?

One huge problem with pension jobs is that they generally require 20+ years before workers are eligible for retirement benefits. I’m sure there are people who claim to love their job for that many years, but I’ve never met one. I have met lots of burnouts. You know the type. They show up for work, do the minimum required to get through the day, all the while bemoaning and complaining about how much they hate their jobs.

The problem is that once you have a certain number of years, you feel the need to finish out your sentence. I’ve talked to tons of people who were “just holding out for a few more years.”  You don’t see many who walk away, even though they are miserable every day.

When starting out, people feel they are ready to work forever, but from experience, 10 years is about all most of us can handle before we need a change. If you’ve put all your eggs in the pension basket, it’s hard to do anything different.

People Get Sick, Disabled, and Die

The unknown is a huge reason everyone should invest outside of a pension plan. According to the US Social Security Administation, twenty year olds have a one in four chance of becoming disabled before they retire. You can’t count on it not happening to you. Even with federal disability benefits, the future does not look bright if there are no outside investments.

Also, if you are the sole income for your family and you die, what happens to your pension? If you aren’t sure, it’s time to find out and make back up plans.

Couples Split Up

Hopefully no one gets married thinking they will end up divorced, but 50% of marriages end that way. I have a cousin who was married to a government employee. She did not save anything for her own retirement because he was eligible for a pension. You can probably see where this is heading, but they went through a nasty divorce where the judge granted my cousin half of her ex’s pension. Now they both have to keep working or try to support two households on a pension that would have been tight for just one.

The Government Could Go Broke

We’ve already seen this in places like Stockton, CA. While it’s doubtful that the federal or state government would abandon all pension plans, they certainly could change the rules or apply more taxes to pensions. I would hate to put my retirement hopes in the hands of any type of government.

What Can I Do To Make Sure I Retire With Enough Money?

I think the key to having the retirement you want is being diversified. We are planning on Jim’s pension as a part of our retirement income, but it’s not the only ship we’re sailing. It’s not even the main part of our planned income. We sort of view it like social security. Whatever we get will be icing on the cake to top off our own investments.

Even if you don’t make much money, it’s important to try and invest a percentage of your income toward retirement. The key is to do it from the beginning so you don’t miss it, but it’s never too late. If you can manage to cut expenses or make some extra money, every dollar invested today will compound for tomorrow.

  • Maxing out an IRA every year for 20 years at 6% would provide an additional $233,956 for retirement.
  • Investing in a non-retirement account, like those at Betterment, could provide a source of income if you decide to change careers or start your own business before you’ve come due for your pension.
  • Investing money in real estate could provide semi-passive income if you want to enjoy life more instead of work until you’re old and broken.
  • Spending every dollar you make because you plan on a pension means very little choice.

Also, whether you have a pension job or not, everyone needs disability insurance and anyone with dependents needs life insurance. It’s cheap if you’re fairly young and healthy.

I guess you might call me a glass half empty person because I will never assume that one vehicle will support retirement. I believe I’m a glass half full because I want to have all the bases covered in case of the unknown. That’s why we’re working so hard to invest, even with the potential of a pension.

Would you take a job for the pension? Do you think the government would ever stop paying pension benefits?


Image: Freedigitalphotos.net/Miles



About Kim Parr

Kim Parr is a private practice optometrist, freelance writer, and personal financial blogger. You can follow her journey to 20/20 financial vision at Eyes on the Dollar.


  1. Kim I 100% agree with you that workers covered by a pension need to save for retirement via plans such as a 043(b) or 457 in the public sector or a 401(k) in the private sector. As examples on the public side one has to only look at Detroit or my home state of Illinois. On the private company side it is a growing trend for companies to freeze their plans meaning that workers do not accrue additional pension benefits. Additionally there is a trend toward companies looking for former employees and offering lump-sum distributions and other ways to reduce their future pension liabilities.

    • Thanks for the comment, Roger. I would be very nervous if I worked for a city or private corporation. I feel like states and federal plans are a bit safer, but not safe enough to rely on as your only source of retirement income.

  2. I always think it is scary when people aren’t saving for retirement because they expect a pension. It’s true that everything is risky, but I wouldn’t count on getting a pension at all- especially at my age. The entire system could go to hell in the next 20 years. That’s just me distrustful of all big business, but I would rather be safe than sorry.

    • I am very distrustful of big business as well, including the government. If they come through great, if not, I’ll still be prepared.

  3. My husband is a government worker and for now we’re relying on his pension for our retirement. Once we pay off our mortgage in a few years we’ll decide if we need to invest more. For all the reasons you listed, we want to make sure that we’re preparing properly, it’s just not our priority right now.

    • I think government pensions are probably safe, but it’s still a good idea to get everything paid off before retirement.

  4. I would never take a job just for a pension, although it’s just an added perk, like anything when it comes to benefits like a 401k or health. But it’s just the icing on the cake. I never fully trust any system that would say, “I’ll take care of you.” It’s nice, but I try to rely on myself first.

    • I almost did take a government job, mainly for the benefits and retirement. I often wonder where I’d be if I had done that. I’d need at least 10 more years. I’m not sure I could do full time red tape for that long.

  5. Those who have pension jobs should definitely still save for retirement. Too many people are realizing that now and it’s almost too late for them. You just never know what may happen in the future!

  6. My husband is one of the lucky ones who have a federal government pension. That pension is the only reason he stayed with the government all those years. It was truly like golden handcuffs. However, we are not relying solely on the pension. We also invested in IRAs and the government version of 401k as soon as the law allowed us to. We also have taxable investments which pay interest and dividends to the extent that all of our non-pension annual earnings exceed the gross amount of the pension. Those earnings are constantly reinvested, we try not to use them since the pension pays our normal daily living expenses. I don’t think our pension will ever go under because there are too many congressmen and senators in the same pension system so they’ll always find a way to fund it. However, if someone in a state or municipal plan, or a private corporate pension plan has the opportunity, I would definitely make other investments in IRAs etc. so there is money there just in case…..

  7. My boyfriend has an awesome pension through his union, which is another area where you can find jobs that pay fairly well with good pension plans. However, you’re right on so many points. Divorce wrecks havoc on a pension. Many union pension plans are now “in the red”, and making drastic changes just to stay afloat. Then add in all the unknowns, like how leaving your pension to your spouse will affect your payouts. There’s so much that is out of your control, and so many unknowns. It makes it really hard to plan for the future. And, at 56 years old, that future isn’t that far away for him, especially since he became eligible for retirement last year.

    • It sounds like you guys have lost of things to sort out before pulling the trigger on retirement. I study Jim’s pension plan all the time but still don’t quite understand everything.

  8. I have seen the “couples split up” one much too frequently for my liking, as of late. Running two households off of one pension really isn’t easy; having more money in the bank is so important. There are a crazy number of people where I live who expect to go from their full time incomes (that are high) down to a pension that is a portion of that… and be just fine. It’s like a train wreck waiting to happen. No, you can’t go from earning $100k to $35k without some major adjustments!

    • I am always surprised at the number of people who retire but still have a mortgage or even credit card debt. I want everything paid off before I even think about it.

  9. I completely agree with your line of thinking, Kim. I don’t think anyone should be reliant upon other sources to fund their retirement. Nothing is guaranteed as far as the future goes. My parents currently live off of social security and a small pension, and I don’t think I could ever have enough faith to do that! I’d rather take control of my retirement savings and make sure I have enough to live off of.

    • I think that’s kind of a good thing about your generation and mine to some extent. We do not have faith that the government or any corporation will take care of us.

  10. I just did a ton of research on this and pensions are definitely falling by the wayside. What’s scary to me is that employers are even scaling back 401k matches now!

    • When Jim started teaching, the state offered pensions with a 401k and match. They stopped the match years ago when the recession hit and never reinstated it once the economy picked up. I think once they see they can get away without it, they have no reason to go back.

  11. People with pensions should absolutely still invest for retirement. Pensions are a lovely perk but it something you have little control over. Sadly, there is a large group of people whose parents lived off of a pension and social security and they assume they can too, but times are also very different now. Not to mention that people also live longer too. As macabre as it may sound people weren’t living in retirement for 20+ years.

    • How true! People retired and kicked the bucket a few years later. Pensions were never meant for people to live into their 90’s.

  12. Diversification is definitely the big takeaway here. No one should depend on any one source for retirement, because who knows what can happen. I guess you could say the “simpler” days are gone but the world will leave you behind if you don’t change your investment habits.

  13. These are all excellent points. I am already feeling burned out and I’ve only been at my job 3 years. (Actually, it’s more that I don’t enjoy my work than true burnout, but the symptoms are similar.) I’m glad I’ve been saving for retirement since age 19.

  14. A pension is never guaranteed. If a city/county goes bankrupt, away goes your pension. It never hurts to have more than you need in FIRE anyway.

  15. I have a client who is a New York teacher and despite the fact that she has a good pension, we are still saving for retirement. I think the last few years of watching State governments challenged with meeting pension obligations woke me up to the reality that there are no guarantees no matter how strong you feel about it and you can never be over prepared where retirement is concerned (at least in my mind).

    • My mind also thinks you can never be overprepared. I plan for the worst but expect the best. I think if you do that, you’ll be prepared for whatever happens, good or bad.

  16. I’m a federal employee too so should get 1% of my average pay over 3-5 years for every year of service but also contribute the max to TSP. I can retire at 57 but can’t draw the pension until 62 without penalty so I need other forms of savings if I want to retire then. I will have 31 years at that point. I’m lucky I started when I was 27! I don’t think it will go away but diversification is always smart.

    • Thanks for the comment. I think government pensions probably won’t ever go away, but you are certainly right about diversification.

  17. This is the typical “Don’t put all your eggs in one basket”. Too many times, I’ve seen people relying on their pensions (Enron, anyone?) and then being totally screwed when the company went belly up. It’s a sad shame, but it’s part of life, and we have to protect ourselves by using the tips you’ve referenced to above. Great post, my friend.

  18. The government is too leaky of a vessel for me to rely on for something as important as retirement savings. In our future projections, we don’t even consider social security as a source of income. Should we get any money, it will be a nice bonus, but we will be able to support ourselves otherwise. No one else cares as much about my financial success as me (oh and Mr. Maroon too ;)). Why on earth would I trust a large organization that is trying to serve so many masters, which are certainly not limited to just the beneficiaries of those pension plans?!

  19. I know a lot of my friends (and significant other) who are teachers still want to save for retirement in other ways. If I had a pension, I’d still save independently so I’d have plenty of money to life the lifestyle I want to when I’m ready to leave the workforce. I’d hate to get a pension and suddenly realize — whoops — this isn’t going to be enough.

    • I think that happens more than you think. People assume their pensions will be more than they actually are. I think people also don’t fully realize how much insurance costs will be if they retire before Medicare age. That takes a large chunk of any income, especially a fixed one.

  20. My sister is a teacher and she said that she is lucky to have chosen this field because it’s really a high-paying job here in our country. Actually she could retire as early as 45 because of her contribution to 401(k) and other benefits. But, I am gonna encourage her to invest like those at Betterment. Thanks for the advice Kim.

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