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New guy question "Cash Balance Plan"
Posted on 12/7/14 at 11:16 pm
Posted on 12/7/14 at 11:16 pm
Ok go easy on me.
Just got hired on to what looks like a possibility at a long fruitful career.
My question is what can I expect from my "Cash Balance plan". The company just switched over from a traditional pension, and I want to see what kind of money I will realistically have to live off of after retiring.
It is worded like this in my offer packet "Pay credits ranging from 4-8% of employee's eligible earnings are allocated annually based on employee's age and years of service.
I am in my 20s and could easily put in 35-45 years with a salary that should average over 110ish (totally depends here).
edit: made title more descriptive
Just got hired on to what looks like a possibility at a long fruitful career.
My question is what can I expect from my "Cash Balance plan". The company just switched over from a traditional pension, and I want to see what kind of money I will realistically have to live off of after retiring.
It is worded like this in my offer packet "Pay credits ranging from 4-8% of employee's eligible earnings are allocated annually based on employee's age and years of service.
I am in my 20s and could easily put in 35-45 years with a salary that should average over 110ish (totally depends here).
edit: made title more descriptive
This post was edited on 12/7/14 at 11:27 pm
2
Posted on 12/8/14 at 12:58 am to Athletix
I have a cash balance pension with my employer.
It's a defined contribution plan with a cash value that is updated on a monthly basis. My company contributes 6% of my pay each month and the cash value earns a rate of return equal to the 30-year Treasury yield (adjusted annually). Right now the yield for my account is 3.6%.
IMO it's a good hedge against your 401k for predictable returns.
It's a defined contribution plan with a cash value that is updated on a monthly basis. My company contributes 6% of my pay each month and the cash value earns a rate of return equal to the 30-year Treasury yield (adjusted annually). Right now the yield for my account is 3.6%.
IMO it's a good hedge against your 401k for predictable returns.
This post was edited on 12/8/14 at 12:59 am
Posted on 12/8/14 at 7:17 am to Dr Rosenrosen
quote:
Right now the yield for my account is 3.6%
Gotcha this is the part I didn't quiet understand. Btw the treasury yield has seen steady decline since 1990.. Any hope to see it reverse course or is 2-4% considered the typical range the yield will be in over the next 10+ years?
Posted on 12/8/14 at 10:51 am to Athletix
A cash balance plan is basically a 401(k) where the risk of loss (and benefit of growth) is borne by the employer, not the employee. So, the earnings rate that is credited to the plan is what is important.
With any retirement plan, once you have no significant debt and an emergency fund, you wanna fill that sucker up. If the rate is really low, though, I might not go max and instead do a Roth IRA if you are eligible.
With any retirement plan, once you have no significant debt and an emergency fund, you wanna fill that sucker up. If the rate is really low, though, I might not go max and instead do a Roth IRA if you are eligible.
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