Short Lesson and Food for Thought on Pensions... one of the primary benefits of a firefighter

I was working on this post before I got tangled up in the attacking comments I had to address in the blogwars, so it's kind of out of order but still worthy of thinking about.

Retirement means relaxation and all the great things you worked for right? Well it didn't for Chief Hennessy when he came under attack for taking a lump sum payout for his pension. So let's explore the differences to their pension benefit AND the difference between his and Lester Godwin III's payment plan.

What's the difference between a Pension and a 401K? I wondered that myself as I've read all these arguments over the general public's outcry over a man who worked nearly 29 years to be the first firefighter to retire from Southern Manatee Fire & Rescue, Tom Hennessy. Then I wondered if Lester Godwin III had really thought it out before he let his outcry go the Bradenton Herald because the general public isn't stupid. There's been a lot of talk about Chief Tom Hennessy's pension payout of $1.6 million.  The amount sounds so exhorbitant until you figure out what that equates to per year for the time he worked: approximately $57,000/year income, which is basically a percentage of his salary.

The union managed to help blow out of proportion the payout that Chief Hennessy recieved for his pension because he got it in one lump sum of $1.6million after nearly 29 years of service to the department. This was properly done (as fully explained in the post by Leigh Hollis) and paid in one lump. This occured because the Union President, Merv Kennell took this to the ABC-TV Ch 7 news and made a news story about the issue.

The amount sounds exhorbitant but let's consider the next retiree who drew attention to himself with his extremely sad story in the Bradenton Herald, Lester Godwin III.  He retired also after 25 years and was told he could not have his lump sum of over $687,000 but would have to "settle for" monthly payouts of about $4800 per month for the rest of his life. Now think this through (as a Bradenton Herald reader has already), Lester Godwin is only 47 years old. There's a fair chance he'll live to be 67 years old, which is another 20 years. At that rate, Lester Godwin will have made $1,141,394.40 off the pension he's being paid montly. That's OVER $1 MILLION!  If he lives another 10 years, he'll earn $1.6 MILLION+ or nearly TRIPLE his lump sum pension! This is short term "sacrifice" for long term gain folks! Just do the math: $4755.81/mo x 12 =  $57,069.72/year income for his pension.

So, might we think the pension board actually did Lester Godwin a favor by securing him an income that he doesn't even have to work, but if he wanted to, COULD and RETIRE from an entirely different field if he wished with another pension or retirement plan?! Can we say shortsighted here? Goodness! In an economy where folks are and have been jobless for years, and pensions have been dissolved, this man ought to be downright grateful to get anything for the rest of his life! And it's guarnateed because TAXPAYERS can't just decide not to pay it out, and TAXPAYERS don't just go away (though they sure can become fewer which just shifts the burden to those of us left behind) so it's a sure thing! So, quit "crying"!

Now, think about the fact that this is a BENEFIT the board sees to the firefighters getting. It's entirely paid for by the taxpayers for the life of a firefighter. And a firefighter who's gifted in playing the stock market might say he'd rather have the 401K but there are many who aren't. Still, he can play the stock market AND have his pension too! Here are the pros and cons of pensions vs. 401K's:

Pension Pros

• Company paid
• benefit based on seniority
• is a leg to stand on (which is not commonly available)
• possible health care benefit in retirement

Cons

• Probably a reduced salary
• Locks you into employer (benefit is based in part on years of service)
• Less control over amount of payout

401k Pros

• reduces tax bill for you in current year
• benefit based on skill of individual
• You control the size of your own benefit
• Not tied to company performance
• You can take 401k with you to another employer or roll over into an IRA if you want another job

Cons

• reduces current income
• need to be educated on how to invest
• dependant on employer plan choices

In the big picture, the pension is an excellent deal for the fire department until someone gets greedy, shortsighted, or impatient. So all the complaining about the lump sum the chief took versus the payout Godwin will have is really ridiculous. The  Chief did the district a favor! Imagine how much his payout would cost over the remainder of his life vs. what Godwin's will cost now? It's a difference in pay scales.

But, what a lousy way to treat someone who'd served the department so well! I can fully understand why Chief Hennessy is aggravated at this situation and all the accusations. When he finally retires and gets what he's due to be able to enjoy what he's worked for, he has to suffer having his "brothers" drag his name through the mud because he got his retirement pension in one lump sum! Truly a shame and hardly the character I thought the fire department was built on.