emmyloo22 OP t1_j2cul3e wrote on December 31, 2022 at 8:09 AM

Reply to comment by Cheaper2000 in Please help — I don’t understand my pension… can somebody ELI5?? by emmyloo22

Thank you! Good to know I wasn’t too far off with my understanding… We have a handbook for with all the formulas for calculating pension benefits, and it makes me really nervous and unsure about the future... I like working here but who knows what will happen in 40 years! It’s a relief to know that in a worst-case-scenario, I should back my 8%.

Also, I just confirmed my DC plan is a 401(a), if that makes any difference. We had open enrollment this past month for benefits, and there wasn’t an option to adjust the contribution. I’ll have to look into it more because I’d definitely like to contribute additional money if possible.

Cheaper2000 t1_j2cv0qj wrote on December 31, 2022 at 8:14 AM

Employers do set the limits for 401a plans so looks like I was wrong and you won’t be able to adjust the contribution. Start with an IRA (through any financial company) and contribute as much there as you can (up to 6500/yr).

I’m not actually sure if you’d be able to contribute to retirement beyond the IRA through tax advantaged accounts, that’s a question for HR or somebody with more financial literacy than myself.

emmyloo22 OP t1_j2cvt04 wrote on December 31, 2022 at 8:25 AM

Okay, yeah, that stinks a little! Was hoping to put it in the 401(a) and just let it do its thing lol. Would you recommend a Roth or Traditional IRA? I don’t feel like my salary will get much higher than it is now tbh. I really lucked out with this last promotion — I think I’ve already hit a lofty ceiling for my line of work.

Cheaper2000 t1_j2cw5sc wrote on December 31, 2022 at 8:29 AM

Roth if you’re under 30. Give it a few years to make the call on whether or not you’ll make more in retirement and then switch to traditional if appropriate. Plus it allows you to contribute “more” since you paid the taxes already (6500 post tax>6500 pre tax).

emmyloo22 OP t1_j2cwapr wrote on December 31, 2022 at 8:31 AM

Points taken! You’re killing it with the advice, man. :) Thanks a billion.