Leaving corporate for VA?

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castafari

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Recently became interested in a VA position. I currently work for one of the mega corporations. Pay is >$400 but Total call including cardiac, OB and backup call is about 10-12 per month including One weekend per month. Total weekly hours in the hospital usually OK but the call feels like a lot. Work environment is ok with a good group of anesthesiologists, but we are working more call than ever now and just took a small pay cut from corporate.
Local VA hiring. Call is only about two calls per month. Weekend call only every 10 weeks or so. Pay is less ($325-340?) but the benefits are great including a pension. Also, they get days off during the week that they can moonlight for extra cash. Anyone else check out of private practice or corporate anesthesia and go to the VA? What was your experience?

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I'd like to know some opinions on this too.

I just started a GS job, which is similar to the VA with regards to benefits (I think).

I get a decent pay, don't work a ridiculous amount, work towards a pension and get 401K (TSP) matching. The health care is pretty cheap too.

I wish I got more time off though.
 
As far as finding stellar clinicians. Dept of Veterans Affairs is the worst. The bureaucracy is overwhelming and it seems to take precedence over everything including clinical care. Everyone at the V.A. is just putting in time til retirement which leads to lackadasical (lets do it tomorrow) attitude. After some time you will become one dimensional (no OB peds). The vacation is 26 days with every federal holiday off. Floor nurses get the same exact vacation if that tells you anything. And nurses are independent of physicians there. except the CRNAs who still have to report to the anesthesiologists. Other than that, it may be a great job. You do get a pension as you mentioned if you stay for a minimum of five years. then its 1% for each year thereafter. so if you stay for ten years your pension would be 10 percent of your highest three years salary. Lets just use 300,000. SO after age 62 you would receive 10% of 300k every year for the rest of your life. Its not free though. They take out like 1000 bucks every month from your paycheck to fund this said defined benefits plan. I personally think you can set up your own defined benefits plan through schwab and do better.
 
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I'd like to know some opinions on this too.

I just started a GS job, which is similar to the VA with regards to benefits (I think).

I get a decent pay, don't work a ridiculous amount, work towards a pension and get 401K (TSP) matching. The health care is pretty cheap too.

I wish I got more time off though.
I was talking to someone recently about their DeptOfDefense job. HE said they only get three weeks off? I was like how the heck do they find people?
 
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I have some experience with the VA system and a lot of your experience and pay will vary surprisingly significantly based on the VA. The majority of your pay at the VA is determined by the specific area your VA exists in and the amount they settled on that they feel makes their pay "competitive". This results in a wide range (>100k) difference between salaries based on VA location and what needs the VA has for an anesthesiologist. To give you some anecdotal numbers, I had a friend who made 270k at a very low volume VA (5 ORs, done by ~3PM routinely, no cRNAs so 1 attending for 1 OR and residents rotating through) and another who made 390k at a VA with around 15 ORs, cardiac, transplants, etc and 1:2 - 1:3 coverage of cRNAs or residents (1:2 with residents of course). The cap for a VA salary is 400k because government jobs are limited by the President's salary, but you can exceed this number with raises and bonuses.

The variety of cases will vary significantly based on the VA as well. A lot of what the VA does often reflects the academic centers around it since many surgeons are "loaned" out by academic programs due to the lack of pay restriction in these scenarios, and the VA pays a portion of their salary. Finding surgeons who are purely VA employees at the more major VAs is not especially common. If you are at a VA associated with a big name academic center with great surgeons you have a higher likelihood of encountering a number of great surgeons at the VA and you'll be doing cases at a much faster pace than VAs elsewhere.

You will definitely lose your feel for OB and Peds, depending on where you practiced before, many major academic centers you may not be doing OB or Peds anyways unless you are on those "teams", so that part of it may be a wash.

The basic benefits are as follows (link: https://www.opm.gov/retirement-services/publications-forms/pamphlets/ri90-1.pdf)

Pension: 5 years to be vested, the formula for payout mentioned above is roughly correct, the % deduction from your pay is somewhat hard to predict as it depends on individual pay, but for higher paid individuals its something around 5%. You would need to find someone who works for a VA currently who could give you a more exact amount. A lot of the traditional VA "rules" of how things are calculated do not really apply to physicians as they get the top end of a lot of benefits from day 1.

401K: The thrift savings plan is basically a 401k. You vest after 18 months. The investment options basically boil down to a S&P500 index, a bond market index, and a government bond type index. The matching is 1% with no contribution from you and then up to 10%, but the dollar amount maxes well before the 10% for a physician salary. You'd need to find someone currently employed there to find out the dollar amount it maxes at because it changes year to year.

The vacation is 26 days a year, you can bank something in the 80s, and they will buy them back when you leave. Sick days I think are 12ish a year and these aren't bought back, but unused ones are added to time spent when calculating your pension. It is not correct that everyone gets 26 vacation days. The amount of vacation days earned changes the longer someone is employed (with a max of 26 a year), but physicians start at the maximum. You get all federal holidays off (I don't know how the random Trump holidays work).

Your day to day varies significantly between VAs. The more advanced ones will run similar to an academic center, likely with longer turnover times in between, and more vilified ones you may just be warming a seat most of the day.

I disagree with the "do it tomorrow" attitude being endemic. I have seen some VAs where this is the case, but I have also seen others where it is very overtly not. The one thing that is removed is a pay incentive to do cases that may otherwise not be the best idea to do.

If you have any questions I have two very good friends who are current employees with the government and I can pass it along.
 
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Out of curiosity, does the government shutdown have any effects on the VA? Like limiting elective surgeries, for example
 
As far as finding stellar clinicians. Dept of Veterans Affairs is the worst. The bureaucracy is overwhelming and it seems to take precedence over everything including clinical care. Everyone at the V.A. is just putting in time til retirement which leads to lackadasical (lets do it tomorrow) attitude. After some time you will become one dimensional (no OB peds). The vacation is 26 days with every federal holiday off. Floor nurses get the same exact vacation if that tells you anything. And nurses are independent of physicians there. except the CRNAs who still have to report to the anesthesiologists. Other than that, it may be a great job. You do get a pension as you mentioned if you stay for a minimum of five years. then its 1% for each year thereafter. so if you stay for ten years your pension would be 10 percent of your highest three years salary. Lets just use 300,000. SO after age 62 you would receive 10% of 300k every year for the rest of your life. Its not free though. They take out like 1000 bucks every month from your paycheck to fund this said defined benefits plan. I personally think you can set up your own defined benefits plan through schwab and do better.

So I guess VA pension not that good? Have to work 35 yrs to get 30 percent of salary?
 
Out of curiosity, does the government shutdown have any effects on the VA? Like limiting elective surgeries, for example

No. The VA is not effected by the current government shutdown. Furthermore, since OR and anesthesia are considered "essential personnel" we have to come to work regardless.

So I guess VA pension not that good? Have to work 35 yrs to get 30 percent of salary?

Depends on when you join and if you're full time or part time (many variations of part time here). The good thing is even if you work 1 day a week you qualify for the benefits and can still get pension if you work long enough to fulfill the requirements. This is most favorable for older PP people who don't want to work as hard nearing retirement and still get a paycheck and build pension at the VA.

I started at my VA straight out of residency because of personal reasons. So I'll probably hit the 35 year max pension no problem. However, like the DM27 said, pay can be variable depending on VA location and locality adjustments. I also don't necessarily work full time and I have days I can pick up other gigs which is a nice supplement and keep my skills up. I hate OB and generally don't care about peds so that's not a big loss for me. While the bureaucracy can be maddening at times it is what it is working for the government. You'll never find a perfect place to work, so you just have to pick a gig that checks off the most boxes for you. I'm quite happy at my VA and lifestyle's pretty great too.

Some of the perks include: pension, matched TSP up to 5%, subsidized healthcare plans, 5 year loan repayment for "in need" specialties, no malpractice, disability paid for by gov., paid vacation (you accumulate a certain number of hours per pay period which you can take whenever). Good lifestyle.
 
So I guess VA pension not that good? Have to work 35 yrs to get 30 percent of salary?

If the salary is $300K and the ~1/3 pension is ~$100K then it's probably worth somewhere around $2M based on what you'd have to pay for a SPIA at age 65ish. That's OK, not great, but OK. Presumably you'd also be saving and investing in the TSP/401k during that time and would have additional savings.

The place the VA pension really shines is the ex-military people who buy in with active duty years, go reserves, and then double-dip the VA/military pension. If that's not you ...
 
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The place the VA pension really shines is the ex-military people who buy in with active duty years, go reserves, and then double-dip the VA/military pension. If that's not you ...
Also the ones at academic VA’s that double dip on the university retirement plus the VA pension.
 
If the salary is $300K and the ~1/3 pension is ~$100K then it's probably worth somewhere around $2M based on what you'd have to pay for a SPIA at age 65ish. That's OK, not great, but OK. Presumably you'd also be saving and investing in the TSP/401k during that time and would have additional savings.

The place the VA pension really shines is the ex-military people who buy in with active duty years, go reserves, and then double-dip the VA/military pension. If that's not you ...

I mean after 35 years of work assuming you didn't really work in other places you'll be 70 yrs old. The avg life expectancy is 78. that's worth 800k.
 
I mean after 35 years of work assuming you didn't really work in other places you'll be 70 yrs old. The avg life expectancy is 78. that's worth 800k.
76 for men and 81 for women ... but that's for newborns. Once you've hit 70 you've dodged death a bunch of times already, and all-comer life expectancy at that point is about 84 for men and 87 for women (per SS actuarial table). It's likely that a 70 year old physician has better health than a 70 year old of lower socioeconomic status. You also can't just multiply years by annual payout and get a value, because money now is worth more than money later.

Most physicians exit residency closer to 30, not 35. Retire at 65 with a 35 year pension, now now the average life expectancy is 18 (21 for women).

Valuing pensions isn't straightforward, so I think there's room for debate. I'm not aware of a generally accepted method that financial planners agree on, beyond using SPIA cost for an equivalent payout as a yardstick.

Anyway, if a physician's retirement plan involves working full-time until age 70, the physician needs a better plan.
 
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If the salary is $300K and the ~1/3 pension is ~$100K then it's probably worth somewhere around $2M based on what you'd have to pay for a SPIA at age 65ish. That's OK, not great, but OK. Presumably you'd also be saving and investing in the TSP/401k during that time and would have additional savings.

The place the VA pension really shines is the ex-military people who buy in with active duty years, go reserves, and then double-dip the VA/military pension. If that's not you ...
Sounds like you know what's going on?
If one set up their own defined benefits plan, would that beat the governments pension?
 
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Sounds like you know what's going on?
If one set up their own defined benefits plan, would that beat the governments pension?

Defined benefit plans are not something you can just do yourself ... so there are fees, and they can be relatively high, at least from the perspective of someone who's used to being a passive index investor. I haven't done it and it isn't an option for me right now so I haven't looked too closely, but I understand it to be something in the range of $thousands in annual fees. Plus whatever fees you incur with the actual investments, but at least those can (probably should) be low fee passive index funds. The benefit is that you can then put away a very large amount of money each year, pre-tax, much more than you'd be able to otherwise, which can dramatically lower your tax bill each year.

But a potential disadvantage is that your annual contribution is determined (each year) by a formula that includes factors such as your account balance, anticipated number of working years remaining that you will contribute, the actual defined benefit that you chose, etc. If you suddenly change jobs and your income decreases temporarily, making that expected DB payment might squeeze you more than you might like. If your investments do poorly one year, your required contribution the next may go up substantially. It's a defined benefit plan, meaning the assets in the account must be able to pay out that defined benefit, when the contribution years are up. And if the investments are coming up short, you must catch it up with larger contributions, or amend the plan (even more $ lost to fees).

So sure, you can beat a pension by earning more elsewhere and investing wisely, but maybe you won't. These things carry an additional, different sort of risk than other retirement plans.
 
Sounds like you know what's going on?
If one set up their own defined benefits plan, would that beat the governments pension?
You do a defined benefit when you get paid 1099, and you want more than the standard 401k/IRA pre-tax contribution. I have a defined benefit but may get screwed because I just became a W2. However, last year I was able to put away >100k pre tax which would be difficult to do (I think) with any other method.
 
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You do a defined benefit when you get paid 1099, and you want more than the standard 401k/IRA pre-tax contribution. I have a defined benefit but may get screwed because I just became a W2. However, last year I was able to put away >100k pre tax which would be difficult to do (I think) with any other method.


You can do a DBP as a W2.
 
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76 for men and 81 for women ... but that's for newborns. Once you've hit 70 you've dodged death a bunch of times already, and all-comer life expectancy at that point is about 84 for men and 87 for women (per SS actuarial table). It's likely that a 70 year old physician has better health than a 70 year old of lower socioeconomic status. You also can't just multiply years by annual payout and get a value, because money now is worth more than money later.

Most physicians exit residency closer to 30, not 35. Retire at 65 with a 35 year pension, now now the average life expectancy is 18 (21 for women).

Valuing pensions isn't straightforward, so I think there's room for debate. I'm not aware of a generally accepted method that financial planners agree on, beyond using SPIA cost for an equivalent payout as a yardstick.

Anyway, if a physician's retirement plan involves working full-time until age 70, the physician needs a better plan.

Oh i didn't realize we live so long!

Though the residency thing is getting later. Average MD matriculant age is 24. + 8 years = 32 minimum if no gap year or fellowship.
 
Similar to most things in life, this statement comes with some built in caveats and assumptions, but they are relatively safe ones. The benefit of the pension is that it is a guaranteed annuity. You could have invested your pension contributions into a series of index funds and have made a better return, probably. However, no one knows where the market will be in a few decades, and what types of changes will occur regarding how we are allowed to save for retirement as high income individuals. The appeal that I see in the pension plan is that while it is a worse return on your investment, you at least know you are retiring with a >100k/year safety net (if your career is at a VA), which is significantly better than 99% of the population could ever dream of.

Basically, it is in all likelihood a worse return on your investment, but finding anything close to that amount of guaranteed retirement income anywhere outside some form of pension plan is very unlikely. To privately finance an annuity of that magnitude you would need to be entering with well over $1 million in starting capital.

This is how I personally would view a pension plan. I would save for retirement as if it wasn't there, but have the peace of mind of knowing I have an extremely livable lifestyle provided solely by my safety net.

The other side benefit of most government pensions, which I believe extends to the VA, is your pension upon retirement includes your most recent health and dental insurance plans as well.
 
But a potential disadvantage is that your annual contribution is determined (each year) by a formula that includes factors such as your account balance, anticipated number of working years remaining that you will contribute, the actual defined benefit that you chose, etc. If you suddenly change jobs and your income decreases temporarily, making that expected DB payment might squeeze you more than you might like. If your investments do poorly one year, your required contribution the next may go up substantially. It's a defined benefit plan, meaning the assets in the account must be able to pay out that defined benefit, when the contribution years are up. And if the investments are coming up short, you must catch it up with larger contributions, or amend the plan (even more $ lost to fees).

I don't disagree with anything you have said but the plans are supposed to be designed so that they can weather market fluctuations without having to always make a bunch of plan amendments.

My understanding also is that taking the defined benefit at retirement isn't popular, most folks just roll it over into something like an IRA.
 
I work primarily at a large, academic VA, affiliated with a major university health system in a small urban area. I agree with a lot of what's been said about the benefits and pay (although, being in the highest "locality pay" region in the country, I'm not at 390 VA pay, so I don't know how that number would be possibly elsewhere). With regard to the pension, it's 1% x years of service x high3, and at year 20 or age 62, the multiplier increases to 1.1%. Expect by the end of your career, conservatively, 400K, 25 years, and you'd be looking at an annual 110K. Again, not amazing, but you would have contributed very little to receive that.

One of the things I like about working for the VA is that I don't have to think about insurance, billing, ability to pay, and the like, and being in an integrated health system, I know a LOT about my patients before they set foot in pre-op, and they get relatively well-coordinated care (e.g., if they're admitted and had an endocrine appt, or need an MRI for something else, or whatever, they get it). Administratively, it is a HUGE pain in the ars. Clinically, I have great equipment, plenty of drugs, and no one has ever hassled me about drug choice, costs, or things of that nature. There's a mission-focus here, kind of like working for the underserved at a County hospital. But again, administratively... oh man. Some places are able to make the VA "go," but we are not one of them. Hiring, scheduling, making policies... it's all REALLY hard.

Does the VA get the worst of the worst employees? Working in both systems (U and VA), I can tell you there's a difference. At the U, everyone is just "on" all the time, from the janitors to the administrators. It's definitely less so here. But then, wouldn't that include us?

So why am I here? My job is highly varied: I work in the OR and ICU here, and the ICU at the academic affiliate. I like variety. I do research, which was harder to do outside the VA. Although I work a decent # of hours, the intensity of those hours is probably less than many places (which means I can do other career advancement things: I spent a year with the Lean group getting trained and certified, I do research, as mentioned, and then the usual academic stuff people do; you're either into that or you're not). I've considered going solely to the University and, all told, their salaries are a little higher, but the job is harder. I've looked at a couple private groups in the area, and many offer a bit more money and a bit more vacation (not a ton better), but it's a really different job.
 
VA or fed pension for new employees after December 31 2012 isn’t great. The grandfather people only contribute 0.8% of their income (post tax) towards pension.

The new employees have to contribute close to 6x as much. (4.4%)

So someone one a $300k salary pre December 31 2012 contributed roughly $2400 a year towards their pension

Vs someone starting on January 1 2014 contributing $13000.

For the same payout!

Essentially you are funding your own pension as new employee at the 4.4% contribution rate
 
Wha!?

Please explain. My employee already is paying into a plan for me.


They’re called cash balance plans and it’s essentially a defined contribution plan disguised as a defined benefit plan. My W2 group has one. We each choose our own contribution amount which can only be changed once every three years. The asset allocation in the plan is standardized and very conservative so most of us are more aggressive in our 401k’s to yield a more balanced overall asset allocation. The advantage is that the contribution limit is very high so we can significantly reduce our current taxable income.

The Pros and Cons of Cash Balance Pension Plans

Contribution Limits » Kravitz Cash Balance Design
 
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Ugh, the title of this thread sucks. How did we get here
 
They’re called cash balance plans and it’s essentially a defined contribution plan disguised as a defined benefit plan. My W2 group has one. We each choose our own contribution amount which can only be changed once every three years. The asset allocation in the plan is standardized and very conservative so most of us are more aggressive in our 401k’s to yield a more balanced overall asset allocation. The advantage is that the contribution limit is very high so we can significantly reduce our current taxable income.

The Pros and Cons of Cash Balance Pension Plans

Contribution Limits » Kravitz Cash Balance Design
Okay, that makes more sense.

I can't do it with my employer as they already have a pension plan in place for me.
 

Cannot read the article since it is behind NYT pay subscription firewall.
But looking at the title, i can say this is a positive step for the veterans since the VA is a cesspool. It is the definition of SWAMP. if you look up SWAMP in the dictionary you should see:
veterans-affairs-logo-clipart-1.jpg
 
Cannot read the article since it is behind NYT pay subscription firewall.
But looking at the title, i can say this is a positive step for the veterans since the VA is a cesspool. It is the definition of SWAMP. if you look up SWAMP in the dictionary you should see:

:rolleyes:

There are good and bad VAs, much the same as with other hospitals. They're all pretty inefficient, but most offer good care. Some are excellent. I spend a couple or a few days per month at one that is superb.
 
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Agree with @pgg. I know 2 VAs. One is a flagship hospital for which veterans come from hundreds of miles, with the anesthesia team working harder than in some PP. The other is not.
 
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Is there a trick? Because I never found anything cheaper than Geico.
It depends on the local market. Geico tends to become expensive once it acquires market share. Buffett likes monopolies and pricing power, and his minions the same.

Also, most insurance companies start cheap (to get the account) and then slowly raise the premiums ("boiling the frog"). It's very typical with Geico. Suckers get punished for their loyalty. Because of this, I end up shopping around and switching insurers every 3-5 years.
 
I heard the military and the VA have overhauled the retirement system. Not surprising that it’s less generous now.
 
I heard the military and the VA have overhauled the retirement system. Not surprising that it’s less generous now.
The changes to the military retirement system are a mixed bag.

It used to be that it was an all-or-nothing deal. Do 20 years and get the pension. Do 19.5 years and get nothing. With the new system, there's some token matching to the military's 401(k) equivalent (Thrift Savings Program), so if you leave before 20 you will have at least received something. The 20 year pension is about 20% less valuable though. It's a net reduction in cost to the military obviously, else they wouldn't have changed it. But since the majority of servicemembers don't serve for 20 years, most come out ahead.
 
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Is there a trick? Because I never found anything cheaper than Geico.

It is mostly timing. From my understanding the rates you are offered when you first apply (assuming you do not have any intrinsic factors against you like accident history, young age drivers, etc. ) are somewhat of a crapshoot regarding their market conditions, the time of year, and the applicant. As your time goes on with the same company your rate will slowly creep up year to year and may eventually exceed the starting rates with other companies. For reference neither my wife or myself have anything on our driving records and nothing changed (no new cars, etc.) between applications.

My experience applying for auto insurance when we moved about 4 years ago (applying for myself and my wife). Was estimates (on 6 month payment plans, annual not offered), of $600 from the period for GEICO, $800 Progressive, $1000 Allstate. This was for identical coverage (or the most comparable possible between providers).

My GEICO bill was slowly creeping up each year and at the end of the period last year was sitting around $680 for 6 months, and a colleague told me that they had called to renegotiate before because of cheaper estimates from elsewhere. So I decided to resubmit to a few other agencies. This time around I got $450 from Progressive, $1400 (wtf?) from Allstate, and something like $800 from a third carrier who I forgot.

So I called GEICO and was told they do not negotiate on prices and I was being given the best offered and they may be able to save like $30 by bundling it differently. My next reaction is wondering why Progressive is so cheap. I called Progressive and told them what I was looking for and bluntly asked "why is my estimate so cheap?". After the rep was done laughing she then said she didn't know why. She explained it to me as basically the rates being offered are calculated through a fairly inscrutable process that takes into account their claims for the year in the area, amount of customers, and market conditions, etc. and that it is not uncommon to have extremely different rates from different companies.


TL;DR is if you're bored one day, check out other insurance companies and you may be in for a surprise, I'll likely do the same again once my rates creep up too much (though with this starting rate it'll be awhile).
 
I heard the military and the VA have overhauled the retirement system. Not surprising that it’s less generous now.

The VA overhauled its systems for employees awhile back. This history may have some inaccuracies, but the theme of it should largely be correct.

The prior system was called CSRS and was replaced by the current FERS program for any employee starting in 1987.

In broad strokes, the way that pension was calculated under CSRS was that you were paid in the following formula:
The average of your 3 years highest salary x 0.02 x years of service. This 2% was for someone who was in the system for 10 years or more, if it was 5-10 years the number was 1.75% and if less than 5 was 1.5%.

The new system (FERS) uses 1% instead of 2%, with a modifier if you've been in the system for 20 years or more and are 62 years of age or older where it is 1.1% instead of 1%.

So in broad strokes the pension system was cut in half. A VA-lifer attending could retire at their minimum retirement age making on average 2/3 of their typical yearly salary, now that number is 1/3. For the majority of people, assuming you trust the government at all (...) this meant you functionally did not have to save for retirement (not that I ever would recommend that approach) since in the CSRS system many attendings would be retiring collecting a yearly pension in the $120k/year + range with >200k/year in some of the better paying VAs. Now with some balancing out in VA pay, most VA lifers in the new system (FERS) will be collecting around 80k-100k a year. My personal way of looking at these pensions/annuities is that it is roughly equivalent to the amount of money I would need in my investments accounts in retirement to live off ~3.5% rate of return. So I view the 80k pension as being worth about $2,300,000 of money saved for retirement with the caveat that I cannot pass it along to my heirs (if I have any). This is a flawed way to think of it, but describing it to other people I found it made it easier for them to understand what they ultimately needed to save for retirement if they wanted to assume the pension was part of the equation.
 
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The VA overhauled its systems for employees awhile back. This history may have some inaccuracies, but the theme of it should largely be correct.

The prior system was called CSRS and was replaced by the current FERS program for any employee starting in 1987.

In broad strokes, the way that pension was calculated under CSRS was that you were paid in the following formula:
The average of your 3 years highest salary x 0.02 x years of service. This 2% was for someone who was in the system for 10 years or more, if it was 5-10 years the number was 1.75% and if less than 5 was 1.5%.

The new system (FERS) uses 1% instead of 2%, with a modifier if you've been in the system for 20 years or more and are 62 years of age or older where it is 1.1% instead of 1%.

So in broad strokes the pension system was cut in half. A VA-lifer attending could retire at their minimum retirement age making on average 2/3 of their typical yearly salary, now that number is 1/3. For the majority of people, assuming you trust the government at all (...) this meant you functionally did not have to save for retirement (not that I ever would recommend that approach) since in the CSRS system many attendings would be retiring collecting a yearly pension in the $120k/year + range with >200k/year in some of the better paying VAs. Now with some balancing out in VA pay, most VA lifers in the new system (FERS) will be collecting around 80k-100k a year. My personal way of looking at these pensions/annuities is that it is roughly equivalent to the amount of money I would need in my investments accounts in retirement to live off ~3.5% rate of return. So I view the 80k pension as being worth about $2,300,000 of money saved for retirement with the caveat that I cannot pass it along to my heirs (if I have any). This is a flawed way to think of it, but describing it to other people I found it made it easier for them to understand what they ultimately needed to save for retirement if they wanted to assume the pension was part of the equation.
I think you are significantly overvaluing that pension. An 80,000 pension is probably worth 1 million invested in the S&P. At the most, it’s worth the cost of an annuity producing 80k income, about 1.3 million dollars.
 
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I think you are significantly overvaluing that pension. An 80,000 pension is probably worth 1 million invested in the S&P. At the most, it’s worth the cost of an annuity producing 80k income, about 1.3 million dollars.
I disagree with your figures.

$1M invested in the S&P won't generate $80K of annual income for the lifetime of a retiree ... not without a very high rate of failure (running out of money before death). I mean, that's an 8% withdrawal rate, which is ridiculous. It's DOUBLE the 4% SWR most people agree is probably safe. Some people think 3% is the new 4%.

You'd need $2M invested (and it'd be foolish to have 100% of it in the S&P) to conservatively produce $80K/year until you're dead. (The 3% SWR crowd would argue for $2.6M.) Granted, if the money is invested it can be left to heirs, unlike a pension or annuity.

Another thing to consider is that FERS and military pensions are indexed for inflation. If you get a quote for a SPIA for a 65 year old male with a 2% COLA rider, you'll likely pay closer to $1.6 or $1.7M for that $80K/year benefit. Make it a 3% COLA rider (FERS is 2.8%) and that cost likely tops $2M.

Or per the Social Security actuary table, a 65 yo M can expect to live another 18 years. So if you time your death perfectly, and buy enough TIPS to produce $80K/year for those 18 years, you'll spend $1.44M. That's the minimum value I'd put on a COLA'd $80K pension starting at age 65.

What's an $80K FERS pension worth? IMO it's somewhere between $1.4 and $2.6M, depending on your risk tolerance.
 
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I disagree with your figures.

$1M invested in the S&P won't generate $80K of annual income for the lifetime of a retiree ... not without a very high rate of failure (running out of money before death). I mean, that's an 8% withdrawal rate, which is ridiculous. It's DOUBLE the 4% SWR most people agree is probably safe. Some people think 3% is the new 4%.

You'd need $2M invested (and it'd be foolish to have 100% of it in the S&P) to conservatively produce $80K/year until you're dead. (The 3% SWR crowd would argue for $2.6M.) Granted, if the money is invested it can be left to heirs, unlike a pension or annuity.

Another thing to consider is that FERS and military pensions are indexed for inflation. If you get a quote for a SPIA for a 65 year old male with a 2% COLA rider, you'll likely pay closer to $1.6 or $1.7M for that $80K/year benefit. Make it a 3% COLA rider (FERS is 2.8%) and that cost likely tops $2M.

Or per the Social Security actuary table, a 65 yo M can expect to live another 18 years. So if you time your death perfectly, and buy enough TIPS to produce $80K/year for those 18 years, you'll spend $1.44M. That's the minimum value I'd put on a COLA'd $80K pension starting at age 65.

What's an $80K FERS pension worth? IMO it's somewhere between $1.4 and $2.6M, depending on your risk tolerance.
I didn’t mean to suggest you could withdraw 80k/yr from 1M indefinitely. (You might be able to if the returns are good in your first several years of retirement, but that wasn’t my point.) I’d say an 80k pension is worth 1M all things considered (missed investment growth, inflexibility, lack of inheritance, etc.)

Also, at a 3-4% withdrawal rate your funds would never run out which isn’t a reasonable comparison to a pension.

It’s ridiculous to act like an $80,000 pension is worth $2.6M. If you are withdrawing 80k/yr from 2.6M investments you’ll probably have more than 6M in the account in 20 years. To compare to a pension you need to calculate a withdrawal rate that will likely deplete in 20-25 years.

A comparable annuity is the maximum value that you could reasonably assign the pension, but annuities are terrible investments so the pension is actually worth significantly less than the cash.
 
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I disagree with your figures.

$1M invested in the S&P won't generate $80K of annual income for the lifetime of a retiree ... not without a very high rate of failure (running out of money before death). I mean, that's an 8% withdrawal rate, which is ridiculous. It's DOUBLE the 4% SWR most people agree is probably safe. Some people think 3% is the new 4%.

From this Schwab calculator I determined an annuity providing $8,000 a month for life ($96K per year) for a 65 year old male (in Illinois as a random state to choose from their list) would cost approximately $1.566M right now.

Using a SWR calculation isn't quite right for determining the value of something equating to an annuity because sustainable withdrawal rates target what you can sustain for a 30 year retirement when in truth the life expectancy of a 65 year old male is < 20 years. Annuities provide far higher spending rates than a comparable SWR, but they leave nothing in an estate (or for a spouse).
 
The bigger change with fers (pension) happened after December 31 2012

Its even worst for new hires. Because people hired before that date only contribute 0.8% of their post tax money to the pension

Now new hires have to contribute roughly 6x more. 4.4%

based on a 300k salary someone hired before December 31 2012 contributes $2400 a year towards fers/pension post tax

Someone hired after December 31 2013 based on 300k salary is contributing $13200! A year.

jan 2013-dec 2013 hires contribute 3.2%.

so new hires are contributing a much higher amount towards their pension than old hires.

So do the math. In 20 years. A new hire would have contibuted $13200 x 20 years. Equals $264k over 20 years. Their pension will be roughly 60k (300k x 1.0 percent x 20 years)

so most docs who join Va Are in their 40s/50s.

say they retire age 65 (started age 45). Say they live 20 years. (Age 85). Reasonable to assume.

60k a year pension x 20 years is worth 1.2 million

but how much is the 265k u would have contributed ur self post tax money worth in 20 years??

I think a reasonable return would put that number between $600-800k of your own money over 20k if u would have invested $13200 a year on ur own.

So assuming 1.2 million is Va pension. In reality. Ur “benefit” is really only 400-600k from the federal govt assuming u even live to age 85. Cause ur own contribution would have been worth $600-800k on its own.

so new hires contribute 4.4%.
It’s not a good deal. Unless u are looking for less calls.

Remember most anesthesia jobs pay 400-450k these days. So u are giving up 100k easily each year in income.

So Even long term. The Va pension doesn’t make much sense. U are easily losing 100k a year to go to VA. Over 20 years. U give up 2 million in income. For a 400-600k “benefit” of the pension.

sure it comes with subsidized private health care worth approx 10k a year. But with Obamacare/ACA. Most people wanting to retire earlier say age 59 don’t need to worry about pre Existing condition. So even the private healthcare that comes with the pension is render pretty mute these days.
 
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From this Schwab calculator I determined an annuity providing $8,000 a month for life ($96K per year) for a 65 year old male (in Illinois as a random state to choose from their list) would cost approximately $1.566M right now.

That estimate doesn't include a COLA rider. Even at 2% inflation that $8K/month is only worth around $5K after 20 years. The COLA is important and it costs money.


Using a SWR calculation isn't quite right for determining the value of something equating to an annuity because sustainable withdrawal rates target what you can sustain for a 30 year retirement when in truth the life expectancy of a 65 year old male is < 20 years. Annuities provide far higher spending rates than a comparable SWR, but they leave nothing in an estate (or for a spouse).
I totally agree. I brought up the SWR calculation because it was suggested $1M invested could produce $80K/year of income for the individual's remaining lifetime, and that's a risky bet. The point of safe SWR rates isn't leaving money to heirs - it's having a high probability of not running out of money before dying.

Just because the MEDIAN life expectancy of a 65 yo M is 18 years doesn't mean many 65 yo men won't live for 30. The average 65 yo who doesn't plan for a 30 year retirement is a playing a dumb game.
 
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