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Staying for the Pension

Many doctors are stuck in depressive and oppressive work environments for their pensions. They are sticking around for the promise of future money to have some dream retirement.

I walked away from my own Kaiser pension at the age of 38 and discussed the value of that in that blog post. It might seem ridiculous to pass on $800,000 of future value, but there are things I value more than promised money.

Valuing Money Excessively

What is the value of money to you? Doctors value the same dollar more than the minimum wage worker.

We believe we need money to be happy and to live a safe life. And it’s only because of money that we can genuinely enjoy being alive.

I am still somewhat obsessed with money – I’m not preaching from some higher place. I keep thinking that I need to save and invest more of it. Something I’m working on.

Viewing Money as a Tool

I’ve come a long way from the past when my life was dominated by the income I made. I definitely stayed at my job longer just to vest in the pension.

Now, I view money as a tool that has helped me be less obsessed and understand the value of my pension. I don’t want to stick around just because someone is waving a pension or retirement at me.

The job itself should be of value to me.

What can money do for me? What is its purpose? I could use a tool to fix everything in my life, but that doesn’t make sense.

A tool is only as good as the person using it. However cliche that sounds, physicians have developed a rather excessively emotional relationship with money.

Staying for the Pension

First, you need to know what the value of this pension is in the future. Most doctors I coach don’t know that number.

For example, Kaiser might give you 2% yearly for the first ten years with a 10-year vesting plan. This is based on your three highest income years, averaged out.

Let’s say the average was $250,000. So 20% of that would be $50,000. You would receive that starting at age 65 until you die.

What will you do with $50,000 at age 65? Undoubtedly, $50k will be worth about $20k when you’re 65. And you’ll still have a bit of taxes to pay on it.

Why Pensions Exist

We refer to pensions as golden handcuffs because they are designed very intentionally to keep doctors working regardless of how shitty their work situation is.

“Oh, it’s okay, at least I’m getting paid a lot. And I’ll have a fat pension when I retire.”

Large medical groups and state-run hospitals hire third-party benefits administrators and consultants. These people are gods at what they do. They know precisely what to dangle in front of you to keep you locked into your job.

When the working conditions deteriorate, the employer doesn’t change the working conditions. Instead, they offer you more income per hour. Or they raise your employment benefits.

They know you’ll stay for the pension if you have a vesting schedule. They also believe that you don’t know how to build your own pension or save for your own retirement.

When is a Pension Worth a Thought?

If you love the work, and your employer values you, then it makes sense to consider your pension.

Staying at a job for the benefits should be a consideration if you genuinely have no other options in life. You are so broke financially and so incapable career-wise that it’s the only thing you can do.

Perhaps you have sat down and know exactly how and where you want to live at age 65. Okay, you need the money; I get it. In that case, it makes total sense to factor in the pension’s value and stay for the pension.

Think About Your Future Self

Dr. Mo in 2022 is unrecognizable from Dr. Mo in 2016. I have grown in good ways, and I have different goals now.

The money, resources, and mentality I have now are so different. I don’t need a pension. And I suspect many of us who can save money won’t require a pension.

I am a more uncomplicated person. I don’t dress fancy, I cook my own meals and enjoy walking, reading, and having coffee with friends.

What’s your health going to be like at 65? Chances are that most of us are going to be quite unhealthy. It’s just stats; I’m not judging you. Working at a job you don’t like won’t help your health prospects.

Physicians have a lower life expectancy than non-physicians. It’s the stress. The stress that perhaps comes from working in a profession that isn’t rewarding causes more stress than offering value.

2 replies on “Staying for the Pension”

This is my conflict nowadays. I’m about less than 2 years from vesting and ever since the pandemic I’ve had a very hard time at my job. Everyone around me seems to think that it would be a waste to leave that pension. The value with 10 years service is about the same noted here so I ran the numbers similarly to what you did and it made me think that, if I rollover that money to a IRA account it may grow way more in 20-25 years even without any further contributions. But the fear and scarcity mindset linger around. Opening a side business helped me see a bit beyond that so hopefully I make decisions by the end of the year. Thank you for sharing in a thoughtful way.

Thank you Tania for sharing your situation – your vulnerability and honestly is appreciated.
If those who are around me giving me advice as to whether I should or shouldn’t stay for vesting are in happy jobs and living fulfilling lives then I’m gonna perk up and ask for more input. That tends to not be the case because those in our circles tend to easily get swept up by the number of zeros – understandably so.
When I walked away in 2017 – not even a decade ago now – it was a tough decision, not difficult mathematically, but difficult emotionally. Now, I hardly think of that decision and can’t imagine an alternative option. It would be nice to have that financial cushion in my future but I say that now with my current fearful-lenses. I suspect that by the time I’m 65 – a couple of decades from now- I won’t remember that I ever could vest in a pension.

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