Everything about Pensions

Pensions are something you should understand whether you are applying to a firefighter job or you are twenty years on the job. The former, you should be informed about how much money you have earned each month for the rest of your life. The latter, so you can be involved and informed during negotiations so you can be knowledgeable when it comes time to make a decision.

What is a Pension?

Pensions are a retirement plan that will give you consistent regular payments after you have retired. This is different from a 401k but very few departments do this so I can talk about this at another time. Pensions for ems workers are typically much more lucrative as they are incentivizing you to work in much more hazardous conditions that have extremely hazardous risks that follow that will follow you down the road to retirement. Its typically expected that due to the job you will die 10 years sooner than the average person. Bleak but eh thats what the science says! Back to the numbers.

So for the majority of pensions, you contribute a certain percent of your paycheck (3%-15% typically) towards the pension, and then the employer ( whether that be the city or county) will also contribute to that pension fund. Those combined contributions are then invested to help make more money for the fund and thus the pension.

Vesting

Many departments require that you work a certain amount of years before you are permitted to obtain your pension benefit. So lets say your department takes 10 years to get vested. If you leave before hand that means you can not get the vested pension. In the same voice this does not mean youll automatically get to start collecting, There may be stipulations that must still be followed per your contract such as if there is an age restriction.( will talk about that more below)

How does the Pension Math work?

If you ask around at various departments you will hear things like, " we have a 25 year with a 3% multiplier with an age of 50". So lets dissect that statement.

25 Year= You have to work there for 25 Years

3% multiplier= For all of those years you get 3% which is your benefit multiplier (3% every year for 25 years tops you out at 75%)

Age of 50 = You have to at least work until the age of 50 before you can receive the benefits of the pension.

Departments best years - (typically your best 3 or 5 years)

So after 25 years of service you will get 75% of your departments alloted time slots for best years. Lets be conservative and say your departments pension is your best 5 years.

If you were to make 100k each year for five years this is how the math would go.

Year 1 +year 2+year 3+year4+year 5/5 years= average of best 5 years

100k+100k+100k+100k+100k/5= $100,000 is the average of best 5 years

$100,000 x 75%= $75,000 every year for the rest of your life

average of best 5 years x multiplier = annual amount to be paid to YOU

$75,000/ 12(months in a year)= $6,250 a month for the rest of your life

So to sum it up, if you work at this department, you are expected to work for 25 years and once you are at least at the age of 50, assuming your top 5 years nets you 100k each year you will make $75,000 a year or $6,250 every month for the rest of your life.

Is that all I need to know about pensions?

This could get more intricate and lucrative for you if youre fortunate enough to have a COLA (cost of living adjustments) after you pension out. Some departments have up to 3% COLA after you retire. So using the same number above, for the next 5 years of compounding 3% from the cola you would make:

100k first year, 103k 2nd year, $106,090 3rd year, $109,272.7 fourth year and so on and so forth.

So thats all the good news. the part that sucks is the next part. In order to participate in a pension, majority of systems require you to contribute to it. So lets say its 5%. if you take the percentage of your check that is pensionable and you take 5% of that, that is what you contribute to your pension.

If the portion of your paycheck thats pensionable ends up equalling $2,000 you would contribute $100 to the pension. So you will have $1,900 before taxes and all the other crap hits.

As you make more you will contribute more to the pension but do not fret it all works out in the end!

***I will be updating and adding further tables and graphs to this page to make it more easily understandable as time goes on.***