WEBVTT NOTE This file was generated by Descript 00:00:05.057 --> 00:00:08.177 Jon: Welcome to the Fiscal Firehouse, a podcast dedicated to promoting 00:00:08.177 --> 00:00:10.097 financial literacy to firefighters. 00:00:10.247 --> 00:00:14.807 I'm your co-host, John Beatty, executive board member of Local 1309, a lieutenant, 00:00:14.927 --> 00:00:16.967 and also a certified financial planner. 00:00:17.297 --> 00:00:21.857 With me, I have the other co-host of the fiscal firehouse, Louis Barella, executive 00:00:21.857 --> 00:00:25.967 Board member of Local 1309 ambulance driver, and want to be financial expert. 00:00:26.567 --> 00:00:29.627 Together, John and I hope to bring clarity to the world of personal finance, 00:00:29.687 --> 00:00:31.427 specifically relating to firefighters. 00:00:31.937 --> 00:00:34.397 Firefighting is a difficult job making sound. 00:00:34.397 --> 00:00:35.802 Financial decisions shouldn't be. 00:00:36.317 --> 00:00:40.097 In today's episode of the fiscal Firehouse, John and Louis will go 00:00:40.097 --> 00:00:44.927 over the defined Benefit Pension Plan administered through the Fire and Police 00:00:44.927 --> 00:00:48.317 Pension Association, also known as FPPA. 00:00:48.907 --> 00:00:52.687 John and Louis will discuss how the pension plan is funded, what the 00:00:52.687 --> 00:00:57.092 contribution rates are, and then also what your expected, defined benefit. 00:00:57.502 --> 00:01:02.002 Is going to be John and Louis will also briefly discuss different retirement 00:01:02.002 --> 00:01:03.942 options regarding the pension plan. 00:01:04.182 --> 00:01:09.332 This is part one of a two-part series regarding the defined benefit pension 00:01:09.332 --> 00:01:14.352 plan Without further ado, let's kick it over to local 1309 studios and the 00:01:14.352 --> 00:01:16.212 recording of the fiscal firehouse. 00:01:19.168 --> 00:01:22.678 Welcome back to another episode of the Fiscal Firehouse. 00:01:23.038 --> 00:01:24.538 I'm your co-host John Beatty. 00:01:24.598 --> 00:01:29.038 With me as always, I have my friend and partner, LB Louis Barella. 00:01:29.248 --> 00:01:30.238 What's going on today, Louie? 00:01:30.358 --> 00:01:30.868 Louie: Oh man. 00:01:30.868 --> 00:01:32.068 So much going on today. 00:01:32.128 --> 00:01:33.208 So much going on today. 00:01:33.238 --> 00:01:34.453 So much going on the a shift. 00:01:35.063 --> 00:01:38.063 John, if you don't mind, I just wanna start with a point of personal 00:01:38.063 --> 00:01:41.663 privilege, as we like to say, I guess, in, uh, in union meetings, union plan. 00:01:41.848 --> 00:01:46.228 today we rung out a legend after 18 years. 00:01:46.408 --> 00:01:51.448 Ronald T side bottom retired out of station three on the a shift. 00:01:51.818 --> 00:01:54.918 he was my engineer and he is, just a dear friend. 00:01:55.008 --> 00:01:56.898 This guy, as you know, John was. 00:01:57.148 --> 00:01:58.678 He's the best of West Metro. 00:01:59.188 --> 00:01:59.998 He's a hard worker. 00:01:59.998 --> 00:02:05.008 He's always happy and positive, and he has an enthusiasm unknown to mankind. 00:02:05.438 --> 00:02:07.328 he's just an amazing mentor too. 00:02:07.418 --> 00:02:11.648 And so, yeah, we had a, we had a really nice last set with him. 00:02:12.068 --> 00:02:14.558 Had a dinner on night two, steak dinner. 00:02:14.588 --> 00:02:18.188 His family, his son came and, it just was really cool. 00:02:18.188 --> 00:02:22.268 He got some cool retirement gifts from past and, current crew members. 00:02:22.898 --> 00:02:24.908 And, it was just, it was a really cool night. 00:02:24.908 --> 00:02:27.188 And talk about a guy that has done it right. 00:02:27.218 --> 00:02:30.728 He made his mark on this organization and on the guys that he worked with. 00:02:31.448 --> 00:02:34.688 And, he was the sole of our crew for a long time. 00:02:34.688 --> 00:02:36.308 I mean, he's been the soul of three A for. 00:02:36.883 --> 00:02:37.813 Eight, eight years. 00:02:38.473 --> 00:02:40.393 And so, uh, it was just really special. 00:02:40.493 --> 00:02:42.263 he, like I said, he did it right. 00:02:42.323 --> 00:02:43.733 Like I said, he did it right. 00:02:44.153 --> 00:02:47.173 I and, Ron, I just want to give you a special shout out, but I know you're 00:02:47.173 --> 00:02:49.333 retired now and you're probably like, I don't need these guys. 00:02:49.333 --> 00:02:51.883 I don't need this Financial Independence podcast. 00:02:51.883 --> 00:02:52.813 I'm all done with that. 00:02:53.353 --> 00:02:56.503 But, if you are listening, I just want you to know that, 00:02:56.503 --> 00:02:57.673 I love you and I'll miss you. 00:02:57.733 --> 00:02:58.963 I'll miss Apple 30. 00:02:59.053 --> 00:03:03.253 I'll miss the late nights laughing around the firehouse table and, all the bullshit 00:03:03.253 --> 00:03:05.053 we gave each other while on shift. 00:03:05.053 --> 00:03:08.713 So have a great retirement and thank you for being a great friend. 00:03:09.673 --> 00:03:10.783 Jon: Well said Louie. 00:03:10.783 --> 00:03:15.013 And, uh, Ron, although I don't have the relationship that you had with 00:03:15.013 --> 00:03:18.983 him, he is the epitome of what you look up when you see work ethic. 00:03:19.163 --> 00:03:21.143 Like you wanna see a person that just works hard. 00:03:21.713 --> 00:03:22.253 That's him. 00:03:22.373 --> 00:03:25.253 And, shout out to him and Kathy and the rest of his family. 00:03:25.583 --> 00:03:28.493 I know he is, got a lot of stuff planned, and, he's no spring 00:03:28.493 --> 00:03:30.023 chicken, so get to it wrong. 00:03:30.023 --> 00:03:33.503 Get on those Harley rides and, ride off into the sunset. 00:03:33.503 --> 00:03:34.883 So, yeah, well said. 00:03:34.883 --> 00:03:35.183 So. 00:03:35.483 --> 00:03:35.693 Yep. 00:03:35.693 --> 00:03:36.683 Nice job, Ronald. 00:03:36.873 --> 00:03:42.513 and while we're on the, points of personal privilege, it's almost, February 28th, 00:03:42.543 --> 00:03:44.223 which is my wife, Katie's birthday. 00:03:44.253 --> 00:03:45.003 technically. 00:03:45.238 --> 00:03:47.968 Technically speaking, it's February 29th. 00:03:48.328 --> 00:03:50.638 She's a Leap Day kiddo, 00:03:50.738 --> 00:03:50.958 Louie: So 00:03:51.148 --> 00:03:54.538 Jon: she's actually 10 and a quarter starting, on Friday. 00:03:54.538 --> 00:03:55.798 special shout out to Katie. 00:03:55.798 --> 00:03:55.858 To 00:03:55.923 --> 00:03:56.883 Louie: Happy birthday, Katie. 00:03:57.148 --> 00:03:57.418 Jon: right. 00:03:57.418 --> 00:04:01.138 She, she supports, obviously me and the podcast and everything else. 00:04:01.138 --> 00:04:04.378 All of our spouses and family put a lot of time and effort into 00:04:04.378 --> 00:04:06.478 sporting us to do what we love to do. 00:04:06.478 --> 00:04:08.068 So special shout out to her for 00:04:08.328 --> 00:04:12.758 Louie: And Katie on her own accord gave us a really nice gift during Christmas. 00:04:12.758 --> 00:04:16.838 She gave us these really cool shirts with our podcast logo on it. 00:04:17.328 --> 00:04:17.928 just really cool. 00:04:17.928 --> 00:04:19.188 She got one for the whole family. 00:04:19.218 --> 00:04:22.763 We're still waiting to get a picture of my family, all my kids, including the 00:04:22.763 --> 00:04:24.433 baby in the little shirt that she got us. 00:04:24.433 --> 00:04:26.648 So that was a very thoughtful, very cool gift that she 00:04:26.708 --> 00:04:28.748 Jon: Yeah, maybe we'll see some, maybe we'll get some merch. 00:04:28.808 --> 00:04:33.113 Maybe we'll start pushing some merch, on the, on the Instagram and on the website 00:04:33.113 --> 00:04:34.823 so we can, start making some money. 00:04:34.823 --> 00:04:36.473 Oh, wait, no, this is a nonprofit. 00:04:36.473 --> 00:04:39.443 This is a union sponsored podcast, but it's for the greater good. 00:04:39.443 --> 00:04:40.933 But, yeah, shout out to her. 00:04:41.203 --> 00:04:42.553 So we're gonna kick things off. 00:04:42.603 --> 00:04:45.573 this is gonna be the pension episode, the heavy hitter, as 00:04:45.573 --> 00:04:47.193 you call it, the cornerstone. 00:04:47.223 --> 00:04:47.523 Yep. 00:04:47.553 --> 00:04:51.813 This is what allows us to hopefully get outta here at a reasonable age and 00:04:51.813 --> 00:04:54.233 have a nice, lifestyle as we leave. 00:04:54.453 --> 00:04:57.633 but before we get into the pension, some of the feedback that we've had 00:04:57.633 --> 00:05:00.993 from the listeners is, they're like, man, I love what you guys are doing. 00:05:00.993 --> 00:05:01.773 This is awesome. 00:05:01.773 --> 00:05:05.193 I'm learning a ton, but so much of what you guys are talking about. 00:05:05.193 --> 00:05:06.873 Is forecasting into the future. 00:05:06.873 --> 00:05:07.983 And that's so far off. 00:05:07.983 --> 00:05:12.063 I just got hired and you guys are talking about the 4 57 plan and all 00:05:12.063 --> 00:05:14.823 these other things, but dude, I'm not gonna touch that for 30 years. 00:05:15.063 --> 00:05:19.413 Is there anything, any advice, is there any quick wins that I can have that I can 00:05:19.413 --> 00:05:22.203 start saving a little ching right now? 00:05:22.233 --> 00:05:26.643 So we're gonna start trying to incorporate some quick little hits and potentially 00:05:26.643 --> 00:05:30.403 some, lost money out there if you will, in which you can, find a little 00:05:30.403 --> 00:05:32.023 bit of extra ching in your pocket. 00:05:32.023 --> 00:05:35.773 So, uh, there is something in the great state of Colorado called 00:05:35.773 --> 00:05:38.023 the Great Colorado Payback. 00:05:38.263 --> 00:05:40.183 So this is actually administered through the, 00:05:40.233 --> 00:05:43.683 The Department of Revenue, and this has actually been going on for many 00:05:43.683 --> 00:05:47.193 years, at least the last five or six years, and they'll advertise 00:05:47.193 --> 00:05:49.113 it every once in a while on tv. 00:05:49.413 --> 00:05:52.353 But a shout out to Kyle Lupe, we were at the training center 00:05:52.353 --> 00:05:54.693 eating some lunch the other day and he was talking about it again. 00:05:54.693 --> 00:05:56.913 I was like, oh man, I haven't done that for a while. 00:05:56.913 --> 00:05:58.143 I haven't looked up that stuff. 00:05:58.143 --> 00:05:59.583 So just Google it. 00:05:59.733 --> 00:06:00.873 You can get on the website. 00:06:00.873 --> 00:06:02.853 It's super easy to fill out, I promise you. 00:06:02.853 --> 00:06:04.053 It's not a phishing scam. 00:06:04.053 --> 00:06:06.993 There's no Nigerian prints offering you millions of dollars. 00:06:07.233 --> 00:06:11.253 But there is something, where all the companies, if you've registered 00:06:11.253 --> 00:06:15.483 with, whether it's bank accounts, phone companies, cable, all sorts of 00:06:15.483 --> 00:06:18.873 things, if you have money returned to you and they can't verify your 00:06:18.873 --> 00:06:22.423 address or something else like this, it goes to the Department of Revenue. 00:06:22.423 --> 00:06:25.183 And they basically keep it until someone claims it. 00:06:25.183 --> 00:06:27.133 So according to their website. 00:06:27.143 --> 00:06:33.023 Over $765 million has been claimed since they've gone live with this 00:06:33.023 --> 00:06:34.733 thing, a tremendous amount of money. 00:06:34.733 --> 00:06:36.623 So just in Colorado. 00:06:36.623 --> 00:06:39.743 So when this thing first kicked off, I did my little search. 00:06:40.103 --> 00:06:44.393 And I'm not gonna shit you, I got like 1200 bones back in my pocket. 00:06:44.423 --> 00:06:48.253 If those of you that don't know me, I was a little bit of a vagabond for a while. 00:06:48.253 --> 00:06:52.213 Traveled a lot of places, lived in a lot of different apartment complexes. 00:06:52.483 --> 00:06:56.323 So most of it was, like I said, some type of deposit that was owed 00:06:56.323 --> 00:06:58.033 to me or something else like this. 00:06:58.303 --> 00:06:59.773 And it's super easy to claim it. 00:06:59.773 --> 00:07:00.523 So go on there. 00:07:00.733 --> 00:07:04.273 You basically just type in your demographic information and then depending 00:07:04.273 --> 00:07:06.253 on what it is, they might make you upload. 00:07:06.253 --> 00:07:08.893 Like I had to upload my driver's license photo and that was it. 00:07:09.133 --> 00:07:11.863 And I just did it again today just for grins to see if I 00:07:11.863 --> 00:07:13.303 had any lost money out there. 00:07:14.353 --> 00:07:14.503 Louie: And 00:07:14.503 --> 00:07:16.783 Jon: I got 87, 78 coming back 00:07:16.783 --> 00:07:17.138 Louie: Oh yeah, baby. 00:07:17.363 --> 00:07:19.423 Jon: within, 30 days is what they promised 00:07:19.423 --> 00:07:21.343 Louie: almost a wine app membership for a whole year. 00:07:21.403 --> 00:07:22.183 Jon: almost. 00:07:22.183 --> 00:07:23.803 So those listeners out there, 00:07:23.843 --> 00:07:24.263 Louie: do it. 00:07:24.263 --> 00:07:26.358 I, Hey, I haven't done it in a while, but I've done it a couple 00:07:26.358 --> 00:07:27.828 times and I've not gotten anything. 00:07:27.873 --> 00:07:29.083 I have $0 out. 00:07:29.133 --> 00:07:30.453 I'm already pretty pension and 00:07:30.508 --> 00:07:33.868 Jon: we know how very, uh, you know, you're just very 00:07:33.868 --> 00:07:35.308 analytical, very organized. 00:07:35.308 --> 00:07:37.438 You've got all the stuff that's coming to you for those, the of 00:07:37.438 --> 00:07:39.388 you that are not organized like me. 00:07:39.608 --> 00:07:40.418 look at this though. 00:07:40.418 --> 00:07:42.728 It's called the great Colorado payback. 00:07:43.058 --> 00:07:46.898 Go on the website, put in your information and see if there's any lost money. 00:07:46.898 --> 00:07:49.898 Now there are some things, especially that are through the state. 00:07:50.178 --> 00:07:53.178 they will make you have a lot more verification when it comes to who 00:07:53.178 --> 00:07:55.318 you are, producing other documents. 00:07:55.318 --> 00:07:59.448 But for the majority of us, it's just uploading a driver's license, maybe a 00:07:59.448 --> 00:08:01.188 social security card, something like that. 00:08:01.188 --> 00:08:03.118 But, yeah, let's see if there's any lost money. 00:08:03.118 --> 00:08:07.018 And I'd be curious, let us know if you guys, uh, maybe we should have a contest 00:08:07.198 --> 00:08:10.168 Who found the most lost money out there? 00:08:10.168 --> 00:08:12.718 Maybe we will, throw in a little gift card or maybe some merch. 00:08:12.718 --> 00:08:12.838 I was 00:08:12.913 --> 00:08:14.833 Louie: I was gonna say, maybe whoever finds the most can 00:08:14.833 --> 00:08:16.393 take us out and buy us a drink. 00:08:16.393 --> 00:08:17.053 Come on, man. 00:08:17.053 --> 00:08:17.863 Like this free money. 00:08:17.863 --> 00:08:18.463 Let's go it 00:08:18.478 --> 00:08:19.288 Jon: a drink. 00:08:19.288 --> 00:08:20.248 Absolutely. 00:08:20.263 --> 00:08:23.383 Louie: that's the great Colorado payback is Colorado's website. 00:08:23.383 --> 00:08:26.293 If you are from a different state, other states have something similar. 00:08:26.293 --> 00:08:28.483 It'll be called, not necessarily the Great payback, but it'll 00:08:28.483 --> 00:08:29.833 be called something like that. 00:08:30.293 --> 00:08:32.753 there's an association, it's called the National Association of 00:08:32.753 --> 00:08:36.563 Unclaimed Property Administration, where, it lists like different 00:08:36.563 --> 00:08:37.793 states, websites where you can go. 00:08:37.793 --> 00:08:41.163 So if you lived in a different state and you might have money, outstanding 00:08:41.163 --> 00:08:45.213 from one of those other states, you can search on their website as well. 00:08:45.603 --> 00:08:48.633 So yeah, look, if you're, even if you're outside of Colorado, that's 00:08:48.633 --> 00:08:49.173 Jon: a good point. 00:08:49.173 --> 00:08:51.513 And I know we've got some outside listeners outside the state, 00:08:51.513 --> 00:08:53.673 but we also have a ton of people that just moved here and they're 00:08:53.673 --> 00:08:54.903 from all sorts of other places. 00:08:54.903 --> 00:08:58.863 So yeah, you might have unclaimed property and wherever other beautiful 00:08:58.863 --> 00:09:01.843 state that you lived in before here, yeah, don't let that state take it. 00:09:02.023 --> 00:09:03.973 I don't know what, I'm sure there's statute of limitations to 00:09:04.108 --> 00:09:04.168 Louie: Yeah. 00:09:04.528 --> 00:09:04.978 I'm sure 00:09:05.023 --> 00:09:07.768 Jon: some point it just goes back at the general coffers, yeah, 00:09:07.768 --> 00:09:09.298 don't, don't wait too late on that. 00:09:09.388 --> 00:09:12.778 So that's our little quick tip for, how to find a little extra money 00:09:13.048 --> 00:09:15.598 that, that you may be entitled to, that you just didn't know about 00:09:15.598 --> 00:09:16.798 and how to go ahead and claim that. 00:09:16.798 --> 00:09:16.888 Yep. 00:09:17.488 --> 00:09:19.528 All right, so that being said, we're gonna kick it off. 00:09:19.778 --> 00:09:22.298 so this is gonna be a two part series, right? 00:09:22.298 --> 00:09:25.298 So there's a lot to unpack when you're talking about the pension plan. 00:09:25.578 --> 00:09:28.338 and we don't wanna make this a three hour conversation, so we're gonna 00:09:28.338 --> 00:09:30.228 give you some of the highlights today. 00:09:30.448 --> 00:09:34.238 and then we will get into some of the finer details for part two of the episode. 00:09:34.238 --> 00:09:37.358 But Louie just want to kick it off and just talk about what the 00:09:37.358 --> 00:09:39.068 pension plan is in generalities. 00:09:39.068 --> 00:09:40.388 And I will highlight this. 00:09:40.778 --> 00:09:44.648 The plan that we are gonna talk about is, Colorado specific, 00:09:44.708 --> 00:09:46.358 firefighter and police specific. 00:09:46.458 --> 00:09:47.358 So FPPA. 00:09:47.358 --> 00:09:51.378 So if you have something on any of your documents that says you're part of the 00:09:51.378 --> 00:09:54.378 FPPA plan, this episode is for you. 00:09:54.468 --> 00:09:54.708 Louie: Yep. 00:09:54.888 --> 00:09:55.158 Yep. 00:09:55.488 --> 00:09:56.568 so yeah, we'll kick it off. 00:09:56.568 --> 00:09:59.538 Like John, you mentioned that I like to call it the cornerstone 00:09:59.568 --> 00:10:00.918 of financial security. 00:10:00.918 --> 00:10:03.918 For most firefighters, most professional firefighters in Colorado, 00:10:03.918 --> 00:10:08.688 this is the thing that will get them most of the way to being able 00:10:08.688 --> 00:10:10.638 to retire with financial security. 00:10:10.988 --> 00:10:13.868 like you mentioned, the plan that we're talking about specifically 00:10:13.868 --> 00:10:15.488 is a defined benefit plan. 00:10:15.968 --> 00:10:20.138 There are other plan plans that we may discuss at a, at another date, but this 00:10:20.138 --> 00:10:25.758 specific episode is for the FPPA defined benefit plan that covers many professional 00:10:25.758 --> 00:10:27.978 firefighters in the state of Colorado. 00:10:28.428 --> 00:10:32.218 So there is a ton of info, of information related to your pension. 00:10:32.708 --> 00:10:35.678 and because it's so vitally important for all of our retirements, 00:10:35.738 --> 00:10:38.398 we, like you mentioned, we'll split it up into two episodes. 00:10:38.828 --> 00:10:43.748 this first episode, we're just gonna give you a general, a general high level view 00:10:43.748 --> 00:10:45.638 of what the pension is and how it works. 00:10:46.268 --> 00:10:49.128 And then, in the next episode we'll go ahead and talk about 00:10:49.458 --> 00:10:52.198 deferral options, about, the drop. 00:10:52.408 --> 00:10:54.298 A lot of people talk about that, especially as they're 00:10:54.298 --> 00:10:55.348 getting closer to retirement. 00:10:55.708 --> 00:10:58.678 So we'll just give you an overview of the pension as it is 00:10:58.678 --> 00:11:00.778 today, the regular pension plan. 00:11:01.158 --> 00:11:04.548 but at the end of the day, having a pension is awesome, right? 00:11:04.578 --> 00:11:05.268 It is. 00:11:05.358 --> 00:11:07.428 It's guaranteed income in retirement. 00:11:07.788 --> 00:11:12.438 So this is something that the 4 57 or a 401k or IRA plans do not offer. 00:11:12.448 --> 00:11:17.098 Those are plans where you invest money and the return that you get in the market 00:11:17.098 --> 00:11:20.348 based off of your investments is what you have, whereas the returns of the 00:11:20.348 --> 00:11:24.218 pension are formulaic, they're based off of a formula that we'll go into later. 00:11:24.588 --> 00:11:28.098 but this will give you a predictable income stream every 00:11:28.098 --> 00:11:29.808 month while in retirement, 00:11:30.588 --> 00:11:33.478 Jon: which is amazing, for a lot of different reasons. 00:11:33.478 --> 00:11:36.748 a lot of the coursework when I was going through my studies, there's a 00:11:36.748 --> 00:11:42.358 lot of literature and studies that talk about just how stressed people are out 00:11:42.388 --> 00:11:46.498 about trying to make a lifetime income stream and worried about running outta 00:11:46.498 --> 00:11:48.448 money and being responsible for that. 00:11:48.538 --> 00:11:52.498 And basically the pension is going to take that risk, right? 00:11:52.498 --> 00:11:55.558 They're gonna take on that liability and it shared just like an insurance 00:11:55.558 --> 00:11:58.508 product, it really does take a lot of that worry outta the way. 00:11:58.508 --> 00:12:03.518 So it's very similar to working right, where you get a monthly check that 00:12:03.518 --> 00:12:05.708 comes into your mailbox every year. 00:12:05.953 --> 00:12:09.043 Pretty much guaranteed, and you just don't have to worry about market 00:12:09.043 --> 00:12:10.633 fluctuations and stuff like that. 00:12:10.993 --> 00:12:14.083 Now, that's not to say that they're foolproof, and it's not like it's any 00:12:14.083 --> 00:12:16.273 better from like a risk standpoint. 00:12:16.273 --> 00:12:20.983 if the market goes down by 75%, everyone's invested in the market, our pension is 00:12:20.983 --> 00:12:24.883 invested in the market, we're all gonna feel something, but they just spread that 00:12:24.883 --> 00:12:27.913 risk out a little bit more because they still have people paying into the plan. 00:12:28.123 --> 00:12:29.683 They haven't paid out all the things. 00:12:29.893 --> 00:12:33.853 So it's just like from a peace of mind, I have found that a lot of people, it 00:12:33.853 --> 00:12:35.773 just makes planning and retirement. 00:12:35.778 --> 00:12:38.808 A lot easier for our members where they don't have to worry about that. 00:12:38.958 --> 00:12:40.758 They know what the calculation is gonna be. 00:12:41.058 --> 00:12:42.788 It's based off of, years of service. 00:12:42.788 --> 00:12:44.198 And we'll talk about that here in a minute. 00:12:44.408 --> 00:12:47.768 But it's a way more predictable plan for them to start 00:12:47.768 --> 00:12:49.918 taking, income in retirement. 00:12:49.918 --> 00:12:54.478 And like I said, just from a psychological perspective, from a spending perspective, 00:12:54.478 --> 00:12:58.048 that's the other part is people are scared to spend money in retirement. 00:12:58.048 --> 00:12:58.618 They really are. 00:12:58.618 --> 00:12:59.818 They're just worried about I don't know. 00:12:59.818 --> 00:13:01.018 Am I gonna live 30 years? 00:13:01.018 --> 00:13:02.098 Am I gonna live 40 years? 00:13:02.098 --> 00:13:03.448 What's the market gonna do? 00:13:03.628 --> 00:13:07.258 So they end up always spending, for the most part, way less 00:13:07.258 --> 00:13:08.068 money than they could have. 00:13:08.068 --> 00:13:08.128 Yeah. 00:13:08.308 --> 00:13:11.878 'cause it's just that fear of running outta money and longevity and the 00:13:11.878 --> 00:13:13.678 pension helps protect against that 00:13:14.193 --> 00:13:18.063 Louie: Or sometimes what also happens is people that are managing their own 00:13:18.063 --> 00:13:22.743 investments, they freak out when there is a big downturn in the market and there's. 00:13:23.118 --> 00:13:25.278 Probably a lot of people that would think if they experienced 00:13:25.278 --> 00:13:30.498 a 30% drop or a 40% drop in the market, that they would be fine. 00:13:30.768 --> 00:13:32.358 But the truth is it doesn't always work that way. 00:13:32.358 --> 00:13:35.418 There's a lot of people that would freak out and they sell low, so they start 00:13:35.418 --> 00:13:37.878 selling off the investments in their 401k 'cause they're worried about it 00:13:37.878 --> 00:13:41.058 going down by another 20 or 30 or 40%. 00:13:41.058 --> 00:13:45.588 So they sell a bunch of stocks at a low and that really hurts 'em in the long run. 00:13:45.588 --> 00:13:48.975 Whereas the pension, it, like you said, it takes that risk away and it 00:13:49.448 --> 00:13:53.668 lets you have a set income, even when the market goes down temporarily, 00:13:53.788 --> 00:13:56.968 which all dips in the market are temporary, they eventually come back. 00:13:57.358 --> 00:14:01.918 And having the fortitude to wait through that is, made a lot easier 00:14:01.918 --> 00:14:04.948 If you have a guaranteed source of income, which is what the pension is 00:14:05.158 --> 00:14:05.908 Jon: a hundred percent. 00:14:05.908 --> 00:14:09.118 It's that behavioral nudge that kind of keeps you from running over the 00:14:09.118 --> 00:14:13.198 cliff and making a really bad decision that if you would've just waited it 00:14:13.198 --> 00:14:16.528 out or if you would've had a different source of income to, to ride out that 00:14:16.528 --> 00:14:17.788 market, you would've been just fine. 00:14:17.788 --> 00:14:20.458 But it, it's scary, man, and I get it the closer I get. 00:14:20.668 --> 00:14:24.218 I'm by no means an old bull by any means, but I'm getting closer every 00:14:24.218 --> 00:14:25.988 day and I tell Katie that every day. 00:14:25.988 --> 00:14:27.098 I'm one day closer. 00:14:27.378 --> 00:14:29.418 but I get scared and I find myself. 00:14:29.518 --> 00:14:32.458 just wandering and being more conservative as I get older. 00:14:32.458 --> 00:14:34.318 we are blessed to have the defined benefit. 00:14:34.478 --> 00:14:38.288 it's something that for a lot of, the private sector employees, they used to 00:14:38.288 --> 00:14:42.588 have, I look back at some research, and this was based from the Bureau of Labor 00:14:42.588 --> 00:14:47.238 Statistics, but like back in the early eighties, man, they had 60% of private 00:14:47.238 --> 00:14:49.158 employers had some form of a pension plan. 00:14:49.158 --> 00:14:53.688 So you think of the big ones like GE, Ford, all of these ones had really. 00:14:53.728 --> 00:14:56.218 Big, robust and dressed real pension plans. 00:14:56.608 --> 00:14:59.938 But as the risks, as the liability started to build up, 00:14:59.938 --> 00:15:02.158 they started to get rid of those. 00:15:02.158 --> 00:15:05.098 And then there was the creation of the 4 0 1 plan, right? 00:15:05.098 --> 00:15:09.298 The 4 0 1 A and K plan that really took it off of the employers and 00:15:09.298 --> 00:15:13.328 it put the ones on the employee, to, fund their retirement. 00:15:13.328 --> 00:15:17.738 So a huge change in legislation and what that was and how that's been effective. 00:15:17.738 --> 00:15:21.108 But, right now, if you were to ask the majority of people, especially people 00:15:21.108 --> 00:15:25.638 that stay in a company for a long time, the pension plan is, it's favored. 00:15:25.638 --> 00:15:28.158 People do like that predictable source of income. 00:15:28.158 --> 00:15:30.468 And if you work in government, you're lucky. 00:15:30.468 --> 00:15:33.138 'cause there's a lot of defined benefit plan and plans in there. 00:15:33.138 --> 00:15:37.538 So if you're a listener, not related to FPPA, maybe, your spouse is 00:15:37.538 --> 00:15:41.438 a state employee or a teacher or some other type of defined benefit, 00:15:41.648 --> 00:15:42.968 they're gonna be very similar. 00:15:43.088 --> 00:15:46.628 So I, a lot of, you'll see a lot of similarities between what Louis and I are. 00:15:46.663 --> 00:15:50.233 Gonna discuss, but always go back to your plan provider and the 00:15:50.233 --> 00:15:53.393 documents to make sure that your plan, reads out a certain way. 00:15:53.393 --> 00:15:56.423 We don't wanna give any misinformation, so the stuff we're talking about 00:15:56.423 --> 00:15:58.553 is specifically FPPA related, 00:15:58.553 --> 00:15:58.973 Louie: advice. 00:15:58.978 --> 00:15:59.318 Good advice. 00:15:59.633 --> 00:16:00.323 Jon: Good topic. 00:16:00.953 --> 00:16:01.253 Louie: Cool. 00:16:01.583 --> 00:16:05.253 John, let's, maybe talk a little bit about what a defined benefit pension 00:16:05.313 --> 00:16:08.643 is, what that means when you talk about defined, defined benefit and 00:16:08.643 --> 00:16:13.833 how calculations are generically performed for a defined benefit pension. 00:16:13.938 --> 00:16:14.208 Jon: Yep. 00:16:14.238 --> 00:16:17.238 So it's exactly, I mean, they tried to make this as 00:16:17.238 --> 00:16:18.798 firefighter proof as possible. 00:16:18.798 --> 00:16:20.988 Like it's always like, how do you define something that's in the 00:16:20.988 --> 00:16:24.918 definition, but defined meaning there's a certain determinant amount, 00:16:24.918 --> 00:16:26.568 like you know what that's gonna be. 00:16:26.598 --> 00:16:29.358 And then obviously benefit in this case is gonna be money. 00:16:29.718 --> 00:16:31.848 So they use different factors, right? 00:16:31.848 --> 00:16:34.788 So first is always going to be years of service. 00:16:34.968 --> 00:16:38.508 So how long are you actually paying into the plan, the longer that 00:16:38.508 --> 00:16:42.018 you're into the plan, the more that plan is gonna be calculated. 00:16:42.288 --> 00:16:45.978 So the way that, FPPA is set up, there's different accrual 00:16:45.978 --> 00:16:47.928 amounts based on years of service. 00:16:47.958 --> 00:16:52.188 So for the first 10 years of service, you get a 2% per year 00:16:52.218 --> 00:16:54.138 accrual on your base benefit. 00:16:54.168 --> 00:16:58.428 And then after that 10th year, it then goes up to 2.5% 00:16:58.428 --> 00:17:01.128 for the remainder of the time that you're gonna be employed. 00:17:01.158 --> 00:17:04.518 And it's all based off, like I said, years of service, but they all also 00:17:04.518 --> 00:17:07.728 take a calculation of the three highest. 00:17:08.108 --> 00:17:12.068 Salary years that you have in the plan, and that's what they're gonna average 00:17:12.098 --> 00:17:14.048 out for whatever your benefit is. 00:17:14.048 --> 00:17:15.698 So it's a calculation. 00:17:15.908 --> 00:17:20.278 We'll put it on the Instagram, page as far as what that calculation chart looks like. 00:17:20.528 --> 00:17:23.288 so you can exactly see based on how many years of service you 00:17:23.288 --> 00:17:25.628 have, what your base benefit. 00:17:25.628 --> 00:17:30.073 Is gonna be, that's generally speaking how the plan is at least calculated. 00:17:30.073 --> 00:17:33.373 Now, there's different options you can take as far as what's considered early 00:17:33.373 --> 00:17:37.423 retirement versus normal retirement versus what Louis was talking about 00:17:37.423 --> 00:17:39.103 at the beginning, deferred retirement. 00:17:39.103 --> 00:17:41.863 So there's different options, strategies that you can take, and those are 00:17:41.863 --> 00:17:45.793 all gonna have a different amount that you're gonna be eligible for. 00:17:45.893 --> 00:17:48.203 if you have early retirement, you're obviously gonna take a hit. 00:17:48.203 --> 00:17:49.973 It's very similar to Social Security. 00:17:50.213 --> 00:17:53.903 When we were talking about social security last month, where, if you take Social 00:17:53.903 --> 00:17:58.493 Security at 62, you're getting penalized because you're taking it earlier than 00:17:58.493 --> 00:18:02.603 what the government says, or what Social Security says is normal retirement at 67. 00:18:02.603 --> 00:18:05.343 So if you think about it from that framework, it's 00:18:05.343 --> 00:18:07.293 very similar in that aspect. 00:18:07.293 --> 00:18:10.353 So years of service, how many years you having on the plan, 00:18:10.593 --> 00:18:14.643 and then also what your three highest average salary years are. 00:18:14.943 --> 00:18:15.993 That's gonna be your base 00:18:15.998 --> 00:18:17.113 Louie: best and then your age. 00:18:17.143 --> 00:18:17.833 Jon: and then your age. 00:18:17.833 --> 00:18:18.373 Correct? 00:18:18.613 --> 00:18:18.883 Yep. 00:18:18.943 --> 00:18:21.103 So your age is the last kicker on that. 00:18:21.293 --> 00:18:25.793 so there has been, certain enhancements to the plan, that have happened 00:18:25.793 --> 00:18:27.233 within the last couple years. 00:18:27.233 --> 00:18:31.553 One of those, I think we've mentioned it before, is called the Rule of 80. 00:18:31.923 --> 00:18:35.433 So the rule of 80 is something that is your years of service. 00:18:35.718 --> 00:18:36.798 Plus your age. 00:18:36.978 --> 00:18:41.598 As soon as you hit 80, then you are now what is considered normally retired. 00:18:41.598 --> 00:18:43.698 It's no longer in early retirement. 00:18:43.968 --> 00:18:46.518 So let's give a an example on this. 00:18:46.608 --> 00:18:50.478 So you have a firefighter that is, let's see, we'll say they're 25 years old. 00:18:50.538 --> 00:18:51.468 They get hired, right? 00:18:51.588 --> 00:18:52.698 Actually, let's make them 20. 00:18:53.008 --> 00:18:54.418 we got a lot of young folks that we're 00:18:54.463 --> 00:18:55.303 Louie: Believe it or not, that 00:18:55.358 --> 00:18:56.018 Jon: that happens. 00:18:56.018 --> 00:18:59.588 So we have a young firefighter that gets hired at 20 and they 00:18:59.588 --> 00:19:01.568 put in 30 years of service. 00:19:01.718 --> 00:19:03.878 So in 30 years they're now gonna be 50. 00:19:04.073 --> 00:19:05.573 So that's their age plus. 00:19:05.573 --> 00:19:07.043 How many years have they put into the plan? 00:19:07.073 --> 00:19:09.293 30 that now equals 80. 00:19:09.473 --> 00:19:13.973 So that particular firefighter at the age of 50, could start taking 00:19:13.973 --> 00:19:17.273 their pension and they wouldn't be penalized for an early retirement 00:19:17.603 --> 00:19:20.453 before the rule of 80 was established. 00:19:20.633 --> 00:19:23.543 It used to be 55 was considered normal retirement age, so they 00:19:23.543 --> 00:19:26.813 would've been penalized for retiring at the age of 50, even though 00:19:26.813 --> 00:19:28.703 they put in 30 years of service. 00:19:28.943 --> 00:19:31.343 So that's an enhancement that's been really nice. 00:19:31.343 --> 00:19:34.853 And we actually have some members that are starting to go down that 00:19:34.853 --> 00:19:38.483 road and they're retiring before 55 and they have 30 years of service. 00:19:38.483 --> 00:19:42.113 So I think that's a huge shout out to the plan and the sponsorship of that. 00:19:42.113 --> 00:19:44.743 And I really encourage our folks to strive. 00:19:44.893 --> 00:19:48.583 You might not get there, but if you strive for it and start saving aggressively and 00:19:48.583 --> 00:19:52.723 doing the right things and trying to, put yourself in a better financial position, 00:19:52.903 --> 00:19:55.873 you might have the opportunity to be one of those members that we're talking 00:19:56.163 --> 00:19:56.313 Louie: yep. 00:19:56.643 --> 00:20:00.293 Jon: so that's, that's just in general how the, how the benefit works. 00:20:00.513 --> 00:20:04.503 the other thing I think it's important to understand is there's a lot of, 00:20:04.533 --> 00:20:09.143 misinformation out there when it comes to, the health of pension plans. 00:20:09.293 --> 00:20:13.403 Those are always under constant scrutiny as far as how well funded they are. 00:20:13.573 --> 00:20:18.493 para, which is the, state plan is one that has constantly been cited 00:20:18.493 --> 00:20:20.233 as being completely underfunded. 00:20:20.483 --> 00:20:23.633 a lot of it had to do with how the contributions were set up, and we'll talk 00:20:23.633 --> 00:20:25.313 about our contributions here in a minute. 00:20:25.553 --> 00:20:28.823 But basically it had been underfunded for a tremendous amount of time. 00:20:28.823 --> 00:20:31.423 The benefits were too juiced up or promised too good. 00:20:31.453 --> 00:20:35.203 And then as they hired people, they had to tear out those people. 00:20:35.203 --> 00:20:37.783 And their benefits were different than someone that was hired 00:20:37.783 --> 00:20:40.273 like five or 10 or 15 years ago. 00:20:40.273 --> 00:20:41.113 And it's terrible. 00:20:41.143 --> 00:20:41.863 It's terrible for 00:20:42.133 --> 00:20:45.568 Louie: It's, it's, and I, I used to work for the state and I actually 00:20:45.568 --> 00:20:49.738 chose not to participate in the defined benefit, pension and instead did a 00:20:49.798 --> 00:20:53.968 defined contribution, which is similar to a 4 57 or a 401k with a match. 00:20:54.208 --> 00:20:56.878 And the reason why I did that is because it was so underfunded. 00:20:57.118 --> 00:20:59.128 Part of that goes back to when it was created. 00:20:59.438 --> 00:21:02.948 there was less safeguards in place when it was created. 00:21:02.948 --> 00:21:06.288 Whereas when the FPPA pension came along, there was some legal 00:21:06.288 --> 00:21:08.358 safeguards that were put in place. 00:21:08.628 --> 00:21:12.558 One of those being that you cannot carry over unfunded liabilities year 00:21:12.558 --> 00:21:13.908 to year, like you couldn't para. 00:21:14.208 --> 00:21:15.768 So that is a way of basically. 00:21:16.263 --> 00:21:18.543 Causing the pension board or forcing the pension board to 00:21:18.543 --> 00:21:19.983 say, Hey, we have a shortfall. 00:21:20.283 --> 00:21:23.763 We need to shore it up now by either increasing contribution rates or 00:21:23.763 --> 00:21:28.953 decreasing benefits or doing something in order to make it whole for the next year, 00:21:29.133 --> 00:21:32.763 that's a, that, that might sound like, oh, it's just a reason for them to maybe 00:21:32.763 --> 00:21:36.563 not give us, cost of living adjustments are something, but the truth is, what 00:21:36.563 --> 00:21:40.283 it does is it guarantees that pension will be healthy and funded for future 00:21:40.313 --> 00:21:44.423 generations and for future firefighters and police officers, it's a good thing. 00:21:44.783 --> 00:21:48.203 So they have those safeguards which make it a healthy pension overall. 00:21:48.203 --> 00:21:49.193 Would you agree with that 00:21:49.338 --> 00:21:49.628 Jon: Yeah. 00:21:49.688 --> 00:21:54.713 Our pension is extremely healthy, and the top tier as far as, funding status. 00:21:54.773 --> 00:21:56.993 So you'll see that a lot and they'll advertise it. 00:21:56.993 --> 00:21:59.393 And I tried to look this up right beforehand, so I couldn't 00:21:59.393 --> 00:22:00.863 get the latest calculations. 00:22:00.863 --> 00:22:03.143 They're typically about a year behind, a six months behind. 00:22:03.443 --> 00:22:05.933 But if I'm not mistaken, the last time I looked at it, it 00:22:05.933 --> 00:22:08.063 was somewhere like a hundred 0.7 00:22:08.063 --> 00:22:09.473 to one oh 1%. 00:22:09.833 --> 00:22:11.563 So overfunded to some degree. 00:22:11.563 --> 00:22:14.563 So all that means is basically every person that's in the plan, 00:22:14.953 --> 00:22:19.213 every new person that they hire, all the actuarial studies show. 00:22:19.463 --> 00:22:23.813 That the plan is healthy enough to pay 100% of your benefit moving forward. 00:22:23.963 --> 00:22:25.853 So that's really why that's of concern. 00:22:25.853 --> 00:22:32.943 And a lot of, pension plans, are somewhere around like 75 to 80% funded, status. 00:22:33.103 --> 00:22:36.013 and that just goes to show you those members that are in the plan that are 00:22:36.013 --> 00:22:39.763 younger, are more at risk for having some funding challenges in the future. 00:22:39.763 --> 00:22:42.103 That's really, that it, the people that are drawing out on 00:22:42.103 --> 00:22:45.943 it already will probably be fine, similar to how social security is. 00:22:46.133 --> 00:22:49.613 but future benefits may have to be reduced if they don't shore those things up. 00:22:49.613 --> 00:22:51.743 So I'm very proud of our plan. 00:22:51.743 --> 00:22:54.423 I'm very proud of, the folks that sit on the boards and the 00:22:54.423 --> 00:22:56.553 people that can consult the CPFF. 00:22:56.823 --> 00:23:01.143 I really do think they're trying to do best by the membership and not put the 00:23:01.143 --> 00:23:03.753 plan at risk by, in incre increasing. 00:23:03.773 --> 00:23:06.713 Crazy Colas and some of these other things that we'll talk about here in a minute. 00:23:06.713 --> 00:23:08.663 So I think they've done a really good job. 00:23:08.663 --> 00:23:12.413 And, if you are a member of F-F-P-P-A and the defined benefit, you should 00:23:12.413 --> 00:23:16.103 feel secure that the money that you're promised is gonna be there. 00:23:16.103 --> 00:23:17.033 They're working diligent. 00:23:17.098 --> 00:23:17.848 Louie: yeah, exactly. 00:23:17.848 --> 00:23:20.128 I think that, there's a lot of fear of I don't get to control 00:23:20.128 --> 00:23:21.118 my money with a pension. 00:23:21.118 --> 00:23:23.998 It goes somewhere and then I have to hope that it's still there 00:23:23.998 --> 00:23:27.328 and hope that some other third party is managing it effectively. 00:23:27.728 --> 00:23:31.958 and they are, we're telling you that at least so far as of right 00:23:31.958 --> 00:23:33.428 now, they're handling it very well. 00:23:33.428 --> 00:23:36.638 So we're very confident that for all you young firefighters that are listening, and 00:23:36.638 --> 00:23:39.428 you got a long career ahead, that pension will be there for you when you retire. 00:23:39.668 --> 00:23:42.108 And like John said, that is a huge blessing for us. 00:23:42.378 --> 00:23:44.908 And that kind of leads us to our next point is, okay, let's 00:23:44.908 --> 00:23:46.168 talk about how it's funded. 00:23:46.178 --> 00:23:46.748 how is this 00:23:46.883 --> 00:23:47.063 Jon: Yeah. 00:23:47.063 --> 00:23:47.843 There's, yeah. 00:23:47.888 --> 00:23:48.848 Louie: what goes into it? 00:23:49.238 --> 00:23:51.608 Where does the money come from and how does it work? 00:23:51.698 --> 00:23:52.148 So. 00:23:52.803 --> 00:23:57.263 all firefighters, and police officers in our pension plan, are automatically 00:23:57.263 --> 00:23:58.583 enrolled upon their hire date. 00:23:58.613 --> 00:24:02.223 So when they are hired and they start receiving paychecks, money 00:24:02.223 --> 00:24:03.483 is already taken out of it. 00:24:03.813 --> 00:24:08.433 So 12% of salary is automatically deducted from each paycheck that 00:24:08.433 --> 00:24:10.443 you pay on behalf of the pension. 00:24:10.983 --> 00:24:16.533 HR takes it out and then it remits it to the, to FPPA and they 00:24:16.533 --> 00:24:18.333 invest it in their pension fund. 00:24:18.613 --> 00:24:20.023 for future benefit. 00:24:20.178 --> 00:24:22.128 Jon: it's something you can opt in or opt out. 00:24:22.128 --> 00:24:25.068 It's automatically you are enrolled, which I think is a godsend. 00:24:25.068 --> 00:24:29.188 I don't wanna have anyone have the option to not, or to be able to opt 00:24:29.188 --> 00:24:30.838 out of some type of retirement plan. 00:24:30.838 --> 00:24:33.058 So I'm happy that it's mandatory. 00:24:33.193 --> 00:24:34.453 Louie: can't pay more or less. 00:24:34.453 --> 00:24:36.343 It's 12% and that is, that's it. 00:24:36.343 --> 00:24:39.073 You, there's no option to like, what if I wanna do more or less? 00:24:39.073 --> 00:24:39.463 Nope. 00:24:39.463 --> 00:24:40.213 It doesn't matter. 00:24:40.213 --> 00:24:43.448 It's everyone pays 12%, into the pension. 00:24:43.968 --> 00:24:46.938 Jon: And is that, do you get taxed on that money, Louis, when it comes out? 00:24:46.938 --> 00:24:48.708 Or is that pre-tax contributions? 00:24:48.993 --> 00:24:49.743 Louie: contribution. 00:24:49.863 --> 00:24:50.103 Beautiful. 00:24:50.103 --> 00:24:52.563 You do not get taxed on that, so that's cool. 00:24:52.563 --> 00:24:55.753 You don't have to worry about, taking a tax hit now on it reduces 00:24:55.753 --> 00:24:58.063 your taxable income by that 12%. 00:24:58.153 --> 00:24:59.353 So that's a good thing. 00:24:59.488 --> 00:25:00.388 Jon: That is a very good thing. 00:25:00.388 --> 00:25:03.388 I wanted to do one quick caveat note here. 00:25:03.578 --> 00:25:06.428 and this is West Metro specific, or it might be other agency 00:25:06.428 --> 00:25:08.648 specific based on your plan design. 00:25:08.648 --> 00:25:12.228 Everyone's a little bit different, but West, a lot of West Metro, 00:25:12.358 --> 00:25:15.358 members are what we consider reentry 00:25:15.913 --> 00:25:20.863 So back in 2007 is when we reentered into FPPA. 00:25:20.863 --> 00:25:23.173 We used to do a self-manage a 4 0 1. 00:25:23.423 --> 00:25:24.713 a plan beforehand. 00:25:24.993 --> 00:25:26.673 but this was brought to the organization. 00:25:26.673 --> 00:25:30.573 We adopted it, but there was a little bit of a premium that we had to 00:25:30.573 --> 00:25:33.813 pay in order to reenter into FPPA. 00:25:33.813 --> 00:25:40.653 So if you were hired before 2008 and you elected to go the defined benefit route, 00:25:40.933 --> 00:25:43.603 you do pay another 2% additional premium. 00:25:43.603 --> 00:25:50.073 So like me, I'm 2007, I actually pay in 14% of, of my paycheck goes into the plan. 00:25:50.073 --> 00:25:51.333 So that's just part of the setup. 00:25:51.673 --> 00:25:53.233 I still think it's a fair deal. 00:25:53.383 --> 00:25:55.873 I've gotten no qualms or complaints about it, but if you're like, man, 00:25:55.873 --> 00:25:59.833 I'm looking at my paycheck, and Louis said it's 12%, I can do basic math. 00:25:59.833 --> 00:26:01.243 So just be mindful of that. 00:26:01.273 --> 00:26:04.753 And there's no special code that you'll see on your payroll that says 00:26:04.753 --> 00:26:06.253 like a reentry fee or something else. 00:26:06.253 --> 00:26:09.383 It's just gonna say, FPPA and then what we paid into that. 00:26:09.383 --> 00:26:09.443 The 00:26:09.473 --> 00:26:11.813 Louie: good news about that is it means you have the same schedule, you 00:26:11.813 --> 00:26:16.133 have the same chart that everyone uses in order to determine your benefit. 00:26:16.133 --> 00:26:18.683 It's not like they're gonna penalize you and say, you did not pay in 00:26:18.683 --> 00:26:22.223 the pension earlier in your career, so you don't get the rule of 80. 00:26:22.253 --> 00:26:24.113 They, you still are subject to the rule of 80. 00:26:24.383 --> 00:26:28.553 You still have those same benefits that I would have who doesn't pay the 14%. 00:26:28.628 --> 00:26:28.658 Okay. 00:26:29.208 --> 00:26:32.428 and, paid in for technically a longer portion of my career. 00:26:32.608 --> 00:26:34.708 You're making up for it now, but you'll get the same benefit. 00:26:34.708 --> 00:26:34.888 Yeah. 00:26:35.098 --> 00:26:35.728 Jon: a hundred percent. 00:26:36.358 --> 00:26:37.198 So then what else? 00:26:37.198 --> 00:26:38.488 The employer has to kick in some 00:26:38.803 --> 00:26:39.418 Louie: oh yeah. 00:26:39.478 --> 00:26:40.048 Jon: free lunch 00:26:40.288 --> 00:26:41.578 Louie: not just you, it's both sides. 00:26:41.578 --> 00:26:43.528 The, the employer has skin in the game too. 00:26:43.528 --> 00:26:47.638 So your department will contribute 10.5% 00:26:47.788 --> 00:26:51.418 of your salary, of the member salary on behalf of the pension. 00:26:51.448 --> 00:26:54.718 And that's as of this year that they pay 10.5%. 00:26:55.268 --> 00:27:00.278 it is important to note that employer contributions will increase 0.5% 00:27:00.278 --> 00:27:04.538 every year until it hits 13% in 2030. 00:27:04.928 --> 00:27:09.608 So by the year 2030, the department will be contributing 13% of your 00:27:09.608 --> 00:27:11.648 salary into the pension plan. 00:27:11.768 --> 00:27:14.438 And this is, as John and I were mention, as John and I were talking 00:27:14.438 --> 00:27:19.418 about earlier, this is a way that FPPA ensures that the pension is healthy, 00:27:19.598 --> 00:27:24.008 that it's fully funded, and that we have enough going forward for all the new. 00:27:24.353 --> 00:27:27.893 Police officers and firefighters that are hired within Colorado, correct? 00:27:27.943 --> 00:27:28.163 Jon: Yep. 00:27:28.263 --> 00:27:31.358 So if you're doing some fast math, that's somewhere, if you do an 00:27:31.358 --> 00:27:35.598 all in contribution between the employee and the employer, it's 00:27:35.628 --> 00:27:38.088 somewhere between what, like 22.5% 00:27:38.088 --> 00:27:44.268 now, and then eventually that will shade upwards to 25 or 26% or 27% if you're a 00:27:44.268 --> 00:27:46.628 defined, or if you're a reentry, member. 00:27:47.113 --> 00:27:48.583 That seems like a lot of money, right? 00:27:48.583 --> 00:27:50.263 That seems like a chunk of change. 00:27:50.593 --> 00:27:51.043 It is. 00:27:51.043 --> 00:27:52.653 it's a significant amount. 00:27:52.933 --> 00:27:55.723 so that's how contributions run out or how we pay into the 00:27:55.723 --> 00:27:57.013 plan, how it becomes funded. 00:27:57.233 --> 00:28:00.053 let's talk a little bit now about how we actually gonna collect our benefit. 00:28:00.053 --> 00:28:00.593 What does that 00:28:00.618 --> 00:28:01.203 Louie: is the fun part. 00:28:01.208 --> 00:28:01.418 This is 00:28:01.463 --> 00:28:02.303 Jon: the fun part, right? 00:28:02.303 --> 00:28:06.093 This is where we start to talk about the second homes or, living 00:28:06.093 --> 00:28:09.033 in a place where you don't have to shovel, you just drive to the snow. 00:28:09.213 --> 00:28:12.033 Like all of those, fascinations that we all have, what kind of 00:28:12.033 --> 00:28:15.203 sailboat or whatever you're gonna get on, all of those things. 00:28:15.203 --> 00:28:18.683 This is really what we strive for and why we try to put in our time 00:28:18.683 --> 00:28:20.363 so we get this amazing benefit. 00:28:20.363 --> 00:28:22.943 So we'll start with normal retirement, right? 00:28:22.943 --> 00:28:25.013 That's hopefully what everyone can achieve. 00:28:25.013 --> 00:28:25.733 that's what we try. 00:28:25.733 --> 00:28:26.243 We try to put 00:28:26.283 --> 00:28:26.828 Louie: we shoot for. 00:28:26.848 --> 00:28:27.628 Jon: we shoot for. 00:28:27.838 --> 00:28:35.298 So they define normal retirement as 25 years of service credit and the age of 55. 00:28:35.483 --> 00:28:39.653 Okay, so that's, 25 years of service and the age of 55 is what's 00:28:39.653 --> 00:28:41.303 considered normal retirement. 00:28:41.303 --> 00:28:42.233 There's no penalty. 00:28:42.233 --> 00:28:43.613 You're not gonna take a deduction. 00:28:43.883 --> 00:28:47.633 You look at that chart and exactly what it says, kicks out it's nicely color 00:28:47.633 --> 00:28:51.683 coded and shaded, and it'll tell you exactly what your benefit is gonna be. 00:28:51.893 --> 00:28:55.393 They did talk about, the enhancement, and that is the rule of 80. 00:28:55.633 --> 00:29:00.933 So once again, if you are younger than the age of 55, but you do have your, if your 00:29:00.933 --> 00:29:05.703 total years of service and your age add up to 80, that will also be considered normal 00:29:05.703 --> 00:29:07.083 retirement, which is a huge benefit. 00:29:07.083 --> 00:29:07.773 It really is. 00:29:08.013 --> 00:29:12.813 We talked about how that's calculated once again, 2% per year for your 00:29:12.813 --> 00:29:16.263 first 10 years, and then your accrual rate goes up by another 00:29:16.263 --> 00:29:18.273 half percent after the 10th year. 00:29:18.273 --> 00:29:19.743 So 2.5% 00:29:19.983 --> 00:29:21.663 basically until you retire. 00:29:21.663 --> 00:29:22.863 So it's a pretty simple calculation. 00:29:22.863 --> 00:29:24.273 You don't even need the chart to figure it out. 00:29:24.423 --> 00:29:25.203 You can figure out what. 00:29:25.203 --> 00:29:27.993 How many years you've got on and then just do the quick math on that. 00:29:27.993 --> 00:29:31.663 But there is a chart available, which we'll have, on our feed for that. 00:29:31.663 --> 00:29:36.433 And it's all based off of your three highest year salaries when they average 00:29:36.463 --> 00:29:38.893 all that stuff out, which for most of us is probably gonna be our last 00:29:38.893 --> 00:29:42.613 three years unless we take a demotion, which I'm not in favor for anyone. 00:29:42.833 --> 00:29:45.843 So it probably should be based on your last three years. 00:29:45.968 --> 00:29:48.518 Yeah, so that is normal retirement. 00:29:48.548 --> 00:29:52.418 Now we are eligible, just like with social security, you can take 00:29:52.418 --> 00:29:54.278 what's considered early retirement. 00:29:54.548 --> 00:29:59.738 So for early retirement you have to have a minimum of five years of service credit, 00:29:59.828 --> 00:30:02.348 and that's payable at the age of 50. 00:30:02.648 --> 00:30:07.168 So an example for that, and we have, we have some folks here and it happens all 00:30:07.168 --> 00:30:12.388 over the place, but they work here for five or six or seven years and then they 00:30:12.418 --> 00:30:16.048 move on to greener pastures or they just find that the fire service isn't for them 00:30:16.048 --> 00:30:17.368 or they do something different, right? 00:30:17.368 --> 00:30:20.098 So they don't get their, they don't get all of that time. 00:30:20.098 --> 00:30:21.538 So what does that look like for them? 00:30:21.808 --> 00:30:25.278 They would then be eligible, to start collecting what's considered 00:30:25.278 --> 00:30:27.318 early retirement at the age of 50. 00:30:27.348 --> 00:30:31.068 But at a minimum they had to have at least five years of service credit. 00:30:31.098 --> 00:30:36.098 And once again, that is calculated at a rate of 2% per year, moving forward. 00:30:36.098 --> 00:30:37.898 But you are gonna take a significant. 00:30:37.968 --> 00:30:41.808 Reduction in that because you're drawing early on it at the age of 50 and you 00:30:41.808 --> 00:30:43.748 just didn't have that much, service time. 00:30:43.748 --> 00:30:46.058 So I'm a huge fan of the defined benefit. 00:30:46.058 --> 00:30:51.038 I think it works amazing for the majority of our members, but if you are one of 00:30:51.038 --> 00:30:55.658 those people that are not able to put in a significant amount of time, I would 00:30:55.658 --> 00:30:57.848 qualify that as probably 20 years or more. 00:30:58.358 --> 00:31:02.048 You take a pretty big hit, and it's not portable, it's just you're 00:31:02.048 --> 00:31:03.638 your money's tied up and locked up. 00:31:03.638 --> 00:31:04.058 So 00:31:04.108 --> 00:31:06.058 Louie: you're penalized, so to speak, for taking that. 00:31:06.058 --> 00:31:11.228 And I know they, they talk about, they use an, an actuarial equivalent basis 00:31:11.228 --> 00:31:14.648 is what they call it, to basically say, Hey, because you're taking it so much 00:31:14.648 --> 00:31:18.158 earlier, we're reducing it by this amount to give you that, those funds earlier. 00:31:18.468 --> 00:31:21.198 that's, you work hard for it. 00:31:21.228 --> 00:31:24.348 Even if you don't work a full career here, you still work hard for it. 00:31:24.378 --> 00:31:28.398 And, getting penalized by taking that early retirement, it is an option, 00:31:28.458 --> 00:31:30.018 might not be the best option for you. 00:31:30.048 --> 00:31:31.638 It might be the best option for you. 00:31:31.848 --> 00:31:34.258 Just know that you'll pay in terms of money outta your 00:31:34.258 --> 00:31:35.848 pocket for taking that early 00:31:36.358 --> 00:31:40.208 Jon: Yeah, always obviously consult a financial professional when you're 00:31:40.208 --> 00:31:43.563 thinking about any of those, distribution strategies or when you're gonna take 00:31:43.563 --> 00:31:44.523 your pension, any of that stuff. 00:31:44.523 --> 00:31:46.923 And that just goes not only for early retirement, but everything 00:31:46.923 --> 00:31:48.033 we're talking about here today. 00:31:48.033 --> 00:31:51.843 But it's, I just, it's unfortunate because I wish there was an alternative, 00:31:51.843 --> 00:31:56.433 but the other alternative is what we have with what we had before, and that's 00:31:56.523 --> 00:32:00.063 where people put in money and then the organization puts in money, the 4 0 00:32:00.063 --> 00:32:02.103 1 a, and then they have to manage it. 00:32:02.103 --> 00:32:03.543 And that creates some problems too. 00:32:03.543 --> 00:32:05.523 So there's not a perfect solution. 00:32:05.733 --> 00:32:10.103 There's always pros and cons, gives and takes, peaks and valleys, if you will. 00:32:10.103 --> 00:32:13.323 But overall, I'm very happy with our defined benefit and 00:32:13.323 --> 00:32:14.493 our members should be too. 00:32:14.493 --> 00:32:16.998 So that's what, early retirement's all about. 00:32:17.043 --> 00:32:17.163 Louie: Yep. 00:32:17.823 --> 00:32:20.913 And then the next, the next thing is the vested retirement. 00:32:20.913 --> 00:32:22.803 So this is, this confuses a lot of people. 00:32:22.803 --> 00:32:26.433 'cause many members that I talk to will assume that if you don't take a. 00:32:26.463 --> 00:32:26.763 Jon: a. 00:32:27.678 --> 00:32:30.828 Louie: a normal retirement that you are taking in early retirement, 00:32:30.828 --> 00:32:33.918 but there's actually this third thing called a vested retirement. 00:32:34.218 --> 00:32:38.028 So just like John was talking about with the early retirement, you have to have the 00:32:38.028 --> 00:32:40.458 minimum of five years of service credit. 00:32:41.008 --> 00:32:43.378 but this one is payable at the age of 55. 00:32:43.438 --> 00:32:45.658 So this is where you wait until you're 55, 00:32:45.673 --> 00:32:46.153 Jon: 50. 00:32:46.438 --> 00:32:47.998 Louie: Which is the normal retirement age. 00:32:48.598 --> 00:32:52.138 but because you only, you don't have your full rule of 80, you are getting 00:32:52.138 --> 00:32:54.058 what's called a vested retirement. 00:32:54.118 --> 00:32:59.338 So once again, it's the same 2% each year for the first 10 years, and then 2.5% 00:32:59.338 --> 00:33:01.018 benefit added for each year of service. 00:33:01.018 --> 00:33:04.328 So you're basically getting, the penalty that you pay basically for 00:33:04.328 --> 00:33:07.178 not hitting the rule of 80 is reduced. 00:33:07.208 --> 00:33:11.808 So you're getting more of your pensionable amount, every year than 00:33:11.808 --> 00:33:13.158 you would with an early retirement. 00:33:13.158 --> 00:33:16.548 Still not as much as if you hit the rule of 80 and you're taking a normal 00:33:16.548 --> 00:33:20.258 retirement, but much, much more than if you took an early retirement. 00:33:20.528 --> 00:33:21.053 Jon: Very good. 00:33:21.113 --> 00:33:23.003 That's a good explanation, and I'll agree with you. 00:33:23.003 --> 00:33:23.693 I would say. 00:33:24.053 --> 00:33:27.603 The vast percentage of people do not understand that, topic. 00:33:27.603 --> 00:33:30.573 And it's not overly complex, but they just, it doesn't make a lot of sense. 00:33:30.573 --> 00:33:31.863 You're like, what do you mean I'm vested? 00:33:32.143 --> 00:33:34.843 that typically just means, I can take my money and I don't get penalized. 00:33:34.843 --> 00:33:35.833 generally speaking. 00:33:35.833 --> 00:33:37.873 So that is how things are calculated. 00:33:37.873 --> 00:33:40.913 Once again, refer back to the chart, and that will tell you 00:33:40.913 --> 00:33:42.083 exactly what the kick out. 00:33:42.083 --> 00:33:42.863 I've got most of it 00:33:43.343 --> 00:33:44.153 Louie: I know, me too. 00:33:44.213 --> 00:33:45.683 I got my own little highlights on my own 00:33:45.743 --> 00:33:47.003 Jon: got my own highlights. 00:33:47.003 --> 00:33:50.233 So 55 and 30 is, 70%. 00:33:50.293 --> 00:33:54.943 And I think if a lot of our members can get to that 70%, they are 00:33:54.943 --> 00:33:56.923 really gonna be set up for success. 00:33:57.113 --> 00:34:00.563 especially when we talk about funding our additional retirement vehicles 00:34:00.563 --> 00:34:04.583 like the 4 57 plan or Roth IRAs and some of these other things that 00:34:04.583 --> 00:34:06.443 Louis and I have briefly touched on. 00:34:06.513 --> 00:34:08.903 Louie: and just to hit on the brochure, so the brochure is very 00:34:08.903 --> 00:34:12.083 good and it lists basically everything that we are talking about here. 00:34:12.113 --> 00:34:15.533 Actually, I will say absolutely everything that we're talking about as it relates 00:34:15.533 --> 00:34:17.903 to the pension is found in that brochure. 00:34:17.903 --> 00:34:21.953 It's a really good brochure, and you can find that at FPAs website. 00:34:21.953 --> 00:34:25.983 We'll also link to it in the show notes and, when we post it on Instagram 00:34:25.983 --> 00:34:29.583 about this episode, I'll try to link to it on there too, so you can see. 00:34:29.583 --> 00:34:34.703 But there is one particular, chart in that brochure that is really helpful 00:34:34.703 --> 00:34:35.843 and that's what we're referring to. 00:34:35.843 --> 00:34:41.573 It's called the benefit calculator, and it's this green, blue and yellow one 00:34:41.573 --> 00:34:48.203 sheet of information that basically lists in one on the XA axis, it lists the age 00:34:48.203 --> 00:34:50.003 of retirement, and I don't know Y axis. 00:34:50.003 --> 00:34:51.413 It lists the years of service. 00:34:51.713 --> 00:34:54.803 So for your specific situation, you can say, I have. 00:34:55.148 --> 00:34:58.388 X years of service and I'm this age at retirement, or I'm going to be this age 00:34:58.388 --> 00:35:00.488 at retirement, what would my benefit be? 00:35:00.788 --> 00:35:04.143 And then there's this, the color code is very significant because if 00:35:04.143 --> 00:35:07.593 it's falls within one of the yellow categories that shows that you're 00:35:07.593 --> 00:35:11.403 getting a normal retirement, if it falls into one of the blue categories, 00:35:11.403 --> 00:35:12.843 you're getting a vested retirement. 00:35:12.903 --> 00:35:16.573 And if you're, in one of the green categories, you're 00:35:16.603 --> 00:35:17.893 getting an early retirement. 00:35:17.893 --> 00:35:19.423 So it'll show you those percentages. 00:35:19.423 --> 00:35:23.383 It's a super easy way to just cross 'em up and look, I know it might sound 00:35:23.383 --> 00:35:26.623 more complicated when I explain it with all the color codes and the axes 00:35:26.758 --> 00:35:26.938 Jon: it. 00:35:26.938 --> 00:35:27.688 And it's pretty 00:35:27.843 --> 00:35:28.683 Louie: it's very intuitive. 00:35:28.713 --> 00:35:31.903 You look at it and it's super helpful if you're trying to plan out your retirement. 00:35:31.903 --> 00:35:33.793 Hey, I wanna retire at 57. 00:35:33.793 --> 00:35:37.333 I wanna get outta here and I'm gonna have 22 years of service. 00:35:37.333 --> 00:35:38.503 what does that look like for me? 00:35:38.803 --> 00:35:42.553 That will tell you exactly what percentage of your three highest year salary you're 00:35:42.553 --> 00:35:44.473 gonna get for the rest of your life. 00:35:44.623 --> 00:35:45.163 Huge. 00:35:45.193 --> 00:35:46.873 that's a easy way to look at it. 00:35:47.143 --> 00:35:48.823 So get that brochure. 00:35:49.093 --> 00:35:52.333 Look at that chart and start playing with it and saying what does it look like? 00:35:52.438 --> 00:35:55.158 Jon: you could play the what if game and start dreaming or thinking about 00:35:55.158 --> 00:35:56.598 what the future's gonna hold for you. 00:35:56.658 --> 00:36:00.958 so we now we have a frequently asked questions that Louis and I, often 00:36:00.958 --> 00:36:05.263 get asked, regarding the pension and certain parameters within the pension. 00:36:05.263 --> 00:36:09.403 And first and foremost, and leave it to firefighters to blow this one 00:36:09.403 --> 00:36:12.583 up is, how is my salary calculated? 00:36:12.763 --> 00:36:14.053 Like, how is my base benefit? 00:36:14.053 --> 00:36:19.183 You keep referring back to base benefits or, the more base pay and FPPA 00:36:19.183 --> 00:36:23.703 uses the definition of a pensionable earnings is how they define it. 00:36:24.013 --> 00:36:25.513 so how is that calculated? 00:36:26.098 --> 00:36:31.818 And specifically is overtime calculated in, in that calculation, so to speak. 00:36:31.818 --> 00:36:36.108 So if you work a bunch of overtime or you work on a special team, or you 00:36:36.108 --> 00:36:38.628 do a bunch of wildland deployments, all this additional money, does 00:36:38.628 --> 00:36:41.088 that beef up my base benefit? 00:36:41.448 --> 00:36:42.828 And the answer is. 00:36:43.038 --> 00:36:43.068 Louie: eh, 00:36:43.613 --> 00:36:46.573 Jon: Eh, we had people that, broke that system. 00:36:46.883 --> 00:36:51.113 specifically, I'm not gonna name names, but you can imagine, this was before our 00:36:51.113 --> 00:36:53.473 time, Louis and I, Louis and i's time. 00:36:53.723 --> 00:36:57.113 but they used to have, people that would call in sick, they'd 00:36:57.113 --> 00:36:58.253 find someone to work for 'em. 00:36:58.253 --> 00:37:01.913 They had this whole little trade scenario going and all of a sudden you got fi 00:37:01.943 --> 00:37:05.383 fighters and officers and promoted folks. 00:37:05.443 --> 00:37:08.443 They're making double what their base benefit was and they're trying to 00:37:08.443 --> 00:37:09.823 do that for their last three years. 00:37:09.823 --> 00:37:13.363 'cause they're trying to juice up what their base benefit is gonna get in. 00:37:13.693 --> 00:37:17.743 The pension plan is smart, it's run by actuarials, and also 00:37:17.743 --> 00:37:18.913 there's a level of fairness. 00:37:19.093 --> 00:37:21.943 I would say to some degree, and it's just not sustainable. 00:37:22.093 --> 00:37:25.723 If we're depending on you to have a salary of a hundred thousand and 00:37:25.723 --> 00:37:29.863 then all of a sudden it's 200,000 and everyone is doing that, the pension 00:37:29.863 --> 00:37:32.383 plan just cannot support that system. 00:37:32.413 --> 00:37:33.103 It will break. 00:37:33.103 --> 00:37:37.133 So as, as hard as it is and, dealing with fairness and everything else 00:37:37.133 --> 00:37:39.453 like this, it is not over time. 00:37:39.968 --> 00:37:43.808 Additional overtime is not calculated into your pensionable earnings. 00:37:44.048 --> 00:37:48.548 What is based on our Fair Labor and Standards Act, FSLA, there 00:37:48.548 --> 00:37:51.848 is a certain amount of prebuilt overtime into everyone's paycheck, 00:37:52.128 --> 00:37:52.938 which you don't even see. 00:37:52.938 --> 00:37:55.848 It just go, comes as part of your paycheck that is added in there. 00:37:55.848 --> 00:37:57.588 So there is that additional benefit. 00:37:57.768 --> 00:38:02.298 It's just anything in addition to what your normal assignment would be is not 00:38:02.298 --> 00:38:04.038 gonna be considered pensionable earnings. 00:38:04.038 --> 00:38:07.068 So if you wanna know more about that, you can look on FPAs website. 00:38:07.248 --> 00:38:10.188 They talk about different things that actually can enhance 00:38:10.368 --> 00:38:11.538 your pensionable earnings. 00:38:11.728 --> 00:38:15.688 so I'm gonna refer back to, and this is specific to the West Metro 00:38:15.688 --> 00:38:20.308 folks and our contract, what is considered pensionable earnings? 00:38:20.308 --> 00:38:21.238 'cause this is important. 00:38:21.933 --> 00:38:25.533 So all of our longevity pay is actually in addition to, 00:38:25.563 --> 00:38:26.853 that's considered pensionable. 00:38:26.853 --> 00:38:30.933 2% every five years in addition all the way through your career, which actually 00:38:30.933 --> 00:38:32.073 towards the end of your career adds up 00:38:32.118 --> 00:38:32.573 Louie: quite Oh yeah. 00:38:32.943 --> 00:38:34.533 Jon: any type of paramedic pay. 00:38:34.713 --> 00:38:38.193 So obviously our firefighter or paramedics that's already built into their pay. 00:38:38.203 --> 00:38:39.643 there's no additional stipend like 00:38:39.658 --> 00:38:39.748 Louie: we 00:38:39.768 --> 00:38:40.188 Jon: before. 00:38:40.188 --> 00:38:43.428 It's just 108% of what a first grade firefighter was. 00:38:43.698 --> 00:38:47.148 But if you are an officer and you're getting a stipend or an engineer, 00:38:47.208 --> 00:38:51.418 whatever that nominal amount is, that would be considered pensionable earnings. 00:38:51.508 --> 00:38:55.778 And then last but not least, is if you are a day worker, the contract says that 00:38:55.778 --> 00:39:00.108 any day wages, an additional stipend that you get, they call it, if you look at 00:39:00.108 --> 00:39:02.808 FPPA, it talks about shift differentials. 00:39:03.018 --> 00:39:04.398 That's how they're classifying that. 00:39:04.638 --> 00:39:08.178 That would also be con considered, pensionable earnings as far as. 00:39:08.188 --> 00:39:09.808 Is what you get towards your pension. 00:39:09.808 --> 00:39:14.388 that's, all the other, ancillary tech, technician fees that we get. 00:39:14.388 --> 00:39:17.538 So all the specialty folks, the hazmat folks, all that other stuff, 00:39:17.778 --> 00:39:19.368 you get your additional stipend. 00:39:19.578 --> 00:39:22.068 It's just at the end of the day, you're not gonna see that reflected 00:39:22.068 --> 00:39:23.728 on your pensionable earnings. 00:39:23.728 --> 00:39:27.478 So if you ever go on to, I would encourage everyone to go on to the FPPA 00:39:27.478 --> 00:39:30.188 website, and log onto their account. 00:39:30.188 --> 00:39:33.848 If you haven't set one up, it will tell you every year basically what 00:39:33.848 --> 00:39:38.138 FPPA has on your records for what is considered pensionable or not. 00:39:38.138 --> 00:39:42.678 And that should pretty much align, with what your paycheck is, minus over time 00:39:42.678 --> 00:39:47.178 and then minus any other, technician pays or any other type of non differential 00:39:47.178 --> 00:39:48.888 pays is how I'd classify that. 00:39:48.888 --> 00:39:53.848 So we get that question asked a lot, but if you, but there's always 00:39:53.848 --> 00:39:57.508 a but, but the thing is, we talked about fairness and, and equity. 00:39:58.338 --> 00:40:00.588 All they care about is the three highest years. 00:40:00.618 --> 00:40:04.818 So if you are a firefighter and then you promote at the very end of your career 00:40:04.968 --> 00:40:08.238 and you work your way up the ladder for, to an officer and then to a chief 00:40:08.238 --> 00:40:12.768 level, and you're only a chief level for three years, you will get whatever the 00:40:12.768 --> 00:40:14.598 chief levels three highest years are. 00:40:14.598 --> 00:40:18.438 and you only paid into that for three years, so there is that as well. 00:40:18.538 --> 00:40:21.568 just in how that is calculated and how that's factored in, are 00:40:21.718 --> 00:40:24.598 Louie: And there, there are members that do it for that particular 00:40:24.808 --> 00:40:25.078 Jon: Sure. 00:40:25.228 --> 00:40:25.438 Oh yeah. 00:40:25.438 --> 00:40:27.728 Louie: beef it up and that's a legal, way to do it. 00:40:27.848 --> 00:40:32.378 Jon: Nothing outside of what is in inside the guidelines, inside the documents, 00:40:32.378 --> 00:40:34.328 and they're abiding by all the rules. 00:40:34.378 --> 00:40:38.068 and it's a significant enhancement to fund their retirement. 00:40:38.308 --> 00:40:38.668 Louie: Yeah. 00:40:38.848 --> 00:40:41.578 And then I would say this is probably the biggest question that we get. 00:40:41.578 --> 00:40:45.898 This next question comes up a lot and there causes a lot of heartache and a 00:40:45.898 --> 00:40:49.958 lot of confusion and a lot of, even hurt fillings, I would say, because of it. 00:40:50.018 --> 00:40:55.988 And that is, does the pension have a cost of living adjustment also known as a Cola 00:40:56.798 --> 00:40:57.638 Jon: Oh, leader A cola 00:40:57.698 --> 00:41:00.218 Louie: does it, does it, does it have a cola? 00:41:00.608 --> 00:41:01.298 Tell me It does. 00:41:01.298 --> 00:41:01.988 John, tell me, 00:41:02.228 --> 00:41:02.438 Jon: me. 00:41:02.438 --> 00:41:03.158 Speak to me. 00:41:03.158 --> 00:41:04.118 Speak to me Louie. 00:41:04.188 --> 00:41:06.918 so it does not have a guaranteed cola. 00:41:07.368 --> 00:41:11.748 Now there are certain provisions and parameters in which FPPA is allowed to 00:41:11.748 --> 00:41:14.148 have a cola and it is a compounding cola. 00:41:14.178 --> 00:41:18.498 It is within the board of directors, it is within the directors 00:41:18.498 --> 00:41:20.148 of FPPA to authorize that. 00:41:20.148 --> 00:41:24.018 But they have to go through a lot of hoops and hurdles and make sure that the funding 00:41:24.018 --> 00:41:28.968 status of the plan will support whatever cost of living adjustment they're gonna 00:41:28.968 --> 00:41:30.948 give their colas, the compounding colas. 00:41:31.008 --> 00:41:32.778 And this has been a huge issue. 00:41:33.088 --> 00:41:37.978 we founded a, pension committee last year to specifically address this. 00:41:38.108 --> 00:41:40.328 I don't wanna say that there's been a lot of misinformation. 00:41:40.978 --> 00:41:44.518 I think a lot of people, a lot of our members are still under the pretense 00:41:44.518 --> 00:41:48.898 that there is some type of cost of living adjustment, whether guar guaranteed. 00:41:48.898 --> 00:41:52.048 And it's just not, it's just not true and it's not accurate. 00:41:52.048 --> 00:41:54.268 And we want to try to dispel that myth. 00:41:54.578 --> 00:41:58.232 so there's certain things that the board will look at to decipher whether 00:41:58.232 --> 00:42:02.022 or not, basically what is the COLA gonna be and how much can they afford 00:42:02.022 --> 00:42:03.672 and what the compounding cola is. 00:42:04.002 --> 00:42:07.122 But they did make, what I would say is a pretty fair concession. 00:42:07.432 --> 00:42:10.762 back in 2023, they passed some legislation. 00:42:10.762 --> 00:42:13.222 FPPA got it through the legislator to change. 00:42:13.222 --> 00:42:14.182 This is through the state. 00:42:14.182 --> 00:42:17.332 So everything that changes with the documents has to be, has 00:42:17.332 --> 00:42:18.592 to go through the legislature. 00:42:19.082 --> 00:42:21.182 but they were able to find a happy medium. 00:42:21.452 --> 00:42:24.092 And at first Man I thought man, these guys are super creative. 00:42:24.092 --> 00:42:25.322 I would've never thought of that. 00:42:25.562 --> 00:42:28.862 Upon further investigation, this is actually pretty common that a lot 00:42:28.862 --> 00:42:30.422 of other pension plans have done. 00:42:30.782 --> 00:42:34.262 But basically what the plan is now allowed to do is give. 00:42:34.662 --> 00:42:38.052 One time non compounding colas. 00:42:38.292 --> 00:42:41.292 All right, so there's certain parameters that they have to hit, and I'll 00:42:41.292 --> 00:42:42.762 talk about those parameters here. 00:42:43.062 --> 00:42:47.892 But they also, they will also reference this as what they call a 13th check. 00:42:48.372 --> 00:42:52.222 And the way that gets distributed is in October, obviously they'll take the 00:42:52.222 --> 00:42:55.222 last year's, they'll take the investment performance, all these other things, 00:42:55.222 --> 00:42:58.432 they'll take inflation into account and then they'll figure out what potentially 00:42:58.432 --> 00:43:00.172 could be the non compounding cola. 00:43:00.412 --> 00:43:07.372 So specifically if the board is to approve a non compounding ko, they can only do 00:43:07.372 --> 00:43:09.622 it under these specific circumstances. 00:43:09.892 --> 00:43:12.742 So first and foremost, the compounding cola. 00:43:13.042 --> 00:43:17.602 That is given, it has to be less than 1%, which I'll talk about that in a minute. 00:43:17.602 --> 00:43:22.432 For the last decade or so, it has definitely been less than 1%. 00:43:22.772 --> 00:43:27.782 FPPA also has to determine and make sure that the long-term investment pool 00:43:28.082 --> 00:43:31.382 has averaged a return of at least 6.5% 00:43:31.772 --> 00:43:33.422 over the last five years. 00:43:33.602 --> 00:43:37.292 So mainly that is a lot of the stocks that they have invested in, that's 00:43:37.292 --> 00:43:40.802 long-term horizon, what they're thinking about paying long-term in the future. 00:43:41.112 --> 00:43:45.162 they just have to make sure that reaches that minimum threshold of 6.5% 00:43:45.222 --> 00:43:49.692 over the last five years, which for the last few years has had no problem. 00:43:49.902 --> 00:43:53.112 In fact, I think last year the annual performance was almost 10%, so 00:43:53.112 --> 00:43:54.282 they've been able to hit that mark. 00:43:54.347 --> 00:43:55.127 Pretty quickly. 00:43:55.187 --> 00:43:58.687 And then they factor in, inflation. 00:43:58.867 --> 00:43:59.227 All right? 00:43:59.227 --> 00:44:04.277 So then they're gonna take in, the CPIW, which is just an inflation metrics, and 00:44:04.277 --> 00:44:07.727 then they're gonna, and then they're gonna subtract whatever additional 00:44:07.727 --> 00:44:12.437 compounding COLA was, and then they're gonna multiply that from the base benefit. 00:44:12.437 --> 00:44:13.967 So that sounds like a mouthful. 00:44:13.967 --> 00:44:15.197 So let's give an example. 00:44:15.377 --> 00:44:19.457 I think this, I'm always about, context and giving me examples 'cause I just 00:44:19.457 --> 00:44:21.197 sound like a bunch of numbers right there. 00:44:21.197 --> 00:44:27.167 So let's say that we had a firefighter who's 55 years old who had retired, and 00:44:27.167 --> 00:44:30.197 their annual base benefit was $70,000. 00:44:30.197 --> 00:44:31.607 70 K is what they're. 00:44:31.922 --> 00:44:33.722 Annual base benefit was gonna get. 00:44:33.992 --> 00:44:42.002 So if you go off of last year's version, all right, the board approved a 3.66% 00:44:42.332 --> 00:44:47.552 onetime annual benefit, which would be added to that $70,000. 00:44:47.822 --> 00:44:48.212 All right? 00:44:48.212 --> 00:44:49.952 That will be paid out in October. 00:44:50.402 --> 00:44:55.532 And basically how they got to that is they took the, compounding cola and 00:44:55.532 --> 00:44:57.842 subtracted it from the previous inflation. 00:44:57.842 --> 00:44:59.222 So that was 3.8 00:44:59.222 --> 00:45:00.992 was last year's previous inflation. 00:45:01.232 --> 00:45:06.112 And then they subtracted what the compounding Cola was, which was 0.14. 00:45:06.322 --> 00:45:08.422 And that's where you get the 3.66. 00:45:08.422 --> 00:45:13.822 So for this particular person that was, had an annual benefit of $70,000. 00:45:14.157 --> 00:45:20.877 It was a check of $2,562 added to the, their October monthly distribution that 00:45:20.877 --> 00:45:22.677 they got, which is no chump change. 00:45:22.677 --> 00:45:28.047 Like it's, it's a way why, why the math works and why, uh, pensions like 00:45:28.047 --> 00:45:32.517 this, it doesn't add the additional liability of that in the future, which 00:45:32.517 --> 00:45:34.167 is what a compounding hole it does. 00:45:34.707 --> 00:45:37.437 And when they start talking about when FPPA was giving their 00:45:37.437 --> 00:45:39.147 presentations and saying we get it. 00:45:39.477 --> 00:45:42.597 All the retirees, people that are getting ready to retire, like they, 00:45:42.777 --> 00:45:45.537 you know, inflation in 2022 was 9%. 00:45:45.537 --> 00:45:47.997 They're like, we need way more than what you guys are giving us. 00:45:48.147 --> 00:45:49.257 Why can't we do this? 00:45:49.257 --> 00:45:50.607 We got a hundred percent funding. 00:45:51.027 --> 00:45:55.617 You know, they start kicking out a 3% cost of living adjustment just in year one. 00:45:55.827 --> 00:45:58.737 And then in year two, you know, within like three years that thing's 00:45:58.737 --> 00:46:00.747 funding status is down to 85%. 00:46:00.747 --> 00:46:03.857 Like it's just precipitous and almost exponential I guess is 00:46:03.857 --> 00:46:04.727 the word I was looking for. 00:46:04.787 --> 00:46:07.037 And how fast you can drain that without it being 00:46:07.147 --> 00:46:07.207 Louie: Yeah, 00:46:08.277 --> 00:46:12.327 Jon: And what it really comes down to, and I was on the committee and we looked at 00:46:12.327 --> 00:46:17.187 this, what it really comes down to is the funding mechanism for our pension plan was 00:46:17.187 --> 00:46:22.107 never, ever designed to have compounding colas that kept up with inflation. 00:46:22.107 --> 00:46:24.807 It's just not, if you look at plans that. 00:46:25.717 --> 00:46:29.827 Offer, a generous compounding cola of two and a half to 3%. 00:46:30.247 --> 00:46:36.727 The average roughly contribution rate that the plan is putting in is about 45%, 20% 00:46:36.727 --> 00:46:39.367 more than what we are currently paying in. 00:46:39.637 --> 00:46:41.257 So that's the message as well. 00:46:41.257 --> 00:46:46.537 It's if members want changes and they want to go to FPPA, basically we gotta 00:46:46.537 --> 00:46:48.967 come up with another 20% in contributions. 00:46:49.387 --> 00:46:51.997 And I'll be honest, I don't know of any of our members that are beating 00:46:51.997 --> 00:46:53.887 down the door to put in another 10%. 00:46:54.037 --> 00:46:56.737 Our employers are already paying another half percent. 00:46:56.737 --> 00:46:59.737 So it's just doesn't seem like it's gonna be in the cards and realistic. 00:46:59.737 --> 00:47:03.577 So it's a short term solution, the one-time check to try to get people 00:47:03.577 --> 00:47:08.617 by, but the message has to be that you cannot rely on the pension to 00:47:08.617 --> 00:47:10.867 have a cost of living adjustments. 00:47:11.407 --> 00:47:11.497 Yeah. 00:47:11.497 --> 00:47:14.177 If they have room in the pension, they will, but it's just not 00:47:14.177 --> 00:47:15.827 dependable, so please don't do it. 00:47:15.827 --> 00:47:15.977 I think 00:47:16.052 --> 00:47:19.322 Louie: And I think that the key takeaway here, so you know, John, and I think 00:47:19.322 --> 00:47:23.432 we work pretty well as a team because he is able to eloquently explain it and 00:47:23.432 --> 00:47:27.002 then I try to dumb it down as much as possible so that I can understand it 00:47:27.002 --> 00:47:28.412 and people like me can understand it. 00:47:28.862 --> 00:47:30.712 And I think the way to look at this is. 00:47:32.017 --> 00:47:36.637 For that firefighter that has a $70,000 pension, they might get a, that 13th 00:47:36.637 --> 00:47:38.977 check or that extra payment of $2,500. 00:47:38.977 --> 00:47:42.697 But the very next year, even though the cost of goods has increased 00:47:42.697 --> 00:47:48.547 permanently, that firefighter will go back down to a $70,000 pension. 00:47:48.967 --> 00:47:52.927 And then maybe, or maybe not in that next year, will they get, 00:47:53.277 --> 00:47:54.507 an additional one-time payment? 00:47:54.507 --> 00:47:54.927 Who knows? 00:47:54.927 --> 00:47:56.577 It all depends on the funding status. 00:47:56.657 --> 00:47:59.927 the important thing to remember there is it's not base building. 00:47:59.927 --> 00:48:03.947 And if your pension when you retire is set it, let's just go to the $70,000 00:48:03.947 --> 00:48:07.097 and let's say you get a 70,000 pension, which is a great pension, you have 00:48:07.097 --> 00:48:11.417 to assume that it's gonna stay around that level and it's not gonna, it's 00:48:11.417 --> 00:48:13.037 not gonna keep up with inflation. 00:48:13.067 --> 00:48:16.287 I think that's the biggest takeaway that we can tell you is it is not 00:48:16.287 --> 00:48:17.607 guaranteed to keep up with inflation. 00:48:17.607 --> 00:48:19.257 And in fact, it probably won't. 00:48:19.647 --> 00:48:22.967 During some of the years when inflation was high over the last, three, four years 00:48:22.967 --> 00:48:28.457 ago, there was inflation that was seven, 8% a year, and those guys were getting. 00:48:29.072 --> 00:48:31.082 0% or 0.5%. 00:48:31.322 --> 00:48:35.067 So they basically, that was reducing the power of their pension 00:48:35.067 --> 00:48:37.647 by 7%, six and a half percent. 00:48:38.157 --> 00:48:39.447 That is big over time. 00:48:40.317 --> 00:48:44.637 Jon: And that's, and I don't think people, it's hard for us to visualize or 00:48:44.637 --> 00:48:49.257 forecast even mathematically what that means, 10 or 15 or 20 years in the future. 00:48:49.257 --> 00:48:50.427 We're just not built that way. 00:48:50.427 --> 00:48:53.157 our brains aren't designed to think abstractly about that. 00:48:53.157 --> 00:48:54.927 And to Louis's point, yeah. 00:48:54.927 --> 00:48:57.277 When we did the research on the history of the compounding 00:48:57.277 --> 00:49:00.707 Colas and FPPA, 2018, it's 0.4%. 00:49:00.902 --> 00:49:06.092 No cost of living in 20 19, 20 20, 20, 21, 20, 22, half a percent each year. 00:49:06.092 --> 00:49:10.322 It's just not meaningful enough to keep up with, even at the two point half or 3%. 00:49:10.322 --> 00:49:12.692 And every year you fall a little bit further behind. 00:49:12.692 --> 00:49:15.752 So I know in the past, if you guys, a quick way to think 00:49:15.752 --> 00:49:18.222 about it is, the rule of 72. 00:49:18.252 --> 00:49:20.442 We've talked about this when we talked about why it's important to 00:49:20.442 --> 00:49:22.062 invest in the doubling of your money. 00:49:22.062 --> 00:49:28.002 In the very basic principle that basically if you take the number 72 and then divide 00:49:28.002 --> 00:49:32.592 that by whatever your rate of return is gonna be, that will give you how much time 00:49:32.592 --> 00:49:34.602 it will take for that money to double. 00:49:34.722 --> 00:49:36.462 So very basic math is. 00:49:36.762 --> 00:49:41.912 If you had a 10% annual return, you know it's gonna be 72 divided by 00:49:41.912 --> 00:49:44.912 10, so it'd take you seven years to double that money, assuming you get 00:49:44.912 --> 00:49:46.412 that return for that amount of time. 00:49:46.832 --> 00:49:51.662 Inflation works the exact same way, so you can take 72 and then divide it by 00:49:51.662 --> 00:49:53.642 whatever the current inflation rate is. 00:49:53.732 --> 00:49:57.992 And in the circumstance, if it's a, if it's around three, it's gonna be 24 00:49:57.992 --> 00:50:01.572 years that money is gonna be halved, your purchasing power is gonna be hald. 00:50:01.902 --> 00:50:02.772 And it's just really tough. 00:50:02.772 --> 00:50:07.092 If we got people leaving at 50 and 55 and they're living to 90, which I 00:50:07.092 --> 00:50:11.392 hope for everyone, when you hit 75, you are definitely gonna feel that 00:50:11.392 --> 00:50:14.212 because the pension has not even come close to keeping up with that. 00:50:14.422 --> 00:50:19.132 That's where we talk about having the supplemental retirement vehicles having 00:50:19.132 --> 00:50:21.262 additional monies to help support that. 00:50:21.422 --> 00:50:24.632 because it's just, it's easy for that money to get eroded and our 00:50:24.632 --> 00:50:26.042 brain just does not work like that. 00:50:26.042 --> 00:50:26.372 It just 00:50:26.642 --> 00:50:27.092 Louie: it doesn't. 00:50:27.092 --> 00:50:28.302 and it's hard to visualize it. 00:50:28.602 --> 00:50:31.062 And that's, I think that's why it's important to keep it in mind. 00:50:31.062 --> 00:50:35.612 If you retire, and you have a $70,000 pension, just keep with that. 00:50:35.612 --> 00:50:36.422 Same example. 00:50:36.832 --> 00:50:40.102 if the Fed is able to keep inflation at around 2.5%, 00:50:40.102 --> 00:50:42.142 which is around their target, they may or may not. 00:50:42.192 --> 00:50:43.302 some years they're better than that. 00:50:43.312 --> 00:50:44.612 some years it's worse than that. 00:50:45.122 --> 00:50:48.362 But let's just say that in the future, they can keep it at about 2.5% 00:50:48.362 --> 00:50:48.692 every year. 00:50:48.692 --> 00:50:52.922 That means that in about 25 years, your purchasing power is cut in half. 00:50:52.922 --> 00:50:57.722 So if you had a, if today you retire with a $70,000 pension, 25 years from 00:50:57.722 --> 00:51:03.302 now, that pension will be able to buy you about $35,000 worth of goods 00:51:03.362 --> 00:51:05.582 and services that it can buy today. 00:51:05.942 --> 00:51:08.032 So you can have. 00:51:08.392 --> 00:51:11.872 These one-time payments, which help, but at the end of the day, your 00:51:11.872 --> 00:51:15.742 base will be about half of what it is when you retire in 25 years. 00:51:15.742 --> 00:51:16.702 That those are just rough. 00:51:16.702 --> 00:51:20.442 And it all depends on the actual inflation rates and how well the pension is doing. 00:51:20.442 --> 00:51:21.702 But in general, it's safe. 00:51:21.752 --> 00:51:24.932 I like to tell our members that it's safe to say that your pension 00:51:24.932 --> 00:51:26.552 is not really inflation adjusted. 00:51:26.552 --> 00:51:27.242 It is not. 00:51:27.572 --> 00:51:32.882 So we encourage John and I like to encourage people to give yourself a cola. 00:51:33.302 --> 00:51:37.052 What's the best way, John, to give ourselves a cola in retirement? 00:51:37.287 --> 00:51:40.227 Jon: that would be, I can't remember what episode, what, when we 00:51:40.227 --> 00:51:42.297 talked about the 4 57 plan, right? 00:51:42.537 --> 00:51:44.937 And investing in the 4 57 plan. 00:51:44.967 --> 00:51:49.527 throw as much as possible as you can into that and your future self will. 00:51:49.527 --> 00:51:50.007 Thank you. 00:51:50.007 --> 00:51:53.247 But that is the money that you can then draw on to basically make up for the 00:51:53.247 --> 00:51:55.467 lack of a cost of living adjustment. 00:51:55.467 --> 00:51:58.477 And the secret is, a lot of people don't think about it, but the things 00:51:58.477 --> 00:52:02.747 that actually go up, as you get older, that are higher than the average, 00:52:02.747 --> 00:52:06.977 normal CPI inflation, healthcare costs, food costs, all these other 00:52:06.977 --> 00:52:09.227 things, they are way higher than 3%. 00:52:09.277 --> 00:52:10.477 most people would pray for a 00:52:10.582 --> 00:52:13.252 Louie: pay God, God forbid you want to eat eggs in retirement, man, you 00:52:13.252 --> 00:52:15.202 better have a 4 57 if you like eggs. 00:52:15.337 --> 00:52:16.357 Jon: That's exactly right. 00:52:16.357 --> 00:52:16.657 Yeah. 00:52:16.687 --> 00:52:17.107 Whatever. 00:52:17.107 --> 00:52:18.367 $10 a dozen. 00:52:18.427 --> 00:52:18.757 yeah. 00:52:18.817 --> 00:52:22.327 We should all, go to the fire stations and start getting the chicken coops up there. 00:52:22.327 --> 00:52:24.967 That would just be a perfect thing for us to start saving some 00:52:25.042 --> 00:52:25.132 Louie: Yeah. 00:52:25.132 --> 00:52:25.432 Combat 00:52:25.807 --> 00:52:26.857 Jon: Combat inflation. 00:52:26.857 --> 00:52:30.697 But, so I know we harp on it, but there's always a rhyme and a reason and we're 00:52:30.697 --> 00:52:35.582 not, I try not to be a vigilante about this stuff and have a lot of dog mu but 00:52:35.582 --> 00:52:40.772 it, I truly feel like this is the path forward in order to set us, set everyone 00:52:40.772 --> 00:52:42.812 up here in the organization for success. 00:52:43.002 --> 00:52:46.392 and if it wasn't about that, we wouldn't be hammered in every time. 00:52:46.392 --> 00:52:49.992 So my goal is every time, we encountering in someone, they 00:52:49.992 --> 00:52:53.262 actually talk about, Hey, just opened up the 4 57, or what do you think? 00:52:53.262 --> 00:52:54.912 should, and I love to have that dialogue. 00:52:54.912 --> 00:52:57.222 That means that you're engaged and you're making action. 00:52:57.372 --> 00:52:58.782 That's the other part is doing action. 00:52:58.782 --> 00:52:59.172 It's a lot to 00:52:59.202 --> 00:53:01.422 Louie: Oh, dude, I congratulate people when they're like, Hey 00:53:01.422 --> 00:53:03.162 man, I'm opened up a 4 57. 00:53:03.162 --> 00:53:03.762 I'm contributing to it. 00:53:03.762 --> 00:53:04.692 I'm like, dude, congratulations. 00:53:04.692 --> 00:53:05.142 That's awesome. 00:53:05.142 --> 00:53:07.932 That's your first step towards financial freedom, financial 00:53:07.932 --> 00:53:12.052 independence, and giving yourself that, that inflation adjusted pension. 00:53:12.082 --> 00:53:15.982 So when cost of goods go up and FPPA says, Hey, we don't have enough for a big, 00:53:16.412 --> 00:53:21.002 inflation adjustment, a cola or even a one-time payout, it's hey, that's okay. 00:53:21.002 --> 00:53:25.412 You got this big old 4 57 pull of money that you can just be like, I'm gonna 00:53:25.412 --> 00:53:29.402 pull $5,000 out from it this year and give myself a cola and make sure that 00:53:29.402 --> 00:53:31.862 my, my standard of living stays the same. 00:53:32.342 --> 00:53:34.562 It's one of the smartest things you can do, and it's the one two 00:53:34.562 --> 00:53:35.762 punch of retirement for us, right? 00:53:35.762 --> 00:53:36.422 that's how you do it. 00:53:36.472 --> 00:53:38.062 you got the pension, you got your 4 57. 00:53:38.062 --> 00:53:41.422 Those things together will get you to financial independence. 00:53:41.722 --> 00:53:42.532 Jon: 100%. 00:53:42.712 --> 00:53:43.012 Yep. 00:53:43.352 --> 00:53:46.772 so the last question that, I get asked sometimes, and I think there's, 00:53:46.832 --> 00:53:49.052 sometimes a sense of, frustration. 00:53:49.292 --> 00:53:52.772 There's always a sense of, uh, you know, equality with some of this stuff, but 00:53:52.772 --> 00:53:56.882 a lot of people wanna know, like, you know, mathematically who's better off. 00:53:56.882 --> 00:54:00.367 Would it be to invest in the defined benefit if you had the option? 00:54:00.367 --> 00:54:03.427 we don't currently have the option, but this is somewhat of a hypothetical, 00:54:03.427 --> 00:54:08.747 but this is also to, I would say just assure the, the folks that have a 4 0 00:54:08.747 --> 00:54:12.927 1 a plan, that have a money purchase plan, a defined contribution plan. 00:54:13.502 --> 00:54:18.332 Your benefit is more than likely, unless you went really crazy on some investments, 00:54:18.602 --> 00:54:22.952 is probably gonna be very similar to what the base benefit of someone on 00:54:22.952 --> 00:54:24.782 the do divine benefit plan's gonna be. 00:54:24.992 --> 00:54:28.842 Now there's always, there's always exceptions, but generally speaking, 00:54:29.142 --> 00:54:32.542 so the way that you could do that, if you were at all curious, once 00:54:32.542 --> 00:54:34.042 again, this is an example, right? 00:54:34.102 --> 00:54:34.972 Another example. 00:54:35.302 --> 00:54:39.382 So we have a 55-year-old firefighter who's retiring after 30 years of 00:54:39.382 --> 00:54:43.122 service, and they, They topped out their three highest years were a 00:54:43.122 --> 00:54:45.162 hundred, was a hundred thousand dollars. 00:54:45.432 --> 00:54:45.942 Alright? 00:54:45.972 --> 00:54:48.642 Based on our little cool little benefit chart, we look on that. 00:54:48.642 --> 00:54:52.302 We say, okay, 55 years old, 30 years of service, that's a base 00:54:52.302 --> 00:54:56.562 benefit of 70% of their highest three years, which was a hundred K. 00:54:56.562 --> 00:54:58.962 So they're gonna get 70 K per year, all right? 00:54:58.962 --> 00:55:02.562 If you do that into a monthly basis, that would be $5,800. 00:55:02.622 --> 00:55:04.782 And then obviously we gotta pay the tax man on that. 00:55:04.782 --> 00:55:05.682 It'd be less than that. 00:55:05.922 --> 00:55:08.952 So what basically is the present day value? 00:55:09.252 --> 00:55:13.862 If you had to go and buy that same kind of benefit, what would that look like? 00:55:13.922 --> 00:55:15.062 And it's called an annuity. 00:55:15.182 --> 00:55:15.512 Alright. 00:55:15.512 --> 00:55:17.282 That's basically what we are all have. 00:55:17.282 --> 00:55:21.302 When you have a pension, you have an annuity, we have a contract with FPPA 00:55:21.572 --> 00:55:25.472 with the pension provider, and they are going to more or less guarantee 00:55:25.472 --> 00:55:28.022 us this benefit moving in the future. 00:55:28.022 --> 00:55:32.132 So the easiest way on an apples to apples comparison, how you'd want 00:55:32.132 --> 00:55:36.092 to do that is you want to compare it to what's called a SPI A or a 00:55:36.092 --> 00:55:38.552 single premium immediate annuity. 00:55:38.827 --> 00:55:41.077 Big nerd talk here, big nerd talk. 00:55:41.077 --> 00:55:43.457 But basically that's saying I'm gonna hand over all this money 00:55:43.457 --> 00:55:46.817 right now, and the next day you're gonna start paying me out at this. 00:55:46.967 --> 00:55:51.527 So in order to get that calculation, in order to get that $5,800 a 00:55:51.527 --> 00:55:54.627 month, and every insurance company's gonna be a little bit different. 00:55:54.627 --> 00:55:57.067 So this is just take it for a grain of salt, a rule of thumb. 00:55:57.397 --> 00:56:00.697 It would be about one point, a little over, $1.1 00:56:00.697 --> 00:56:05.347 million is what you would have to have in your 4 0 1 a account in order to 00:56:05.347 --> 00:56:07.327 purchase basically that same benefit. 00:56:07.687 --> 00:56:12.007 Now, there's additional factors that we'll talk about in episode two, and 00:56:12.007 --> 00:56:16.177 that talks about, when you think about survivor benefits and other options, 00:56:16.207 --> 00:56:17.602 that add some complexity to it. 00:56:17.617 --> 00:56:20.067 But just on a general speaking, so if you really feel like 00:56:20.067 --> 00:56:21.207 you're getting shafted, right? 00:56:21.567 --> 00:56:24.477 I don't want to say, I don't know if this is a healthy exercise or not, but 00:56:24.527 --> 00:56:28.457 if you invested your money in just the stock market, it didn't get super crazy, 00:56:28.457 --> 00:56:30.227 didn't sell when it was really low. 00:56:30.527 --> 00:56:32.057 I can almost, especially with. 00:56:32.057 --> 00:56:36.162 The way that the market has been over the last 25 or 30 years, I'm pretty 00:56:36.162 --> 00:56:39.792 confident that it would be very close to what that benefit's gonna do. 00:56:39.792 --> 00:56:40.482 'cause honestly, that's. 00:56:41.087 --> 00:56:46.847 What FPPA is using, their barometer for what their average Expected returns is 00:56:46.847 --> 00:56:51.617 about 7% and that's pretty much more or less what the stock market has offered. 00:56:51.647 --> 00:56:54.797 Even a little bit higher than that, but that's a pretty conservative amount. 00:56:54.797 --> 00:56:59.577 So I don't want to feel like people are, are somehow, at risk if they 00:56:59.577 --> 00:57:00.657 don't have a defined benefit. 00:57:00.657 --> 00:57:01.287 That's the other part. 00:57:01.287 --> 00:57:03.507 Like you guys have been putting a lot of money away. 00:57:03.657 --> 00:57:06.507 The department has been kicking a lot of money away, into that. 00:57:06.507 --> 00:57:09.627 but that's just a way that from a mathematical standpoint, how you can 00:57:09.627 --> 00:57:12.087 value what is your pension benefit. 00:57:12.177 --> 00:57:15.057 And where a lot of advisors will work on people is when they have 00:57:15.057 --> 00:57:18.627 the option to either take a lump sum or should they annuitize this. 00:57:18.627 --> 00:57:22.347 So basically take a monthly payment in the future and they can all run those 00:57:22.347 --> 00:57:26.307 calculations if you worked at another job or you have a spouse that has that option. 00:57:26.307 --> 00:57:28.407 there's another way to figure out what makes the most sense. 00:57:28.407 --> 00:57:32.307 But that's a pretty, pretty simple rule of thumb is what's my pension 00:57:32.307 --> 00:57:37.207 worth if I retire today and I have this benefit, like in, in real time dollars. 00:57:37.212 --> 00:57:37.352 Yeah. 00:57:37.412 --> 00:57:37.502 Louie: Yep. 00:57:37.927 --> 00:57:38.017 Jon: Yeah. 00:57:38.137 --> 00:57:39.307 Hopefully that makes sense. 00:57:39.632 --> 00:57:40.682 Louie: Yeah, I think that's really good. 00:57:40.722 --> 00:57:44.772 and we were kind of mentioning earlier, we think that the pension is awesome. 00:57:44.772 --> 00:57:45.702 We think it's secure. 00:57:45.732 --> 00:57:48.942 We're confident that it's gonna be there for us when we retire, and 00:57:48.942 --> 00:57:52.122 it's gonna be a central part of our own personal retirement plan, John's 00:57:52.122 --> 00:57:53.652 retirement plan, my retirement plan. 00:57:53.992 --> 00:57:56.242 and we are absolutely relying on it. 00:57:56.522 --> 00:57:58.762 but we're also telling you that don't let it be the only thing, 00:57:58.762 --> 00:58:02.307 like all don't it's nice to have it, but don't let it be the only thing. 00:58:02.307 --> 00:58:04.377 There's a lot of guys out there, a lot of firefighters, John, that I've 00:58:04.377 --> 00:58:05.787 talked to who are like, this is it. 00:58:05.787 --> 00:58:09.147 I gotta keep working way past my expiration date here. 00:58:09.147 --> 00:58:11.187 But I have to because I. 00:58:11.857 --> 00:58:13.837 I don't have enough in the pension, and that's all I have. 00:58:13.837 --> 00:58:15.007 I don't have a 4 57. 00:58:15.007 --> 00:58:16.027 I haven't been contributing to that. 00:58:16.087 --> 00:58:17.257 I don't have a Roth IRA. 00:58:17.677 --> 00:58:20.287 And so this is all I got and I gotta keep beefing that up. 00:58:21.037 --> 00:58:22.147 We don't want people to be that way. 00:58:22.147 --> 00:58:25.897 We, we almost named this show 55 and out because we were like, we want 00:58:25.897 --> 00:58:27.817 people to be able to get outta here when they want to get outta here and 00:58:27.817 --> 00:58:29.827 have a long, fruitful retirement. 00:58:30.067 --> 00:58:31.777 And give yourself that option. 00:58:31.777 --> 00:58:35.587 Don't put all your eggs in one basket and spread that risk around, or spread that. 00:58:35.712 --> 00:58:36.322 Diversify. 00:58:36.472 --> 00:58:37.477 Yeah, diversify. 00:58:37.517 --> 00:58:41.327 and you can do that easily with a, with your pension, with your 4 57. 00:58:41.607 --> 00:58:45.217 and if you want to go crazy with a Roth, IRA too, you can, spread things 00:58:45.217 --> 00:58:48.277 out like that and then give yourself the flexibility and the options 00:58:48.277 --> 00:58:51.277 to get outta here when you want to get outta here and have the kind of 00:58:51.277 --> 00:58:52.507 retirement that you want to have. 00:58:52.872 --> 00:58:53.092 Jon: Yep. 00:58:53.257 --> 00:58:56.917 And there's a lot of, we'll talk about it in part two of the episode. 00:58:56.917 --> 00:58:59.587 Some of the stuff that we didn't get to today, just because we didn't 00:58:59.587 --> 00:59:03.137 wanna make this, like I said, a two and a half or three hour, episode. 00:59:03.347 --> 00:59:06.407 But we will talk about things specifically like the drop plan, 00:59:06.497 --> 00:59:09.637 the deferred retirement option plan, which a lot of people talk 00:59:09.637 --> 00:59:11.047 about and they sing their praises. 00:59:11.317 --> 00:59:13.717 There's also something called deferred retirement, so you're 00:59:13.717 --> 00:59:16.387 not taking your retire retirement, you're holding off on that. 00:59:16.757 --> 00:59:19.427 and then we'll talk about, survivor options or spousal 00:59:19.427 --> 00:59:20.837 options and what that looks like. 00:59:20.837 --> 00:59:22.157 'cause there's kind of some things here. 00:59:22.367 --> 00:59:26.417 And try to get into some more of the nuances with some of these other things 00:59:26.417 --> 00:59:30.017 that make our pension a little bit more unique than just, a traditional pension. 00:59:30.017 --> 00:59:32.867 So there'd definitely be a lot more to come 'cause we know we've gotten 00:59:32.867 --> 00:59:34.817 a lot of feedback specifically. 00:59:35.777 --> 00:59:39.347 differentiating between should I enter the drop plan or is the 00:59:39.347 --> 00:59:41.087 deferred retirement a better option? 00:59:41.087 --> 00:59:45.137 And we're gonna give some case studies on what LA looks like and potentially 00:59:45.137 --> 00:59:48.357 who should be thinking about what, in those particular circumstances. 00:59:48.357 --> 00:59:49.557 So definitely more to come. 00:59:49.557 --> 00:59:51.267 So I hope this was beneficial. 00:59:51.267 --> 00:59:54.357 I hope this is just I would say this is kinda level one and just getting 00:59:54.357 --> 00:59:57.507 an understanding of how the pension works, how it's funded, how much we 00:59:57.507 --> 01:00:01.677 pay into it, what's it look like when I retire, all of those other things. 01:00:01.737 --> 01:00:05.047 and it gives us the foundation that now we can talk about some of these 01:00:05.047 --> 01:00:09.517 more, complex topics regarding the pension and what options, you 01:00:09.517 --> 01:00:10.987 should consider or just what's 01:00:11.497 --> 01:00:11.797 Louie: Yeah. 01:00:12.367 --> 01:00:12.607 Yep. 01:00:12.607 --> 01:00:14.557 So we're excited for the second part two to talk to you guys a little 01:00:14.557 --> 01:00:15.727 bit more about those other options. 01:00:16.087 --> 01:00:17.677 And then John, I was just thinking about this. 01:00:17.677 --> 01:00:18.307 This just came up. 01:00:18.307 --> 01:00:22.067 We didn't even game plan this as we were talking, but, we might have to do like a 01:00:22.067 --> 01:00:23.507 third episode or come back to it later. 01:00:23.507 --> 01:00:25.907 But I can already tell you one of the questions we're gonna get is, 01:00:26.417 --> 01:00:29.267 how does divorce impact my pension? 01:00:29.297 --> 01:00:32.207 Which is, significantly, it's gonna significantly impact it. 01:00:32.627 --> 01:00:36.097 And we haven't made any kind of show notes on that or talked about that. 01:00:36.097 --> 01:00:39.247 But we'll just tell you that your pensionable amount is gonna be 01:00:39.247 --> 01:00:43.692 all screwed up and messed up and blown up potentially by a divorce. 01:00:43.837 --> 01:00:44.127 Jon: Yeah. 01:00:44.202 --> 01:00:46.992 We can also have some, case studies of that. 01:00:46.992 --> 01:00:50.962 And that's honestly, I would say overarchingly a lot of the members that 01:00:50.962 --> 01:00:54.802 have been here for a long time, that is one of the big reasons that they 01:00:54.802 --> 01:00:58.132 are still working is because they had a divorce at some point in their career 01:00:58.147 --> 01:00:59.707 Louie: or two divorces, or three divorces. 01:00:59.812 --> 01:01:01.102 Jon: the old baker's dozen. 01:01:01.322 --> 01:01:03.962 and it is, yeah, every time you just take a little bit more, 01:01:03.992 --> 01:01:05.342 a little bit less off of that. 01:01:05.342 --> 01:01:09.832 So it's something, Louis and i's one of our cardinal rules is one of the most 01:01:09.832 --> 01:01:14.662 important financial decisions you will ever make is basically who you end up 01:01:14.662 --> 01:01:20.252 marrying, co cohabitating with however you wanna qualify it or, describe it. 01:01:20.442 --> 01:01:21.552 that is super important. 01:01:21.557 --> 01:01:21.657 Yeah. 01:01:21.782 --> 01:01:24.272 Louie: so Katie and Caitlin, we love you. 01:01:24.392 --> 01:01:24.607 That's great. 01:01:24.612 --> 01:01:25.502 We value you. 01:01:25.502 --> 01:01:26.702 We're so thankful for you. 01:01:26.762 --> 01:01:27.742 And, don't divorce us. 01:01:27.792 --> 01:01:29.982 Jon: please, yes, please do not divorce us. 01:01:29.982 --> 01:01:31.562 But, that's it for today. 01:01:31.592 --> 01:01:33.182 hopefully that was, beneficial. 01:01:33.182 --> 01:01:33.242 Yeah. 01:01:33.432 --> 01:01:36.552 it's always something that we like talking about and it's a heavy topic, 01:01:36.602 --> 01:01:39.842 But it's an important topic and it's just something that we want our 01:01:39.842 --> 01:01:43.532 members to be front and center of and thinking about and just knowing that, 01:01:43.532 --> 01:01:45.332 they are already set up for success. 01:01:45.332 --> 01:01:48.812 A lot of Americans would love to have what we have. 01:01:48.962 --> 01:01:49.022 Yeah. 01:01:49.022 --> 01:01:50.582 And we should be, grateful for that. 01:01:50.582 --> 01:01:54.332 it's a blessing honestly, to have that optionality, to be able to 01:01:54.392 --> 01:01:56.442 hopefully retire at, a somewhat early 01:01:56.697 --> 01:01:58.212 Louie: an earliest early-ish 01:01:58.332 --> 01:01:59.352 Jon: earliest age. 01:01:59.352 --> 01:01:59.622 Yep. 01:01:59.622 --> 01:02:03.222 So everyone out there listening, once again, thank you guys all for tuning in. 01:02:03.612 --> 01:02:07.992 you guys have just showered us with a lot of kudos and support, and we truly 01:02:07.992 --> 01:02:12.092 do this because we enjoy it, we enjoy the feedback, we enjoy the conversation. 01:02:12.242 --> 01:02:15.242 It makes us better, it keeps us engaged in some of this stuff. 01:02:15.242 --> 01:02:15.932 It's anything else. 01:02:15.932 --> 01:02:18.452 If you're not really thinking about it, it's easy to forget about it. 01:02:18.452 --> 01:02:21.512 So, uh, yep, huge shout out to everyone that's tuning in. 01:02:21.542 --> 01:02:23.822 Louie: And of course, as always, if you guys have any comments or 01:02:23.822 --> 01:02:28.232 feedback, you can send that to, at Fiscal Firehouse on Instagram 01:02:28.292 --> 01:02:31.232 or ask fiscal firehouse@gmail.com. 01:02:31.232 --> 01:02:34.322 We're always looking for feedback and suggestions and willing to 01:02:34.322 --> 01:02:35.582 answer your questions if we can. 01:02:35.902 --> 01:02:36.892 maybe even on air. 01:02:36.892 --> 01:02:38.782 That's, I know that's always fun for guys when they get one of 01:02:38.782 --> 01:02:39.802 their questions answered on air. 01:02:39.802 --> 01:02:41.212 So we always encourage that. 01:02:41.812 --> 01:02:44.412 And, yeah, I think that's, that about wraps it up, 01:02:44.472 --> 01:02:48.087 Jon: That's it for, yep, that's it for, part one of the pension episode. 01:02:48.087 --> 01:02:51.327 Tune in for part two of the pension episode and everyone 01:02:51.327 --> 01:02:53.527 stay safe out there and, have a, 01:02:53.527 --> 01:02:55.782 Louie: have a great, couple weeks until our next episode and 01:02:56.142 --> 01:02:56.472 Jon: Yeah. 01:02:56.682 --> 01:02:57.252 Happy St. 01:02:57.252 --> 01:02:57.822 Patrick's Day. 01:02:57.822 --> 01:03:01.092 I think that's the next holiday, I guess is what we got on the horizon, yep. 01:03:01.312 --> 01:03:02.902 until next time, everyone take care. 01:03:02.902 --> 01:03:06.002 And Louis, as always, thanks for being here, and offering all your 01:03:06.122 --> 01:03:08.772 wonderful commentary and, perspective. 01:03:09.342 --> 01:03:09.612 Yep. 01:03:09.642 --> 01:03:10.662 And, we'll catch you guys later. 01:03:12.933 --> 01:03:16.233 The Fiscal Firehouse Podcast is a podcast curated specifically 01:03:16.233 --> 01:03:18.003 for local 1309 members. 01:03:18.123 --> 01:03:21.813 This podcast is for informational and educational purposes only, 01:03:22.023 --> 01:03:24.933 and should not be construed as professional financial advice. 01:03:25.083 --> 01:03:27.813 Should you need professional advice, consult a licensed 01:03:27.933 --> 01:03:30.333 financial advisor or tax advisor. 01:03:30.513 --> 01:03:34.383 The opinions of John Beatty, Louis Barilla and their castmates are 01:03:34.383 --> 01:03:37.863 solely their own, and don't reflect that of West Metro Fire Rescue.