Thursday, November 09, 2006

Animation Pensions Replacing Animation Wages


The subject of animation pensions was raised in "comments" a week ago, to wit: how much of a weekly paycheck does a pension replace? And what's the real world experience of some retirees with their pensions?...

I've talked to a number of seasoned animation citizens over time, and I've got a rough idea of how many are doing. All find their Motion Picture Industry pensions extremely helpful in maintainint living standards. In broad brush strokes, here's some specifics:

Most older artists who had 20-plus years in the biz and retired, say, two or more years ago, have a replacement rate of pensions to wages around 30-45%. This includes motion picture industry pension and Social Security. (For instance, yesterday I talked to a long-time animator and timing director who retired eighteen months ago; he said Social Security and the Motion Picture Pension has replaced 42% of his final weekly salary. He's also got other income sources.)

Another example: An animator who's now 78, who worked in the business roughly forty years, retired thirteen years back with a fifty thousand dollar lump-sum payout from the IAP (it was new then, and much less lucrative), and a combined yearly cash flow of thirty-six thousand dollars from his industry pension and Social Security. This has been enough for him to live on, but he's not independently wealthy (multiple marriages and divorces have seen to that.) This guy's wage replacement was around forty percent.

Now let's take a story artist to whom I recently talked. The guy is not yet retired, but he's getting up there. He's 58 years old, with 29 qualified years in the pension plan, and 68,000 hours. Round figures, he's looking at a monthly annuity of $2350 (after the latest bump-up), an IAP of $105,000, and a Social Security check of approximately $1650 a month, if he bails out and claims it at age 62. Social Security bumps up around $2100 (give or take) if he waits until he's 66. Now, he's also got money in the TAG 401(k), some investments, and a house with a clump of equity.

So this artist, assuming he works at least 400 hours in 2007, could retire in two years at age sixty with full Motion Picture industry pension and retiree health benefits. Health benefits would cover him, his wife and any dependent children. He would have to wait two additional years to pick up the minimum Social Security payout. Alternately, he could work until age 62 (three more years) and then retire. Working full-time (2000 hours per year), that would get him an industry pension of $2621 monthly annuity, and $139,500 in the Individual Account Plan (this assumes contributions of $4,000 per year, and an investment return of around 7%).

So is this guy ready for retirement? Guess it depends on the life-style he plans to maintain. He makes, on average, a bit over $100,000 a year, but 80-85 grand is what he takes home after deductions. When I talked to him, he said he would have a cash flow of around 55-60 thousand a year, if he pulled 4% out of what he's got in his 401(k) and investment savings, and his IRA money.

The point to all this is, everybody has different requirements. My basic recommendation is to salt away as much as possible on a weekly basis, because you can never save too much, and who the hell knows what pensions in this country are going to be like twenty or thirty years hence?

As I've noted previously, Ric Edelman's book, The Truth About Money, is a pleasant, easy-to-read primer on saving, investing, estate-planning and other money-oriented things. (He disagrees with other financial planners on paying off your house, but diversity of opinion is what makes this country great.) I'd say it's a good place to start if you're a novice.


Anonymous said...

Could you elaborate on what the retiree health benefits include? Say, for someone about 62- 63, with over 30 qualified years and over 50,000 hours, what's covered and how much? Are the numbers about the same as someone who's currently actively employed? Will some out of pocket costs increase or stay the same? Will supplementary coverage be needed?

Anonymous said...

Retiree health benefits are pretty close to active health benefits. One difference: prescription drug co-pays are lower (Examples: generic drug 30-day supply is $10 for actives, $5 for retirees. Preferred brand 30day supply is $20 for actives, $15 for retirees.)

A retiree who has 30 qualified pension years and 60,000 hours can retire with full earned pension benefits at age 60. For someone with 30 qualified years and 55,000 hours, the full pension kicks in at 61; someone with 30 qualified years and 50,000 hours gets it at age 62.

The retiree pension would cover a non-working spouse and dependent children. The industry pension becomes supplemental to Medicare when the retiree becomes eligible for Medicare.

Here's the pension plan's website, where you'll find more detailed answers.

Anonymous said...

Prescription drug co-pays for actives and retirees are even lower if you use the Medco system to order 90-day supplies by mail.

Details and forms are here.

Anonymous said...

Nice article. It rounds up almost everything to consider.
I guess the most important thing is just, that you get started.

Interest and time is on your side! ;-)


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