Author Topic: More pensions to disappear when bond yields improve?  (Read 10202 times)

Gone Fishing

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More pensions to disappear when bond yields improve?
« on: December 02, 2015, 03:00:21 PM »
My thought is that it is pretty expensive to unwind (pay out accrued benefits as a lump sum) a pension right now, but if bond yields improve, it may cost less sometime down the road. The lower cost to exit might encourage companies to get out of the pension business. On the other hand it will also be cheaper to fund the pensions, so maybe they keep them.  Any thoughts?

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #1 on: December 02, 2015, 05:10:07 PM »
My thought is, who cares, I'd rather have my money in my name than sitting in a pension fund that with the way things are going in this country will end up paying out drastically reduced benefits by the time I am old enough to collect.  I have 13 years vested in a large, multi employer, union pension fund from a previous job, and they are currently in the process of reducing benefits.  I couldn't be more happy at my new job where I get a better 401k match and money put into an annuity account in my name by my employer.

I'm not relying on my pension for anything in retirement, its just going to be extra money and nothing I'm figuring on needing.  I wouldn't even look at government pensions as being safe anymore these days either, as most government pensions are drastically under funded, and the more people in the private sector that are going pensionless that realize they are paying for someone else to get a fat pension, the more backlash there is going to be against overly generous government pensions at the polls.  I have family members that retired in their 40s from government jobs, and after yearly raises on their pensions they are pulling six figure pensions at 60+.  Those numbers just simply aren't sustainable, and they don't contribute anywhere near enough to get anywhere near that type of pay out, otherwise funds like that wouldn't need massive infusions of tax payer dollars to stay afloat.

reader2580

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Re: More pensions to disappear when bond yields improve?
« Reply #2 on: December 03, 2015, 06:40:17 AM »
I would much rather have a pension.  Some of my co-workers retired with pensions of nearly $3,000 per month.  If you consider a safe withdrawal rate of 4% that is the same as having $900,000 in investments.  My father was able to cash out his pension when he was around 50 years old and got somewhere around $500,000 to put in an IRA.  My employer's pension requires no contribution from employees.  It is just a company supplied benefit.

Government pensions used to be absolutely ridiculous.  State of Minnesota employees used to be able to get a full pension at 55 years old if they worked for the state their entire lives.  That rule was abolished for employees who started after 1989.  Full pensions do not start for employees hired after 1989 until age 66 now.  Government employees do contribute to pensions in most cases.  Government job historically have paid less in cash compensation but have had very good benefits.

For those planning to retire early a pension is less beneficial since most probably won't need the extra cash at normal retirement age and would prefer to have the cash earlier.
« Last Edit: December 03, 2015, 06:42:34 AM by reader2580 »

lostamonkey

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Re: More pensions to disappear when bond yields improve?
« Reply #3 on: December 03, 2015, 07:12:53 AM »
It is not really a fair comparison to compare a pension to a 4% rule stock market portfolio;
1. Pensions have $0 value when you die, while with the 4% rule it likely that you will die very rich
2. Pensions have a minimum retirement age which is not consistent with early retirement
3. You are required to stay at the same job for decades and miss out on the gains from switching jobs
4. If you want a pension, you could always just buy an annuity. Vanguard sells them.

dude

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Re: More pensions to disappear when bond yields improve?
« Reply #4 on: December 03, 2015, 09:10:08 AM »
It is not really a fair comparison to compare a pension to a 4% rule stock market portfolio;
1. Pensions have $0 value when you die, while with the 4% rule it likely that you will die very rich
2. Pensions have a minimum retirement age which is not consistent with early retirement
3. You are required to stay at the same job for decades and miss out on the gains from switching jobs
4. If you want a pension, you could always just buy an annuity. Vanguard sells them.

Well, "fair" or not, it is representative of what it's worth.  Conceptually, it helps to put a dollar figure on it; it's instructive to know for example that I'd need $1M in the bank for a $40,000 annual draw.  Using a 4% SWR is one way to do it (dividing your annual pension benefit by 0.04), the other is to go to a site like www.immediateannuities.com to see what it would cost to buy an annuity that would yield the same as your expected pension benefit.  Though it can be tough to account for COLAs and such.

irishbear99

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Re: More pensions to disappear when bond yields improve?
« Reply #5 on: December 03, 2015, 10:12:39 AM »
It is not really a fair comparison to compare a pension to a 4% rule stock market portfolio;
1. Pensions have $0 value when you die, while with the 4% rule it likely that you will die very rich
2. Pensions have a minimum retirement age which is not consistent with early retirement
3. You are required to stay at the same job for decades and miss out on the gains from switching jobs
4. If you want a pension, you could always just buy an annuity. Vanguard sells them.

I know nothing about annuities, so I can't respond to your point number 4. However, for the other 3...

1. My pension offers a survivor's benefit, whereby I could take a slightly (couple hundred dollars/month) lower payment in retirement, and if I die first, my husband would continue to receive a monthly payment afterwards.

2. Yes, but there's nothing stopping one from saving outside of the pension and using those savings to cover the "gap" years between early retirement and when the pension kicks in. That's my plan.

3. With federal pensions, this is also not true. You just have to stay in civil service. I've switched jobs 5 times in the last 10 years (wow, it sounds bad when I say it that way) to take promotions and/or better opportunities and still accrue my pension benefits.

I only have knowledge of federal pensions, so this very well may be in the minority. I just wanted to throw out that there are exceptions to the points you listed above.

JZinCO

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Re: More pensions to disappear when bond yields improve?
« Reply #6 on: December 03, 2015, 10:36:20 AM »
It is not really a fair comparison to compare a pension to a 4% rule stock market portfolio;
1. Pensions have $0 value when you die, while with the 4% rule it likely that you will die very rich
2. Pensions have a minimum retirement age which is not consistent with early retirement
3. You are required to stay at the same job for decades and miss out on the gains from switching jobs
4. If you want a pension, you could always just buy an annuity. Vanguard sells them.
I don't disagree with the thesis of your argument, but you are over simplifying pensions.
On point 1. Some pensions do have cobeneficiarys in the event of death. Mine for example has options which include transferring your benefit to a another in the event of death, and a 100% match on a lump sum payout to a secondary person in the event of the cobeneficiary's death.
On point 2. In my pension plan, it is possible to retire at 40 or 55 depending on the plan structure albeit with a reduced benefit (~40% of salary). These require service of 25 and 19 years respectively. Additionally, when I was a fed and covered under the firefighter retirement plan, 20 years of service was all it took to retire. Maybe retiring between 40 and 55 isn't the definition of early retirement for you and maybe it is more restrictive, but it's all in the eye of the beholder.
I can't deny #3, but if you work for a large employer (say the Federal govt), you could work in an umpteen number of jobs for many different agencies. It's pretty common to be hired in a position capped at a certain grade and once one is qualified for a new grade, to transfer to a new job with a substantial jump in salary.
I won't deny that pensions limit one's employment choices over a defined contribution plan, but I do know public employee's that have been able to roll over credit from one state pension plan to another state.

That said, my pension is my fixed income allowing me to max my 403b with a more aggressive AA in that pot :) 18K/yr in a 401k-type plan plus a pension? Yes please. Just about the only downside is that I can't rebalance across plans.

edit:looks like I was beat to the chase
« Last Edit: December 03, 2015, 10:43:52 AM by JZinCO »

lostamonkey

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Re: More pensions to disappear when bond yields improve?
« Reply #7 on: December 03, 2015, 10:57:06 AM »
It is not really a fair comparison to compare a pension to a 4% rule stock market portfolio;
1. Pensions have $0 value when you die, while with the 4% rule it likely that you will die very rich
2. Pensions have a minimum retirement age which is not consistent with early retirement
3. You are required to stay at the same job for decades and miss out on the gains from switching jobs
4. If you want a pension, you could always just buy an annuity. Vanguard sells them.

I know nothing about annuities, so I can't respond to your point number 4. However, for the other 3...

1. My pension offers a survivor's benefit, whereby I could take a slightly (couple hundred dollars/month) lower payment in retirement, and if I die first, my husband would continue to receive a monthly payment afterwards.

2. Yes, but there's nothing stopping one from saving outside of the pension and using those savings to cover the "gap" years between early retirement and when the pension kicks in. That's my plan.

3. With federal pensions, this is also not true. You just have to stay in civil service. I've switched jobs 5 times in the last 10 years (wow, it sounds bad when I say it that way) to take promotions and/or better opportunities and still accrue my pension benefits.

I only have knowledge of federal pensions, so this very well may be in the minority. I just wanted to throw out that there are exceptions to the points you listed above.

1. Yes, but with investments you will likely leave a large sum to your children or your favorite charity. For example if a couple retired at 65 with $1,000,000 in assets and withdraw $40,000 per year, it is fairly likely that they will be able to leave $1,000,000 to their children when both spouses are dead. A pension that pays out $40,000 a year will be worth nothing once both spouses are dead.

2. Okay, but if you are saving outside your pension to cover the gap years then the pension is not worth as much as a 4% portfolio which covers all years.

3. Yes, but you are still limited to working in civil service.

My point is that pensions are not worth as much as a 25x portfolio. I still think pensions are great for most people for a few reasons:
1. Forced saving plan
2. Prevents people from buying stupid investments (gold, high ER mutual funds)
3. Additional tax deferred space in the US (we don't have this benefit in Canada).
« Last Edit: December 03, 2015, 11:02:36 AM by lostamonkey »

JZinCO

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Re: More pensions to disappear when bond yields improve?
« Reply #8 on: December 03, 2015, 11:04:13 AM »
It is not really a fair comparison to compare a pension to a 4% rule stock market portfolio;
1. Pensions have $0 value when you die, while with the 4% rule it likely that you will die very rich
2. Pensions have a minimum retirement age which is not consistent with early retirement
3. You are required to stay at the same job for decades and miss out on the gains from switching jobs
4. If you want a pension, you could always just buy an annuity. Vanguard sells them.

I know nothing about annuities, so I can't respond to your point number 4. However, for the other 3...

1. My pension offers a survivor's benefit, whereby I could take a slightly (couple hundred dollars/month) lower payment in retirement, and if I die first, my husband would continue to receive a monthly payment afterwards.

2. Yes, but there's nothing stopping one from saving outside of the pension and using those savings to cover the "gap" years between early retirement and when the pension kicks in. That's my plan.

3. With federal pensions, this is also not true. You just have to stay in civil service. I've switched jobs 5 times in the last 10 years (wow, it sounds bad when I say it that way) to take promotions and/or better opportunities and still accrue my pension benefits.

I only have knowledge of federal pensions, so this very well may be in the minority. I just wanted to throw out that there are exceptions to the points you listed above.

1. Yes, but with investments you will likely leave a large sum to your children or your favorite charity. For example if a couple retired at 65 with $1,000,000 in assets and withdraw $40,000 per year, it is fairly likely that they will be able to leave $1,000,000 to their children when both spouses are dead. A pension that pays out $40,000 a year will be worth nothing once both spouses are dead.

2. Okay, but if you are saving outside your pension to cover the gap years then the pension is not worth as much as a 4% portfolio which covers all years.

3. Yes, but you are still limited to working in civil service.

My point is that pensions are not worth as much as a 25x portfolio. I still think pensions are great for most people for a few reasons:
1. Forced saving plan
2. Prevents people from buying stupid investments (gold, high ER mutual funds)
3. Additional tax deferred space in the US (we don't have this benefit in Canada).
Cobeneficiarys do not also mean spouses. Benefit trusts can be set up for children.
In my pension, if I were to pass on, the list of cobeneficiaries actually starts anyone named, then spouse, then dependent children, then disabled adult children, then dependent parents, then anyone else named. It sounds morbid, but being a kid or young adult and inheriting your parent's benefit for life (COLA incl.) is not a bad deal. Being childless and planning to for the foreseeable future, I'll probably name a niece/nephew once they're a bit older.
Again, I'm not trying to argue against your general point, and I certainly bank on my 403b only, but you discredit pensions too easily.
« Last Edit: December 03, 2015, 11:12:20 AM by JZinCO »

reader2580

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Re: More pensions to disappear when bond yields improve?
« Reply #9 on: December 03, 2015, 11:28:26 AM »
It is not really a fair comparison to compare a pension to a 4% rule stock market portfolio;
1. Pensions have $0 value when you die, while with the 4% rule it likely that you will die very rich
2. Pensions have a minimum retirement age which is not consistent with early retirement
3. You are required to stay at the same job for decades and miss out on the gains from switching jobs
4. If you want a pension, you could always just buy an annuity. Vanguard sells them.

For a $3000 a month annuity it looks like you need to put in $525,000.  Not as much as a 4% SWR.

The reason pensions are good is usually because the employer paid for all or a good chunk of the cost.  A pension is guaranteed to never lose value and sometimes has a COLA.  If the pension fund loses value the employer has to put more money in.  My employer terminated our pension at end of 2009 yet they have still had to put in a lot of money into the pension in the last five years.  Sure, i could buy an annuity, but I would have to save up $525,000 to buy it.

I paid nothing into my pension, plus the company still matched 401K money and put 1.5% into the 401k automatically.

CheapskateWife

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Re: More pensions to disappear when bond yields improve?
« Reply #10 on: December 03, 2015, 11:46:45 AM »
It is not really a fair comparison to compare a pension to a 4% rule stock market portfolio;
1. Pensions have $0 value when you die, while with the 4% rule it likely that you will die very rich
2. Pensions have a minimum retirement age which is not consistent with early retirement
3. You are required to stay at the same job for decades and miss out on the gains from switching jobs
4. If you want a pension, you could always just buy an annuity. Vanguard sells them.

I know nothing about annuities, so I can't respond to your point number 4. However, for the other 3...

1. My pension offers a survivor's benefit, whereby I could take a slightly (couple hundred dollars/month) lower payment in retirement, and if I die first, my husband would continue to receive a monthly payment afterwards.

2. Yes, but there's nothing stopping one from saving outside of the pension and using those savings to cover the "gap" years between early retirement and when the pension kicks in. That's my plan.

3. With federal pensions, this is also not true. You just have to stay in civil service. I've switched jobs 5 times in the last 10 years (wow, it sounds bad when I say it that way) to take promotions and/or better opportunities and still accrue my pension benefits.

I only have knowledge of federal pensions, so this very well may be in the minority. I just wanted to throw out that there are exceptions to the points you listed above.

To point 3.   as a Federal employee, you lock in the capability to have a deferred pension at 10 years.  So even if you didn't work another day of federal work in your life, you would still have the 10% of your high 3 (one % for every year of service) to draw on at 62 (or 57 if you are willing to take the 25% penalty.)  So no, you don't just have to stay federal.  You can FIRE early and pick up that pension later.  You would need to plan for assets to cover you in the mean time, but there are all sorts of Roth Conversions, taxable accounts, TSP withrawls, and other options to work during the "inbetween" years.  Highly recommend any federal employee read up at the OPM website.

https://www.opm.gov/retirement-services/fers-information/types-of-retirement/#url=Deferred-Retirement


dude

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Re: More pensions to disappear when bond yields improve?
« Reply #11 on: December 03, 2015, 11:50:06 AM »
I would much rather have my pension than not have it, even if my salary were adjusted upward to account for the deferred compensation deposits made each payday by my employer.  The fact that I have to work for the same agency for 20 years is a virtue for me, not a defect (though my federal agency covers all but a few states in the country, with dozens of different jobs to perform; moving geographically or into another area of expertise is not all that difficult to do), though as others have said, one can move to any of numerous agencies in the federal government (as a LEO, my options are more limited).

JZinCO

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Re: More pensions to disappear when bond yields improve?
« Reply #12 on: December 03, 2015, 12:00:31 PM »
It is not really a fair comparison to compare a pension to a 4% rule stock market portfolio;
1. Pensions have $0 value when you die, while with the 4% rule it likely that you will die very rich
2. Pensions have a minimum retirement age which is not consistent with early retirement
3. You are required to stay at the same job for decades and miss out on the gains from switching jobs
4. If you want a pension, you could always just buy an annuity. Vanguard sells them.

I know nothing about annuities, so I can't respond to your point number 4. However, for the other 3...

1. My pension offers a survivor's benefit, whereby I could take a slightly (couple hundred dollars/month) lower payment in retirement, and if I die first, my husband would continue to receive a monthly payment afterwards.

2. Yes, but there's nothing stopping one from saving outside of the pension and using those savings to cover the "gap" years between early retirement and when the pension kicks in. That's my plan.

3. With federal pensions, this is also not true. You just have to stay in civil service. I've switched jobs 5 times in the last 10 years (wow, it sounds bad when I say it that way) to take promotions and/or better opportunities and still accrue my pension benefits.

I only have knowledge of federal pensions, so this very well may be in the minority. I just wanted to throw out that there are exceptions to the points you listed above.

To point 3.   as a Federal employee, you lock in the capability to have a deferred pension at 10 years.  So even if you didn't work another day of federal work in your life, you would still have the 10% of your high 3 (one % for every year of service) to draw on at 62 (or 57 if you are willing to take the 25% penalty.)  So no, you don't just have to stay federal.  You can FIRE early and pick up that pension later.  You would need to plan for assets to cover you in the mean time, but there are all sorts of Roth Conversions, taxable accounts, TSP withrawls, and other options to work during the "inbetween" years.  Highly recommend any federal employee read up at the OPM website.

https://www.opm.gov/retirement-services/fers-information/types-of-retirement/#url=Deferred-Retirement
With the state, I could defer until 65 to get the best benefit. The more years I defer, the higher the benefit (like SS). The problem is if you achieve your high 3 at age 45 and wait till age 62 the high 3 is not adjusted to account for inflation between age 45 and 65, correct? I suppose you could go back to work at age 59 to inflation-adjust the high 3...
Also, just to add my special FERS I was once under allows a full retirement at 50 and a mandatory at 57.

dude

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Re: More pensions to disappear when bond yields improve?
« Reply #13 on: December 03, 2015, 12:02:26 PM »

To point 3.   as a Federal employee, you lock in the capability to have a deferred pension at 10 years.  So even if you didn't work another day of federal work in your life, you would still have the 10% of your high 3 (one % for every year of service) to draw on at 62 (or 57 if you are willing to take the 25% penalty.)  So no, you don't just have to stay federal.  You can FIRE early and pick up that pension later.  You would need to plan for assets to cover you in the mean time, but there are all sorts of Roth Conversions, taxable accounts, TSP withrawls, and other options to work during the "inbetween" years.  Highly recommend any federal employee read up at the OPM website.

https://www.opm.gov/retirement-services/fers-information/types-of-retirement/#url=Deferred-Retirement

Good point, CSW, though it's worth noting that COLA adjustments do not apply to deferred pensions until one begins to collect it, so it would lose a lot of value to inflation over the years before collecting.

As to pensioned jobs not being compatible with FIRE generally, that's not the case with law enforcement jobs.  20-25 years depending on age means someone who starts at 22 can retire by 47 -- I think that qualifies as early retirement.  It's damn near two decades earlier than your typical retirement.

runningthroughFIRE

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Re: More pensions to disappear when bond yields improve?
« Reply #14 on: December 03, 2015, 12:05:51 PM »
To loop back to the OP: I think pensions would see more phase outs.  Pensions are more costly for an employer to keep, since there are more complex regulations they need to comply with than other options and the funding comes from the employer, not the employee.  The employer would also see some kind of savings from the poor fools who don't take advantage of retirement fund matching if the retirement plan was a 401(k) or similar instead of a pension.  The only benefit to the employer I can think of is the incentive for employees to stay, and avoiding the costs of training new people.

Personally, I much prefer the 401(k) system to the pension system.  Mainly this is because I don't trust someone else to manage my money better or with more care than I will.  I hate the idea that my income might change from a pension years down the line just because of a policy change.  The majority of pensions I see are also horribly underfunded, which would be a source of anxiety for me.  One of the reasons I was attracted to the MMM/FIRE idea was not having to worry about finances and to be in control over that aspect of my life, and a pension seems to run counter to that.

My experience with pensions is my mother/sister's public school pension system, and the pension for steel union workers where I work.

CheapskateWife

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Re: More pensions to disappear when bond yields improve?
« Reply #15 on: December 03, 2015, 12:20:52 PM »

To point 3.   as a Federal employee, you lock in the capability to have a deferred pension at 10 years.  So even if you didn't work another day of federal work in your life, you would still have the 10% of your high 3 (one % for every year of service) to draw on at 62 (or 57 if you are willing to take the 25% penalty.)  So no, you don't just have to stay federal.  You can FIRE early and pick up that pension later.  You would need to plan for assets to cover you in the mean time, but there are all sorts of Roth Conversions, taxable accounts, TSP withrawls, and other options to work during the "inbetween" years.  Highly recommend any federal employee read up at the OPM website.

https://www.opm.gov/retirement-services/fers-information/types-of-retirement/#url=Deferred-Retirement
Good point, CSW, though it's worth noting that COLA adjustments do not apply to deferred pensions until one begins to collect it, so it would lose a lot of value to inflation over the years before collecting.
The loss of COLA adjustments is a problem to be sure, but I'm willing to give it up for the FREEDOM!  Oh, and the last 8 years, the COLA increase has been pitiful; 3 of the last 8 have been an annual adjustment of 0.  Investing my energies in more lucrative endeavors feels like the way to go.   
http://www.myfederalretirement.com/public/189.cfm

Current required contribution levels for new employees is so high that I wonder just how many are going to be in it for the long haul and serve for the full retirement benefit.   

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #16 on: December 03, 2015, 04:14:52 PM »
The reason pensions are good is usually because the employer paid for all or a good chunk of the cost.

The reasons pensions SEEM so good is because for decades many of them have paid out unsustainable amounts.  That is why pension funds are bankrupting cities, placing strain on government at all levels, and many private sector pension funds are reducing benefits or simply going bankrupt and pension insurance pays out pennies on the dollar to people.

A pension is guaranteed to never lose value and sometimes has a COLA.

Only pensions I ever heard about with a COLA are government pensions.  If they don't have a COLA they lose value every year we have inflation.  At 31 I have 13 years vested in a large multi employer pension fund(teamsters).  When I left my previous job, I called up the pension fund managers to see what I had earned for my years of service, and it was 31k a year....when I'm 64.  Considering I have 33 years to go its losing a ton of value compared to if I was 33 years older and could collect soon as I retired.

If the pension fund loses value the employer has to put more money in.

No they don't.  They can cut your benefits or simply let the fund go belly up and you end up collecting pennies on the dollar.  I personally know teamsters have been cutting payouts for current recipients, and they aren't the only ones.  If the money simply isn't there not all companies are endless money bags that can dump millions into pension funds.

My employer terminated our pension at end of 2009 yet they have still had to put in a lot of money into the pension in the last five years.  Sure, i could buy an annuity, but I would have to save up $525,000 to buy it.

I'd consider myself lucky if I were you...there are plenty of companies out there just buying people out or cutting benefits.

I paid nothing into my pension, plus the company still matched 401K money and put 1.5% into the 401k automatically.

I wouldn't say no to a pension...but if my employer said we'll put 8k a year into a pension fund on your behalf, or 8k a year into your 401k, I'd take it in my 401k any day.  I did the math out a while back when I quit my union job, and if I had all the money put into the pension fund on my behalf in a 401k instead, I'd have about 200k more in my 401k.  200k growing at 7-8% a year for 33 years would leave me with an extra 2 million.  2 million / 31k = 64 years worth of collecting my pension to break even with what a 401k would have done with the same amount of money assuming my post retirement interest rate is 0%.  Pensions really aren't that great of a deal unless you get one of those sweet 20 and out government pensions with a yearly COLA.

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #17 on: December 03, 2015, 04:37:49 PM »
1. Pensions have $0 value when you die, while with the 4% rule it likely that you will die very rich
2. Pensions have a minimum retirement age which is not consistent with early retirement
3. You are required to stay at the same job for decades and miss out on the gains from switching jobs
4. If you want a pension, you could always just buy an annuity. Vanguard sells them.

1. Forced saving plan
2. Prevents people from buying stupid investments (gold, high ER mutual funds)
3. Additional tax deferred space in the US (we don't have this benefit in Canada).

I think you have summed up the pros and cons pretty well.

At my last job, union job, all the guys who had 0 dollars in retirement savings and lived pay check to pay check thought our pension was the greatest thing ever.  Those of us who were smart enough to save money as well realized what a bad deal the pension was.  It was grossly underfunded, I think around 60% funded when I left so most of us will never see the full promised amount, and we all fully understood with the amount of our compensation package that was contributed to the pension fund we would be much better off with it in a 401k instead.

Fast forward to new job.  Everyone hired before some date 10ish years ago gets a pension equal to I think 60% of their base pay for an average of their last 3 years on the job, so for most guys probably in the ballpark of 40-60k a year depending on their position.  If they want the full amount they can't collect until 60 and have to have I think 30 years of service.  They also get a 3% 401k match.

Everyone hired past that date starts off with a 4% 401k match and 4% into a personal pension account.  Those numbers go up to 5/5, 6/6, and eventually 7/7 @ 20 years of service.  When you leave, regardless of age, the 401k is obviously yours, and with the other account you can opt for a lump sum payout, an annuity that let's me pick the duration, or a deferred annuity.

Most the older guys wish they had the deal the new guys got.  Sure they get the pension but I'll be getting an extra 8-14k a year thrown into accounts in my name.  It gives me the freedom to job hop any time I want, or to retire early without taking any kind of penalty to my savings.  The pension people lose those options without taking a heavy hit.  For the average guy working a 30-40 year career in the industry...the more generous 401k match and money into my personal account rather than a group fund pretty much means they'll have an extra million at retirement.  It really doesn't take a genius to figure out it would take 20 years of collecting their pension to break even with 0% gains post retirement on that million dollars.

dude

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Re: More pensions to disappear when bond yields improve?
« Reply #18 on: December 04, 2015, 09:27:39 AM »
The reason pensions are good is usually because the employer paid for all or a good chunk of the cost.

The reasons pensions SEEM so good is because for decades many of them have paid out unsustainable amounts.  That is why pension funds are bankrupting cities, placing strain on government at all levels, and many private sector pension funds are reducing benefits or simply going bankrupt and pension insurance pays out pennies on the dollar to people.


This is only partly true, if at all.  The main reason municipal pensions are going broke is because cocksucking politicians were not funding them as they were supposed to by law, preferring instead to kick the can down the road in favor of using current receipts for their pet projects.  It is outright theft, plain and simple.  For some private pensions, mismanagement played a big role as well, as pension managers bought into risky investments like derivatives and such.  Oh, and piss-poor, make-believe accounting.

JZinCO

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Re: More pensions to disappear when bond yields improve?
« Reply #19 on: December 04, 2015, 11:20:13 AM »
We are definitely off track from the OP's question..
Since we are, I don't asking this question :)
Once the mouse passes through the serpent (i.e. the baby bommers have retired and we have a more normal demography), will pensions be fully solvent once again? Albeit, maybe the benefits have changed but can we expect the (surviving) pensions in 30-35 years to be no longer in peril?

reader2580

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Re: More pensions to disappear when bond yields improve?
« Reply #20 on: December 04, 2015, 12:28:28 PM »
I doubt we'll have to worry about pension solvency after the baby boomers are all gone because hardly anyone except maybe government employees will have a pension by then.  I would expect a number of pension funds to run out of money and get taken over by government.  Government has gotten far less generous with pensions for new employees.  They typically don't offer full payout until age 66 or 67.  New employees often have to pay in more towards pensions than previously.

A friend of mine was a union employee and gets enough pension money he doesn't even have to touch the money he put aside in retirement accounts.


Left

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Re: More pensions to disappear when bond yields improve?
« Reply #21 on: December 04, 2015, 12:36:11 PM »
I jumped past a lot of posts, but to the person who said we have to give up other jobs to stay in pension... ugh what? No, we have to give up other companies... we can certainly take other jobs in the same company to increase salary...

Sure I don't plan on relying on the fers pension because well... I plan to retire early, as in I won't have many years of service in for it to accrual anyway. somewhere between 10-15 years, though I might get tempted by 20 years if I make it to 15 lol.

But still, with current rules, it is just 20% of pay, not a whole lot. What I'm more interested in is the healthcare that comes with pension. That would be worth more than the pension payment to me (mostly because I plan to get money elsewhere...)

JZinCO

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Re: More pensions to disappear when bond yields improve?
« Reply #22 on: December 04, 2015, 12:45:43 PM »
I doubt we'll have to worry about pension solvency after the baby boomers are all gone because hardly anyone except maybe government employees will have a pension by then.  I would expect a number of pension funds to run out of money and get taken over by government.  Government has gotten far less generous with pensions for new employees.  They typically don't offer full payout until age 66 or 67.  New employees often have to pay in more towards pensions than previously.

A friend of mine was a union employee and gets enough pension money he doesn't even have to touch the money he put aside in retirement accounts.
Thanks for your commentary. I think you addressed my question where bolded.

edit: read an actuarial report on my pension. Looks like liabilities will eat at the fund so much such that in 35 years, there is about a 1 in 4 chance of total insolvency. So if the mouse doesn't choke the serpent, all should be good.
« Last Edit: December 04, 2015, 01:14:24 PM by JZinCO »

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #23 on: December 04, 2015, 01:50:09 PM »
This is only partly true, if at all.  The main reason municipal pensions are going broke is because cocksucking politicians were not funding them as they were supposed to by law, preferring instead to kick the can down the road in favor of using current receipts for their pet projects.  It is outright theft, plain and simple.  For some private pensions, mismanagement played a big role as well, as pension managers bought into risky investments like derivatives and such.  Oh, and piss-poor, make-believe accounting.

My grandfather retired at 47 after 20 years of service as a state cop.  He will be 87 this year.  After his yearly COLA for 40 years his pension payments are bigger than his highest working year, and he literally has been collecting a pension for twice as long as he was working.  I have an aunt that retired in her mid 40s as well after 23 years of state service, and in her mid 60s has been collecting for 20 years...same boat as my grandfather...her pension payments are higher than her highest working year.

I'm glad I at least have family members got some benefit out of such a shitty system, and to be quite honest I'll be inheriting a 6 or 7 figure amount when (hopefully not anytime soon) my multi millionaire retired state cop grandfather passes which he was able to accumulate due to this fucked up system, but if you want to talk about theft, mismanagement, and piss poor make believe accounting government unions and the politicians they paid for are the worst offenders.

The simple reality now is the less people out there pulling a private pension, the more people are going to start questioning why government pensions are costing tax payers such a ludicrous amount of money as they fund pensions for other people while they don't even get one of their own.  We'll be seeing government funds going belly up left and right as people continue to leave high tax and debt laden decaying areas, like Detroit, and we'll be seeing public pensions getting cut just like their private counter parts as the money simply isn't there because the whole system was pretty much a ponzi scheme from the start.  I'm pretty sure that when my grandfather draws his last pension check, its probably going to turn out his 20 year cop career cost the state 300,000+ a year, with 90%+ of it being paid to him through his pension.  Its just ridiculous considering a lot of private sector pensions people only collect 30-40k a year, and can't collect until 60+ so they'll end up with a few hundred thousand in pension payouts on average...not millions.

JZinCO

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Re: More pensions to disappear when bond yields improve?
« Reply #24 on: December 04, 2015, 01:55:23 PM »

The simple reality now is the less people out there pulling a private pension, the more people are going to start questioning why government pensions are costing tax payers such a ludicrous amount of money as they fund pensions for other people while they don't even get one of their own. 
These same people will be ignorant of the fact that social security is severely reduced by WEP/GPO, if the beneficiary even qualifies for social security in the first place. Some offerers of pensions are social security exempt.

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #25 on: December 04, 2015, 02:52:55 PM »

The simple reality now is the less people out there pulling a private pension, the more people are going to start questioning why government pensions are costing tax payers such a ludicrous amount of money as they fund pensions for other people while they don't even get one of their own. 
These same people will be ignorant of the fact that social security is severely reduced by WEP/GPO, if the beneficiary even qualifies for social security in the first place. Some offerers of pensions are social security exempt.

And those that don't qualify for SS are also exempt from SS tax.  Considering SS will end up being my worst performing retirement investment, those who are exempt from it are pretty damn lucky.

Funny thing is, on advice of one of his retired cop buddies, my grandfather collected social security, because a lot of retired cops do and nobody really checks into it.  He collected for 20 years and just got caught this year...his punishment...he had to pay back 2 years worth of payments.  Why is social security going broke?  Because its not run any better than the government runs pensions funds lol.

Left

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Re: More pensions to disappear when bond yields improve?
« Reply #26 on: December 04, 2015, 03:09:53 PM »
Just wondering, but I see "pensions" slowly coming back as well...

not in the same form as before, but in the form of annuities... A hospital locally buys an annuity on their employees, they contribute X% to it and the employee also pays into it. If they leave early, they can take it with them but they lose the contributions and have to make up the full amount on their own, or stop paying on it (no idea what happens to annuity if this happens, do they lose it?)

I also see 401k plans offering annuities in them as well, so they could get employer match to help pay for it that way.

both options/methods I could see slowly coming back in the future. It is a poor return in terms of investment, but well... pensions were not really about return to begin with.

Anyways, I wouldn't count pensions out of the game yet. Well, pension being a monthly paycheck that is "defined"...

neither of which explains why all the people jealous over pensions don't just buy themselves an annuity and just drop the issue... it's like they think pensions are free... they get paid into just like any other investments. Think of it as a forced savings, same argument that people use when they "invest" in a home. They see it as a forced savings....
« Last Edit: December 04, 2015, 03:12:08 PM by eyem »

JZinCO

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Re: More pensions to disappear when bond yields improve?
« Reply #27 on: December 04, 2015, 03:13:10 PM »

The simple reality now is the less people out there pulling a private pension, the more people are going to start questioning why government pensions are costing tax payers such a ludicrous amount of money as they fund pensions for other people while they don't even get one of their own. 
These same people will be ignorant of the fact that social security is severely reduced by WEP/GPO, if the beneficiary even qualifies for social security in the first place. Some offerers of pensions are social security exempt.

And those that don't qualify for SS are also exempt from SS tax.  Considering SS will end up being my worst performing retirement investment, those who are exempt from it are pretty damn lucky.
It may or may not be a good thing. My employer and myself pay alot more into it than SS (a bit above 28% of salary), so I likely receive a lower salary but the forced savings benefit my future self. If I was under SS, I could take that spread (~16%) and invest it. Maybe the annuitized value would be more, maybe less.
As you said, voters might envy pensioners for the mere fact of having a pension. My guess is that these folks could have been just as well creating their own 'pension fund' in lieu of their small 401k contribution rate. But, I'm not about to go after social security benefits just because I don't get it. Talk about a race to the bottom.
« Last Edit: December 04, 2015, 03:17:09 PM by JZinCO »

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #28 on: December 04, 2015, 04:53:48 PM »
It may or may not be a good thing. My employer and myself pay alot more into it than SS (a bit above 28% of salary), so I likely receive a lower salary but the forced savings benefit my future self. If I was under SS, I could take that spread (~16%) and invest it. Maybe the annuitized value would be more, maybe less.
As you said, voters might envy pensioners for the mere fact of having a pension. My guess is that these folks could have been just as well creating their own 'pension fund' in lieu of their small 401k contribution rate. But, I'm not about to go after social security benefits just because I don't get it. Talk about a race to the bottom.

Its not pension envy, its a combination of people didn't contribute enough(kinda hard to when you work for 20 and collect for 30-40), benefits were too high(COLA mean people end up earning more being retired than they made working after 12ish years), and the tax payers have to constantly bail them out.

What are non government employees facing?  Many of them that have pensions are facing benefit cuts because the funds are properly funded, and the only pensions I've ever heard of that get a yearly COLA are government pensions.  Why do they have to bail out someone else's pension while being told to eat a dick when their pension is under funded?  I'm not disagreeing with you that if you don't have a pension you could create your own "pension fund" in other forms of saving, but let's face it, the average person sucks at saving, and none of them are happy to be bailing out someone else's six figure pension because their fund is underfunded while they get zero pension and are facing a retirement of 20k a year in ss and a few hundred thousand in a 401k.

I personally don't have a problem with government employees collecting a pension, I Just have a problem with the fact that many of them contributed pennies on the dollar that they should have to collect the benefits they are collecting, and tax payers have to constantly foot the bill for it.  I know when I was working a union job it was directly stated in the contract that for every hour I worked x.xx dollars would be paid into the pension fun.  It was totally find with me, it was transparent, my company knew what it had to pay, the union knew what to expect in contributions, and ultimately when the fund ended up underfunded they didn't get a bail out, they lowered future accrual rates and started cutting benefits to keep the fund as solvent as possible before it got even more under funded.  It wasn't anyone's job to bail them out because of a combo of things...mainly pay outs were too generous for what current retirees paid in, and a mismanaged fund by elected union representatives.  Government pensions should simply have to live by the same rules as private pensions.

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Re: More pensions to disappear when bond yields improve?
« Reply #29 on: December 04, 2015, 05:04:26 PM »
So how about govt just pay the people as much as if they were private sector? Sure the tax payer fund the pension to an extent, my paycheck gets deducted for it too, as to if it is enough or not, that's not something I'm up to debate about...

but if it wasn't for pension, they would pay higher to keep workers from going to better paying private jobs. So what's the cost difference between pension vs lower/no pension and higher salary during working years?

If someone was making 20% more in private sector, why can't they just use that on their own to save? If the govt paid 20% more for 30 years of service, or pay a pension of 30% salary, it seems like the pension is the cheaper option...

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #30 on: December 04, 2015, 05:07:14 PM »
not in the same form as before, but in the form of annuities... A hospital locally buys an annuity on their employees, they contribute X% to it and the employee also pays into it. If they leave early, they can take it with them but they lose the contributions and have to make up the full amount on their own, or stop paying on it (no idea what happens to annuity if this happens, do they lose it?)

My current job offers this...I think they are a great idea.  Basically they put x% of my pay(not out of my pay check, just like a free match) into what I think they call a pension benefit account, I forget the exact terminology they use.  My account is vested after 3 years.  When I leave...it doesn't matter if its 3 years and 1 day or 30 years, the account is mine.  They give me the option of an annuity, of which I can pick the duration, a deferred annuity, of which I can pick the start date and duration, or I can take a lump sum and go.  Obviously the pay out will depend on how much money builds up in the account and what the rates are at the time, but I don't have to worry about my account going broke or my benefits getting cut, and I can log in and check out how my account is growing whenever I want.

neither of which explains why all the people jealous over pensions don't just buy themselves an annuity and just drop the issue... it's like they think pensions are free... they get paid into just like any other investments. Think of it as a forced savings, same argument that people use when they "invest" in a home. They see it as a forced savings....

I'm not jealous over anyone's pension.  If they got a good job, earned a decent pension, and contributed enough to the pension fund that it is actually a solvent fund, I'm happy for them.

However, what I am pissed over is government employees who collect ridiculous pensions, who obviously didn't contribute enough because their funds are broke, and who receive yearly bail outs from tax payers.  When my taxes keep going up and the state pension fund is under funded by billions, but they continue to get their yearly COLA...yes, I think that's a problem.  If they actually contributed enough to keep their fund solvent, or had their retirement age raised to 60+ to collect their full pension like private sector pensions, and they didn't require an ever growing bail out every year(well any bail out, ever), I'd be happy for those people.

Long story short, I am pretty pissed, not jealous, just straight up pissed that my generation is forced to fund my parent's and grandparent's ridiculous promises they made to themselves and refused to properly fund while they were working.  It must be nice having a pension funded by screwing your kids and grand kids over!

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #31 on: December 04, 2015, 05:25:22 PM »
So how about govt just pay the people as much as if they were private sector? Sure the tax payer fund the pension to an extent, my paycheck gets deducted for it too, as to if it is enough or not, that's not something I'm up to debate about...

but if it wasn't for pension, they would pay higher to keep workers from going to better paying private jobs. So what's the cost difference between pension vs lower/no pension and higher salary during working years?

If someone was making 20% more in private sector, why can't they just use that on their own to save? If the govt paid 20% more for 30 years of service, or pay a pension of 30% salary, it seems like the pension is the cheaper option...

Hell no its not.  Let's take 2 people...

One guy makes 100k a year total compensation starting at 25, retires at 65 after 40 years with the company, collects a 50k year pension with no COLA for 15 years and dies at 80.  Total life time compensation...4,000,000 for working, 750,000 in pension payments...or 4.75 million for 40 years worth of service.

Now let's run the numbers for someone with a 20 and out deal...starts work at 25, retires at 45, dies at 80 just like the last guy.  He makes 80k a year(puts the private sector guy 25% ahead of him) for 20 years...that's 1,600,000 for working.  The way state pensions work here...they'd get 70% of their highest 3 years averaged, so generally what they do is pump up their pay with as much overtime as possible their last 3 years to get an inflated pension, but I won't even account for that...so let's just say year 1 of pension is 56,000...after 40 years with a 3% yearly COLA his pension is up to 180,000 a year.  Over 40 years he collects roughly 4,400,000 in pension benefits.  In other words...for 20 years of service he is paid a total of 1,600,000 + 4,400,000 = 6 million dollars.

So let's break it down now...

Private sector guy $4,750,000/40 years of service = $118,750 per year worked after pension benefits

State pension guy $6,000,000/20 years of service = $300,000 per year worked after pension benefits

And again...this was assuming the state guy didn't pump up his last years to get an inflated pension, and also didn't include anything extra for the state guy getting fully paid for insurance for an extra 20 years of retirement as well...if either of those were accounted for it would push things even more in his favor.
« Last Edit: December 04, 2015, 05:27:00 PM by SirFrugal »

beltim

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Re: More pensions to disappear when bond yields improve?
« Reply #32 on: December 04, 2015, 06:51:49 PM »
Now let's run the numbers for someone with a 20 and out deal...starts work at 25, retires at 45, dies at 80 just like the last guy.  He makes 80k a year(puts the private sector guy 25% ahead of him) for 20 years...that's 1,600,000 for working.  The way state pensions work here...they'd get 70% of their highest 3 years averaged, so generally what they do is pump up their pay with as much overtime as possible their last 3 years to get an inflated pension, but I won't even account for that...so let's just say year 1 of pension is 56,000...after 40 years with a 3% yearly COLA his pension is up to 180,000 a year.  Over 40 years he collects roughly 4,400,000 in pension benefits.  In other words...for 20 years of service he is paid a total of 1,600,000 + 4,400,000 = 6 million dollars.

Do you have any evidence to share that this ever happens?  I've never seen a pension that generous, let alone in the past 20 years.

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #33 on: December 04, 2015, 07:30:18 PM »
Now let's run the numbers for someone with a 20 and out deal...starts work at 25, retires at 45, dies at 80 just like the last guy.  He makes 80k a year(puts the private sector guy 25% ahead of him) for 20 years...that's 1,600,000 for working.  The way state pensions work here...they'd get 70% of their highest 3 years averaged, so generally what they do is pump up their pay with as much overtime as possible their last 3 years to get an inflated pension, but I won't even account for that...so let's just say year 1 of pension is 56,000...after 40 years with a 3% yearly COLA his pension is up to 180,000 a year.  Over 40 years he collects roughly 4,400,000 in pension benefits.  In other words...for 20 years of service he is paid a total of 1,600,000 + 4,400,000 = 6 million dollars.

Do you have any evidence to share that this ever happens?  I've never seen a pension that generous, let alone in the past 20 years.

State of CT pensions were like this for decades.  I have a grandfather that's getting this deal, retired state cop after 20 years, an uncle that's getting it, retired conservation officer after 20 years, an aunt, retired probation officer after 20 years, and several friends of the family that are all retired correction's officers after 20 years.  All retired in their 40s...20 years of service regardless of age they retire with a full pension with a yearly COLA and full health benefits for life.

First year payment was equal to 70% of their highest 3 years averaged together.  Not their base pay...simply their highest 3 years averaged, so it was like the unspoken rule that nobody undercuts overtime from guys who plan on retiring within 3 years...they work all the overtime they can get so their pension ends up insane.  Well...I lied a little...my aunt worked 23 years...she got an extra 1.5% per year over 20 plus a few more tries to make more money.  They eventually gave her a golden handshake...instead of 74.5% of her highest 3 average they offered her 77%

Just to rub a little salt in the wound some of these people even retire, collect their pension, and literally go back to working for the state as a contractor.  I'm sure you heard the term double dipping before.  What state unions have been getting away with for decades here is unbelievable...then again its also why we are one of the most heavily taxed and most expensive to live states.  Within the last 10 years they made the 20 year pensions 25, and I think put a 50 year age requirement on it, but considering how they can still be inflated with overtime and get a COLA they are still miles ahead of any middle class private sector pension I've ever heard of anyone getting.

edit: did a little research on cop salaries here...in 2012 captains, the rank my grandfather retired at, were making 128-136k a year without counting overtime.  Pump that up with a little overtime your last few years and then leave with a % of that and a COLA...and suddenly you begin to realize why a lot of people have the idea that state pensions are overly generous.

edit 2:  http://pensionretirement.com/connecticut-state-pensions/

Quote
The standard rate of contribution for these programs is 2% of an employee’s annual income.  The only difference is for Tier One employees who may opt to contribute up to 5% of their annual income.  The remainder of an employee’s retirement fund is matched by the state.

Quote
Members who are employed in a hazardous line of work may retire at any age when they have accumulated at least 20 years of service.

So basically here in my state we have state employees that contribute practically nothing, some get to go in 20 years, and our state pension fund is 9 billion under funded...go figure.
« Last Edit: December 04, 2015, 07:49:14 PM by SirFrugal »

beltim

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Re: More pensions to disappear when bond yields improve?
« Reply #34 on: December 04, 2015, 09:21:15 PM »
Now let's run the numbers for someone with a 20 and out deal...starts work at 25, retires at 45, dies at 80 just like the last guy.  He makes 80k a year(puts the private sector guy 25% ahead of him) for 20 years...that's 1,600,000 for working.  The way state pensions work here...they'd get 70% of their highest 3 years averaged, so generally what they do is pump up their pay with as much overtime as possible their last 3 years to get an inflated pension, but I won't even account for that...so let's just say year 1 of pension is 56,000...after 40 years with a 3% yearly COLA his pension is up to 180,000 a year.  Over 40 years he collects roughly 4,400,000 in pension benefits.  In other words...for 20 years of service he is paid a total of 1,600,000 + 4,400,000 = 6 million dollars.

Do you have any evidence to share that this ever happens?  I've never seen a pension that generous, let alone in the past 20 years.

State of CT pensions were like this for decades.  I have a grandfather that's getting this deal, retired state cop after 20 years, an uncle that's getting it, retired conservation officer after 20 years, an aunt, retired probation officer after 20 years, and several friends of the family that are all retired correction's officers after 20 years.  All retired in their 40s...20 years of service regardless of age they retire with a full pension with a yearly COLA and full health benefits for life.

First year payment was equal to 70% of their highest 3 years averaged together.  Not their base pay...simply their highest 3 years averaged, so it was like the unspoken rule that nobody undercuts overtime from guys who plan on retiring within 3 years...they work all the overtime they can get so their pension ends up insane.  Well...I lied a little...my aunt worked 23 years...she got an extra 1.5% per year over 20 plus a few more tries to make more money.  They eventually gave her a golden handshake...instead of 74.5% of her highest 3 average they offered her 77%

Just to rub a little salt in the wound some of these people even retire, collect their pension, and literally go back to working for the state as a contractor.  I'm sure you heard the term double dipping before.  What state unions have been getting away with for decades here is unbelievable...then again its also why we are one of the most heavily taxed and most expensive to live states.  Within the last 10 years they made the 20 year pensions 25, and I think put a 50 year age requirement on it, but considering how they can still be inflated with overtime and get a COLA they are still miles ahead of any middle class private sector pension I've ever heard of anyone getting.

Thanks for responding.  I knew some of that craziness that used to happen (counting overtime in pension amounts, for example), but it's nice to see it all together.

And I agree that the system your family used is crazy.  But you have to realize that
1) That system no longer exists.  The highest pension you can get in CT now is 2% of your salary per year.
2) The system for police officers in CT now, while still crazy generous, is nowhere near what most public employees get.  So they get 2% of their final salary per year of service, which starts when they retire from the police force.  But non law-enforcement public employees (the overwhelming majority) even in a relative generous state like CT, get 1.33 to 1.83% of their salary (depending on how much they make) per year of service, that starts at age 60 at the earliest.
3) Well-run systems for non law-enforcement pensions like I described in 2 should cost the state less than the state would pay in Social Security.  An adjacent state that I'm familiar with is Massachusetts, which realized relatively early that a pay-as-you-go system would eventually balloon.  So the typical Massachusetts pension pays out 1.5-2.5% of your final salary per year of service depending on your retirement age (age 60-70).  MA state employees pay 9-11% of their salary and the state picks up the rest.  Do you know the total cost of MA pensions in that system as a percentage of employee salary?  3.2% And since that system opts out of Social Security, it costs the state of Massachusetts much less to offer that pension than it costs private employers to contribute to Social Security.

So when the average state employee, who's never heard of a state pension as generous as the ones your family has received, sees you railing on public pensions:
Long story short, I am pretty pissed, not jealous, just straight up pissed that my generation is forced to fund my parent's and grandparent's ridiculous promises they made to themselves and refused to properly fund while they were working.  It must be nice having a pension funded by screwing your kids and grand kids over!
Well, they get pretty defensive.  They contribute 5%, or 9%, or 11% of their paycheck to fund their pension, which covers most of their pension.  And they save the taxpayer money because the employer contributes less to their pension than they would have to contribute to Social Security.  But the individual has to work in the same system for 5-10 years to get anything.  And they don't get Social Security, so the pension is all they have. 
« Last Edit: December 04, 2015, 09:23:06 PM by beltim »

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #35 on: December 05, 2015, 07:16:04 AM »
Thanks for responding.  I knew some of that craziness that used to happen (counting overtime in pension amounts, for example), but it's nice to see it all together.

And I agree that the system your family used is crazy.  But you have to realize that
1) That system no longer exists.  The highest pension you can get in CT now is 2% of your salary per year.
2) The system for police officers in CT now, while still crazy generous, is nowhere near what most public employees get.  So they get 2% of their final salary per year of service, which starts when they retire from the police force.  But non law-enforcement public employees (the overwhelming majority) even in a relative generous state like CT, get 1.33 to 1.83% of their salary (depending on how much they make) per year of service, that starts at age 60 at the earliest.
3) Well-run systems for non law-enforcement pensions like I described in 2 should cost the state less than the state would pay in Social Security.  An adjacent state that I'm familiar with is Massachusetts, which realized relatively early that a pay-as-you-go system would eventually balloon.  So the typical Massachusetts pension pays out 1.5-2.5% of your final salary per year of service depending on your retirement age (age 60-70).  MA state employees pay 9-11% of their salary and the state picks up the rest.  Do you know the total cost of MA pensions in that system as a percentage of employee salary?  3.2% And since that system opts out of Social Security, it costs the state of Massachusetts much less to offer that pension than it costs private employers to contribute to Social Security.

The damage is already done.  They just ended this system about 7-8 years ago.  I know because I almost got in the last wave of hiring that got grandfathered into the 20 and out deal.  Sadly my candidate pool got wiped due to hiring freezes after the financial meltdown, otherwise I'd be 1/3 of the way to retiring at 45 lol.  This is the problem now...my generation is still forced to foot the bill for this ridiculousness that was never close to funded, in which workers contributed 2% and end up collecting salaries higher than what most people are making for working.

Feel free to get offended all you want, but the truth about these unfunded systems is that when people were working for them they were not contributing enough, and those people as well as the people benefiting from their service were not paying a high enough tax rate as CT did not contribute enough, and now my generation is forced to fund a bunch of people's retirements who barely contributed anything to their own retirement, all while being told our retirement age is increasing.

http://www.ctpost.com/opinion/article/Connecticut-s-unfunded-pension-liabilities-A-4879149.php

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As of its last biennial actuarial evaluation in 2012, Connecticut had $9.7 billion in assets and $23 billion in liabilities in its State Employees' Retirement System (SERS), meaning that only 42.3 percent of its obligations were funded, and $13.3 billion, or about 58 percent, were unfunded.

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It's also worth noting that the $13.3 billion in unfunded SERS obligations represent only a portion of the state's unfunded long-term liabilities. Unfunded obligations related to the Teachers' Retirement Fund and post-employment health and life benefits for both teachers and other state employees total about $25 billion.

So we got stuck with literally a 25 billion dollar bill.  We have roughly 57,000 state employees.  If their fund were to magically get 100% funded next year, they'd all have to contribute 438,600 dollars.  Any private sector fund this under funded would be making cuts, yet governments in this position just keep raising taxes, and I know CT isn't the only place in this position, I know other states did the same dumb shit, and some towns and cities have already outright claimed bankruptcy.  Its probably also why CT has been losing young, educated workers for years now, and has had one of the more anemic recoveries among states after the financial melt down...all things which will make it even more difficult going forward.


Well, they get pretty defensive.  They contribute 5%, or 9%, or 11% of their paycheck to fund their pension, which covers most of their pension.  And they save the taxpayer money because the employer contributes less to their pension than they would have to contribute to Social Security.  But the individual has to work in the same system for 5-10 years to get anything.  And they don't get Social Security, so the pension is all they have.

5, 9, or 11% is still less than the 12.4% contribution rate employee/employer make to SS, and a lot of state employees still get to collect it earlier and get a higher payout than what most of us will end up getting from SS.  Look I fully get it, not all state employees are 20 and out who pumped up their OT their last few years and walked out with insane pensions, but you take a state employee making 50k a year contributing 5%...they put 2500 a year into a pension fund...even if they do 11%...that is 5500 a year.  After 25 years they contribute 62,500-137500 and expect to walk out at 60 with a sustainable pension for life and a COLA?  How far would that same contribution rate take you if you put that much in a 401k and expected it to full fund a retirement...NOT VERY.

When I was working a union job, 3 dollars and change an hour went to the pension fund on my behalf.  19 went to my paycheck, which to be fair, this is probably a number a lot closer to what a lot of state employees made as a lot are just administrative office type workers, most of which still participate in SS its just cops, teachers, and maybe 1 or 2 other unions exempt from it, but this was roughly a 15% contribution rate.  We couldn't collect until 64 and never got a COLA and that fund was still under funded.  Boo hoo...I'm not feeling bad for some guy who contributed 5% a year an expects a fully funded pension with a yearly increase...they should be going without yearly increases and facing benefit cuts just like non-government workers are facing.  I really don't care that they gave themselves some sweetheart deal they themselves couldn't be bothered to fund long before I was even old enough to work or vote, and now they demand I pay for their scam to continue.  If you are one of said government retirees who finds that offensive, good, my generation doesn't appreciate the shackles you have placed upon us.

beltim

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Re: More pensions to disappear when bond yields improve?
« Reply #36 on: December 05, 2015, 09:47:11 AM »
Thanks for responding.  I knew some of that craziness that used to happen (counting overtime in pension amounts, for example), but it's nice to see it all together.

And I agree that the system your family used is crazy.  But you have to realize that
1) That system no longer exists.  The highest pension you can get in CT now is 2% of your salary per year.
2) The system for police officers in CT now, while still crazy generous, is nowhere near what most public employees get.  So they get 2% of their final salary per year of service, which starts when they retire from the police force.  But non law-enforcement public employees (the overwhelming majority) even in a relative generous state like CT, get 1.33 to 1.83% of their salary (depending on how much they make) per year of service, that starts at age 60 at the earliest.
3) Well-run systems for non law-enforcement pensions like I described in 2 should cost the state less than the state would pay in Social Security.  An adjacent state that I'm familiar with is Massachusetts, which realized relatively early that a pay-as-you-go system would eventually balloon.  So the typical Massachusetts pension pays out 1.5-2.5% of your final salary per year of service depending on your retirement age (age 60-70).  MA state employees pay 9-11% of their salary and the state picks up the rest.  Do you know the total cost of MA pensions in that system as a percentage of employee salary?  3.2% And since that system opts out of Social Security, it costs the state of Massachusetts much less to offer that pension than it costs private employers to contribute to Social Security.

The damage is already done.  They just ended this system about 7-8 years ago. 

Tier 2 pensions (less generous than the system your family got, more generous than the current system) only applies to employees who started more than 18 years ago: http://www.osc.ct.gov/empret/tier2summ/tier2summ.htm

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Feel free to get offended all you want, but the truth about these unfunded systems is that when people were working for them they were not contributing enough, and those people as well as the people benefiting from their service were not paying a high enough tax rate as CT did not contribute enough, and now my generation is forced to fund a bunch of people's retirements who barely contributed anything to their own retirement, all while being told our retirement age is increasing.

I'm not offended.  You just need to realize that you're wildly and dramatically over-extrapolating.  Yes, the system your family paid into was underfunded – either they or they state (or probably both) needed to chip in a lot more at the time.

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Well, they get pretty defensive.  They contribute 5%, or 9%, or 11% of their paycheck to fund their pension, which covers most of their pension.  And they save the taxpayer money because the employer contributes less to their pension than they would have to contribute to Social Security.  But the individual has to work in the same system for 5-10 years to get anything.  And they don't get Social Security, so the pension is all they have.

5, 9, or 11% is still less than the 12.4% contribution rate employee/employer make to SS, and a lot of state employees still get to collect it earlier and get a higher payout than what most of us will end up getting from SS. 

5% is just barely less than the employee contribution to Social Security.  The others are much higher.  And most employees aren't eligible to collect it significantly earlier.  As for whether the pension or Social Security is more generous, that depends on your income and how long you work.

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Look I fully get it, not all state employees are 20 and out who pumped up their OT their last few years and walked out with insane pensions, but you take a state employee making 50k a year contributing 5%...they put 2500 a year into a pension fund...even if they do 11%...that is 5500 a year.  After 25 years they contribute 62,500-137500 and expect to walk out at 60 with a sustainable pension for life and a COLA?  How far would that same contribution rate take you if you put that much in a 401k and expected it to full fund a retirement...NOT VERY.

I love looking at examples.  A state employee making 50k who contributes 11%, and whose state contributes 5% (so the State is paying no more into the pension than they would into Social Security), who worked from say age 30 to age 60, and who got the average market return over the last century or so, would have about $816k in their account.  Using the 4% rule, that would be $32.6k per year they could withdraw.  If they received a pension that had a formula of 1.5% of final salary per year, that pension would be $21,750.  So that contribution rate should fund a much higher pension.

Now, using a bit of math, we can figure out if the state contributions 5%, what the employee contribution needs to be for a 401k-style program to give the same benefit as a pension.  It turns out to be 5.65%, for the assumptions above.

So this statement of yours is 100% wrong.

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Boo hoo...I'm not feeling bad for some guy who contributed 5% a year an expects a fully funded pension with a yearly increase...they should be going without yearly increases and facing benefit cuts just like non-government workers are facing.  I really don't care that they gave themselves some sweetheart deal they themselves couldn't be bothered to fund long before I was even old enough to work or vote, and now they demand I pay for their scam to continue.  If you are one of said government retirees who finds that offensive, good, my generation doesn't appreciate the shackles you have placed upon us.

I think tearing up contracts like that is immoral.  There is literally no difference between taking someone's pension after they earned it, and confiscating a 401k.  Both are morally wrong.  I'm probably younger than you, and I am not in a position that earns a pension (heck, I'm not even eligible to participate in a 401k).  But that doesn't mean I can't point out extreme confiscatory policies when I see them, and that's exactly what you're advocating.

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #37 on: December 05, 2015, 12:39:45 PM »
I'm not offended.  You just need to realize that you're wildly and dramatically over-extrapolating.  Yes, the system your family paid into was underfunded – either they or they state (or probably both) needed to chip in a lot more at the time.

That is the point I've been advocating.  When this happens in the private sector, retirees get told too bad, your benefits are getting cut.  When it happens to government workers taxpayers get told cough up some more money boys.  If these people wanted generous pensions they should have funded them WHEN THEY WERE WORKING, not push it onto the next generation.

5% is just barely less than the employee contribution to Social Security.  The others are much higher.  And most employees aren't eligible to collect it significantly earlier.  As for whether the pension or Social Security is more generous, that depends on your income and how long you work.

5% is less than half of what is paid into Social Security...but regardless...I think you need to research your numbers a bit more...5 minutes on google and here's what I find for contribution rates...

http://www.sacbee.com/news/politics-government/the-state-worker/article24491536.html

CA - 3 - 3.75% employee contribution

http://sers.pa.gov/pdf/Employers/2014-2015-finance_documents_Employer-Rate-Chart.pdf

PA - employees 5-10%, state 13.77-31.52%  (LOL 31% wtf?)

Here's another little gem...Illinois

https://www.illinoispolicy.org/reports/illinois-taxpayers-bear-the-brunt-of-rising-pension-costs/

2013 shows their pension obligations were 21% funded by contributions and 79% funded by tax payers.

Most of the people who pay rates anywhere close to 11-12% are teachers or law enforcement whom also don't pay SS.

I love looking at examples.  A state employee making 50k who contributes 11%, and whose state contributes 5% (so the State is paying no more into the pension than they would into Social Security), who worked from say age 30 to age 60, and who got the average market return over the last century or so, would have about $816k in their account.  Using the 4% rule, that would be $32.6k per year they could withdraw.  If they received a pension that had a formula of 1.5% of final salary per year, that pension would be $21,750.  So that contribution rate should fund a much higher pension.

Now, using a bit of math, we can figure out if the state contributions 5%, what the employee contribution needs to be for a 401k-style program to give the same benefit as a pension.  It turns out to be 5.65%, for the assumptions above.

So this statement of yours is 100% wrong.

Because you just moved the goal post and added another 5%.  If they contribute 5% and the state contributes 5%, that is 10% of their compensation, not 5%.  But regardless, those jobs with higher compensation rates still get generous benefits.  I decided to look into teachers a bit further because I know that is one group that is exempt from SS.

http://www.ct.gov/trb/cwp/view.asp?a=1579&Q=272076&trbPNavCtr=|#41324

They contribute 7.25% of their pay towards retirement, with 6% going to their pension and 1.25% going towards retiree health insurance.  6% is less than SS tax, they get a COLA, and a 2% accrual rate under the newer, less generous rules...so a 30 year retiree at 60 would get 60% of their highest 3 years averaged, which more than likely is just their last 3.

http://www.theday.com/article/20140114/NWS12/301149943

Average CT teacher pension...47,000.  How is 6% of their salary funding a 47,000 dollar a year pension with a COLA?  They literally contribute less than the rest of us do to SS and expect more generous benefits.  Its why the system is under funded and tax payers are on the hook for billions...enough wasn't contributed to the system.  Again, if they were treated like private sector employees and told future contribution rates are going up and benefits are being cut/COLA's being frozen until funding levels are looking better, I wouldn't care what they got for a pension...but its not like that, they just demand they "earned" a benefit they didn't want to pay for for themselves and pass the bill to the next generation.

I think tearing up contracts like that is immoral.  There is literally no difference between taking someone's pension after they earned it, and confiscating a 401k.  Both are morally wrong.  I'm probably younger than you, and I am not in a position that earns a pension (heck, I'm not even eligible to participate in a 401k).  But that doesn't mean I can't point out extreme confiscatory policies when I see them, and that's exactly what you're advocating.

You know what I think is immoral...someone contracting them self a comfy retirement, not funding it, and then demanding the next generation pay for it because they were too cheap/stupid/greedy to fund it for themselves.  They didn't earn that pension, if they earned it, it would have been properly funded.  Its really irrelevant if they didn't contribute enough as workers, or if the state didn't contribute enough, because they were the ones voting for those state officials...they were the ones voting to kick the can down the road, and now my generation gets screwed over.

Let me ask, what am I advocating to confiscate?  I'm saying their pensions should be cut down to a level its current funding can support, JUST LIKE PRIVATE SECTOR PENSIONS THAT WERE NOT PROPERLY FUNDED AND/OR POORLY MANAGED.  Like I already said in this thread...I'm part of a union pension fund.  They are currently cutting benefits.  I'm ok with it, I basically invest x amount of dollars in the fund and I'm only going to get out of it what they can afford to pay me, like all investments sometimes you lose.  I'm not saying we should raid their pension funds, I'm saying they didn't fund them when they were in the workforce, why should I have to make up the difference now?  They are stealing from me by forcing me to pay for a retirement they chose not to properly fund, I'm not confiscating anything from them, especially since it is literally impossible to confiscate something that isn't there.  What am I going to go confiscate, their unfunded pensions?  How exactly do you confiscate debt?  For people in areas where the pensions weren't as ridiculous and were better funded, they wouldn't have to worry much, would they?

reader2580

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Re: More pensions to disappear when bond yields improve?
« Reply #38 on: December 05, 2015, 01:54:11 PM »
Generally, the whole point of a pension is that it is mostly employer funded.  My pension is 100% funded by my employer.  I put nothing towards it.  My employer's pension fund is over 90% funded and my employer continues to put in money even though the pension fund is closed.

It isn't a government employee's fault their employer didn't put enough into the pension fund.  Government employees often took those jobs at lower pay knowing the jobs have very generous benefits.   The employees didn't write the benefits rules.  Employees were willing to sacrifice pay for benefits.

beltim

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Re: More pensions to disappear when bond yields improve?
« Reply #39 on: December 05, 2015, 04:28:46 PM »
I'm not offended.  You just need to realize that you're wildly and dramatically over-extrapolating.  Yes, the system your family paid into was underfunded – either they or they state (or probably both) needed to chip in a lot more at the time.

That is the point I've been advocating.  When this happens in the private sector, retirees get told too bad, your benefits are getting cut.  When it happens to government workers taxpayers get told cough up some more money boys.  If these people wanted generous pensions they should have funded them WHEN THEY WERE WORKING, not push it onto the next generation.

No they don't.  The PBGC guarantees pensions up to about $60k for people retiring at age 65.

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5% is just barely less than the employee contribution to Social Security.  The others are much higher.  And most employees aren't eligible to collect it significantly earlier.  As for whether the pension or Social Security is more generous, that depends on your income and how long you work.

5% is less than half of what is paid into Social Security...but regardless...I think you need to research your numbers a bit more...5 minutes on google and here's what I find for contribution rates...


Please correctly read my statement before you correct it.  The bolded section reads "5% is just barely less than the employee contribution to Social Security."  The actual employee contribution to Social Security is 6.2%.

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I love looking at examples.  A state employee making 50k who contributes 11%, and whose state contributes 5% (so the State is paying no more into the pension than they would into Social Security), who worked from say age 30 to age 60, and who got the average market return over the last century or so, would have about $816k in their account.  Using the 4% rule, that would be $32.6k per year they could withdraw.  If they received a pension that had a formula of 1.5% of final salary per year, that pension would be $21,750.  So that contribution rate should fund a much higher pension.

Now, using a bit of math, we can figure out if the state contributions 5%, what the employee contribution needs to be for a 401k-style program to give the same benefit as a pension.  It turns out to be 5.65%, for the assumptions above.

So this statement of yours is 100% wrong.

Because you just moved the goal post and added another 5%.  If they contribute 5% and the state contributes 5%, that is 10% of their compensation, not 5%.  But regardless, those jobs with higher compensation rates still get generous benefits.  I decided to look into teachers a bit further because I know that is one group that is exempt from SS.

http://www.ct.gov/trb/cwp/view.asp?a=1579&Q=272076&trbPNavCtr=|#41324

They contribute 7.25% of their pay towards retirement, with 6% going to their pension and 1.25% going towards retiree health insurance.  6% is less than SS tax, they get a COLA, and a 2% accrual rate under the newer, less generous rules...so a 30 year retiree at 60 would get 60% of their highest 3 years averaged, which more than likely is just their last 3.

http://www.theday.com/article/20140114/NWS12/301149943

Average CT teacher pension...47,000.  How is 6% of their salary funding a 47,000 dollar a year pension with a COLA?  They literally contribute less than the rest of us do to SS and expect more generous benefits.  Its why the system is under funded and tax payers are on the hook for billions...enough wasn't contributed to the system.

States can offer a better deal to retirees than Social Security can with a lower contribution rate because they invest the funds.  I already showed the math, feel free to ask questions if you don't understand that.

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Again, if they were treated like private sector employees and told future contribution rates are going up and benefits are being cut/COLA's being frozen until funding levels are looking better, I wouldn't care what they got for a pension...but its not like that, they just demand they "earned" a benefit they didn't want to pay for for themselves and pass the bill to the next generation.

This does happen to current government employees.  I'm sorry if your state has mismanaged its pension, but don't use your state's mismanagement to impugn all public employees.

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I think tearing up contracts like that is immoral.  There is literally no difference between taking someone's pension after they earned it, and confiscating a 401k.  Both are morally wrong.  I'm probably younger than you, and I am not in a position that earns a pension (heck, I'm not even eligible to participate in a 401k).  But that doesn't mean I can't point out extreme confiscatory policies when I see them, and that's exactly what you're advocating.

You know what I think is immoral...someone contracting them self a comfy retirement,

That didn't happen.

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…not funding it, and then demanding the next generation pay for it because they were too cheap/stupid/greedy to fund it for themselves.

There's that unfair impugning again.
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They didn't earn that pension, if they earned it, it would have been properly funded.
No.  The pension is part of their compensation.  There is no legal right to take that from them.  I'm sorry if your state mismanaged its pension earlier – but that means tax rates were lower than they should have been for the state to actually pay its obligation.

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Let me ask, what am I advocating to confiscate?

Their salary.  It doesn't matter when the state said it would pay it, it still counts as compensation, and taking it would be theft.

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I'm saying their pensions should be cut down to a level its current funding can support, JUST LIKE PRIVATE SECTOR PENSIONS THAT WERE NOT PROPERLY FUNDED AND/OR POORLY MANAGED. 

Again, that's not what happens in the private sector.  See my earlier comment.

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #40 on: December 05, 2015, 10:50:05 PM »
No they don't.  The PBGC guarantees pensions up to about $60k for people retiring at age 65.

Lol...its a federally run insurance program that itself is billions of dollars in the red.  The only people that get the 60k "guarantee" are single employer plans because they are traditionally less stable than multi employer.  Multi employer plans are only guaranteed for 12,870.

http://www.heritage.org/research/reports/2015/07/bankrupt-pensions-and-insolvent-pension-insurance-the-case-of-multiemployer-pensions-and-the-pbgcs-multiemployer-program

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Taxpayers should not be on the hook for the PBGC’s unfunded liabilities because the PBGC is and always has been a self-financed program. According to ERISA, the “United States is not liable for any obligation or liability incurred by the corporation.”

In other words, if this insurance program can't remain solvent itself its "guarantees" mean NOTHING...hence why it was legislated in 2014 that plans could be cut.  It was deemed healthier for the system that plans attempt to remain solvent rather than continue to pay obligated amounts they could not afford, go bankrupt, and obliterate the already underfunded PBGC.

http://www.pensionrights.org/take-action/act-now/summary-pension-cutback-provisions-cromnibus

Please correctly read my statement before you correct it.  The bolded section reads "5% is just barely less than the employee contribution to Social Security."  The actual employee contribution to Social Security is 6.2%.

SS is 12.4% of your total compensation, the fact that it doesn't show in your pay check is irrelevant.  Ask any self employed person about that, and 5% is way below 12.4%.

This does happen to current government employees.  I'm sorry if your state has mismanaged its pension, but don't use your state's mismanagement to impugn all public employees.

I'm not.  If there are funds that are fully funded, good for them, keep paying out what they are.  I'm only talking about the grossly under funded plans that require ridiculous amounts of tax payer bail out every year.

That didn't happen.

If it didn't happen all those plans would be fully funded and we wouldn't be having this discussion.

There's that unfair impugning again.

It's true, I don't care what you want to call it.

No.  The pension is part of their compensation.  There is no legal right to take that from them.  I'm sorry if your state mismanaged its pension earlier – but that means tax rates were lower than they should have been for the state to actually pay its obligation.

Their salary.  It doesn't matter when the state said it would pay it, it still counts as compensation, and taking it would be theft.

Taking what?  Its like I already said, you can't raid a pension fund they never funded, they are stealing from future generations.  They either should have contributed more while they were working, or the state should have raised taxes and contributed more on their behalf while those people were actually working.  The fact that they just left a massive unfunded liability for future generations is the only thing going on here that is theft.

Like I said, if there are towns/states that didn't do this, kudos to them, I'm not talking about them, I'm talking about the states with billions/trillions in unfunded pension liabilities.

Again, that's not what happens in the private sector.  See my earlier comment.

Yes, yes it does happen.  If the PGBC goes belly up it will require a change in federal law to bail them out with tax payer money, and there are private sector pensioners right now that have had their benefits cut.

beltim

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Re: More pensions to disappear when bond yields improve?
« Reply #41 on: December 06, 2015, 10:41:34 AM »
No.  The pension is part of their compensation.  There is no legal right to take that from them.  I'm sorry if your state mismanaged its pension earlier – but that means tax rates were lower than they should have been for the state to actually pay its obligation.

Taking what?  Its like I already said, you can't raid a pension fund they never funded, they are stealing from future generations.  They either should have contributed more while they were working, or the state should have raised taxes and contributed more on their behalf while those people were actually working.  The fact that they just left a massive unfunded liability for future generations is the only thing going on here that is theft.

There is literally no difference between taking someone's pension and taking someone's 401k.  Both are legal obligations to employees earned by employment.  If you want to advocate theft of that, fine.  But be honest about it, and realize what you're doing it.

I'll be here to remind you that it's theft and wrong.

reader2580

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Re: More pensions to disappear when bond yields improve?
« Reply #42 on: December 07, 2015, 09:20:58 AM »
Taking what?  Its like I already said, you can't raid a pension fund they never funded, they are stealing from future generations.  They either should have contributed more while they were working, or the state should have raised taxes and contributed more on their behalf while those people were actually working.  The fact that they just left a massive unfunded liability for future generations is the only thing going on here that is theft.

Like I said, if there are towns/states that didn't do this, kudos to them, I'm not talking about them, I'm talking about the states with billions/trillions in unfunded pension liabilities.

It is NOT the employees fault that their employer didn't put in enough money into the pension fund.  The employer promised a pension to their employees and they are obligated to fund it.  A lot of employees like myself didn't put any money into our pensions as our employer offered the pension as an employer paid benefit.  (My employer's pension fund is at least 90% funded.)

Left

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Re: More pensions to disappear when bond yields improve?
« Reply #43 on: December 07, 2015, 09:49:49 AM »
How is it stealing from future any more than people who underfund their 401k and go on govt assistance?

Guses

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Re: More pensions to disappear when bond yields improve?
« Reply #44 on: December 07, 2015, 12:40:16 PM »
I just want to add that the state or fed can legislate higher taxes to pay for those pensions.

Who pays those taxes? Everybody with income. Pensions revenues are also income.

I don't think anyone is stealing from future generations. I think that the power that be underestimated the demographic impact of the pay as you go structure when they put in those benefits.

I think the reaction to the demographic "hump" in pension regulations are actually quite stringent. Once the hump has passed, I would not be surprised to see pension plans running surpluses.
 




dude

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Re: More pensions to disappear when bond yields improve?
« Reply #45 on: December 08, 2015, 10:49:54 AM »
I doubt we'll have to worry about pension solvency after the baby boomers are all gone because hardly anyone except maybe government employees will have a pension by then.  I would expect a number of pension funds to run out of money and get taken over by government.  Government has gotten far less generous with pensions for new employees.  They typically don't offer full payout until age 66 or 67.  New employees often have to pay in more towards pensions than previously.

A friend of mine was a union employee and gets enough pension money he doesn't even have to touch the money he put aside in retirement accounts.
Thanks for your commentary. I think you addressed my question where bolded.

edit: read an actuarial report on my pension. Looks like liabilities will eat at the fund so much such that in 35 years, there is about a 1 in 4 chance of total insolvency. So if the mouse doesn't choke the serpent, all should be good.

The Federal pension (FERS) is the opposite -- it is on solid footing. fully funded basically in perpetuity (though current CSRS obligations, i.e., the old Fed pension system, continue to need additional funding through 2035-ish (by that time, all CSRS pensioners should be dead)).  From the most recent Congressional Research Service's annual report:

Although the CSRDF has an unfunded liability, it is not in danger of becoming insolvent.
According to the projections of OPM’s actuaries, the assets of the CSRDF will continue to grow over the next 75 years. The fund’s assets are projected to reach $1.1 trillion in 2020, $2.2 trillion in 2040, $5.0 trillion in 2060, and $9.6 trillion in 2080. Actuarial projections indicate that the CSRDF will be able to meet its financial obligations in perpetuity. According to OPM, “the total assets of the CSRDF, including both CSRS and FERS, continue to grow throughout the term of the projection, and ultimately reach a level of about 5.3 times payroll, or about 20 times the level of annual benefit outlays.”22 One reason that the CSRDF will not exhaust its resources is that all federal employees hired since 1984 are enrolled in FERS. By law, the benefits that employees earn under FERS must be fully funded by the sum of employer and employee contributions and interest earnings.


Full report here: https://www.fas.org/sgp/crs/misc/98-810.pdf
« Last Edit: December 08, 2015, 10:54:58 AM by dude »

JZinCO

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Re: More pensions to disappear when bond yields improve?
« Reply #46 on: December 08, 2015, 12:04:17 PM »
I doubt we'll have to worry about pension solvency after the baby boomers are all gone because hardly anyone except maybe government employees will have a pension by then.  I would expect a number of pension funds to run out of money and get taken over by government.  Government has gotten far less generous with pensions for new employees.  They typically don't offer full payout until age 66 or 67.  New employees often have to pay in more towards pensions than previously.

A friend of mine was a union employee and gets enough pension money he doesn't even have to touch the money he put aside in retirement accounts.
Thanks for your commentary. I think you addressed my question where bolded.

edit: read an actuarial report on my pension. Looks like liabilities will eat at the fund so much such that in 35 years, there is about a 1 in 4 chance of total insolvency. So if the mouse doesn't choke the serpent, all should be good.

The Federal pension (FERS) is the opposite -- it is on solid footing. fully funded basically in perpetuity (though current CSRS obligations, i.e., the old Fed pension system, continue to need additional funding through 2035-ish (by that time, all CSRS pensioners should be dead)).  From the most recent Congressional Research Service's annual report:

Although the CSRDF has an unfunded liability, it is not in danger of becoming insolvent.
According to the projections of OPM’s actuaries, the assets of the CSRDF will continue to grow over the next 75 years. The fund’s assets are projected to reach $1.1 trillion in 2020, $2.2 trillion in 2040, $5.0 trillion in 2060, and $9.6 trillion in 2080. Actuarial projections indicate that the CSRDF will be able to meet its financial obligations in perpetuity. According to OPM, “the total assets of the CSRDF, including both CSRS and FERS, continue to grow throughout the term of the projection, and ultimately reach a level of about 5.3 times payroll, or about 20 times the level of annual benefit outlays.”22 One reason that the CSRDF will not exhaust its resources is that all federal employees hired since 1984 are enrolled in FERS. By law, the benefits that employees earn under FERS must be fully funded by the sum of employer and employee contributions and interest earnings.


Full report here: https://www.fas.org/sgp/crs/misc/98-810.pdf
Thanks. I've been in and out out of the fed system before (but no real pension with them) and might return some time down the road, so it's good to know.

SirFrugal

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Re: More pensions to disappear when bond yields improve?
« Reply #47 on: December 08, 2015, 07:30:56 PM »
There is literally no difference between taking someone's pension and taking someone's 401k.  Both are legal obligations to employees earned by employment.  If you want to advocate theft of that, fine.  But be honest about it, and realize what you're doing it.

I'll be here to remind you that it's theft and wrong.

If you had a 401k and didn't fund it while you were working and you retire...guess what, you don't get a 401k.  The government doesn't say look at this guy, he didn't fund his 401k, let's just pass a law saying his kids and grand kids have to put money is his 401k for him.

But wait...that same guy had a pension and didn't fund it while he was working...and now his kids and grand kids have to pay for it?  WTF?  That is my problem with the system.  I'm not opposed to pensions, just some greedy people who couldn't be bothered with funding their own pensions and now demand their kids and grand kids pay for it.  These people aren't innocent victims, they are the same ones that voted for the politicians and unions bosses who put such a shitty system in place and kept running with the status quo.

I'm not trying to steal anything from anyone, I just want them to stop stealing from me to fund a retirement their own generation didn't even contribute to.  Trust me, if they have a funded pension fund I've no interest in raiding it, because that would be stealing.

beltim

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Re: More pensions to disappear when bond yields improve?
« Reply #48 on: December 08, 2015, 09:16:16 PM »
There is literally no difference between taking someone's pension and taking someone's 401k.  Both are legal obligations to employees earned by employment.  If you want to advocate theft of that, fine.  But be honest about it, and realize what you're doing it.

I'll be here to remind you that it's theft and wrong.

If you had a 401k and didn't fund it while you were working and you retire...guess what, you don't get a 401k.  The government doesn't say look at this guy, he didn't fund his 401k, let's just pass a law saying his kids and grand kids have to put money is his 401k for him.

But wait...that same guy had a pension and didn't fund it while he was working...and now his kids and grand kids have to pay for it?  WTF?  That is my problem with the system.  I'm not opposed to pensions, just some greedy people who couldn't be bothered with funding their own pensions and now demand their kids and grand kids pay for it.  These people aren't innocent victims, they are the same ones that voted for the politicians and unions bosses who put such a shitty system in place and kept running with the status quo.

I'm not trying to steal anything from anyone, I just want them to stop stealing from me to fund a retirement their own generation didn't even contribute to.  Trust me, if they have a funded pension fund I've no interest in raiding it, because that would be stealing.

It doesn't matter whether the contract called for employee contributions or not.  It was agreed to as part of the compensation.  Taking it now would be theft.

Cathy

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Re: More pensions to disappear when bond yields improve?
« Reply #49 on: December 08, 2015, 10:01:11 PM »
The Constitution of the United States provides that "[n]o State shall ... pass any ... Law impairing the Obligation of Contracts". Art I, § 10, cl 1. This guarantee means that "a State cannot refuse to meet its legitimate financial obligations simply because it would prefer to spend the money to promote the public good rather than the private welfare of its creditors". United States Trust Co of NY v. New Jersey, 431 US 1, 29 (1977). For this reason, as beltim correctly points out, "states that use [a] contractual approach [to pensions] have limited pension reform options ...". Hayleigh S. Crawford, Going for Broke: Arizona's Legal Protection of Public Pension Benefits, 46 Ariz St L J 635, 649 (2014).

However, some pensions may not be contracts. For example, existing Connecticut case law apparently suggests that certain state pensions are not contractually protected. See Kevin E. McCarthy & Sandra Norman-Eady, Constitutional Issues in Revoking or Reducing Pension Benefits of Convicted State Employees, CT ORR 2004-R-0150 (February 10, 2004) (arguing that case law "suggest[s] that state employees and officials whose pensions are based on statute do not have contractual rights to their pensions"). The idea behind those rulings is that a statute enacted by the Legislature is not a contract between an individual and the state. I express no view on the accuracy of that proposition.
« Last Edit: December 08, 2015, 10:23:43 PM by Cathy »