Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Old 12-19-2011, 01:32 PM   #61
Full time employment: Posting here.
arebelspy's Avatar
 
Join Date: Apr 2011
Posts: 625
Tif7 - someone linked to this article in another thread: http://www.chicagobusiness.com/artic...plate=printart

This quote from that article may help you understand why future returns assumptions is indeed relevant to the percent funded:
"The system, which has just 46.5% of the assets it needs to cover promised payments to retirees, is counting on an 8.5% annual return, which many portfolio managers and investors, including Berkshire Hathaway Inc.'s Warren Buffett, say is unrealistically high. If TRS banked on a 7.75% return — the rate that two other Illinois public pensions lowered their forecasts to this year — its assets would equal only 43% of obligations."

Or perhaps you can think of it this way...

The percent funded is not an amount of current assets over current obligations. If it was, future returns wouldn't matter. This seems to be how you're looking at it.

The percent funded is future assets over future liabilities. Future liabilities is more relevant than current, because you may have pensions that are rising, more retiring soon, etc.

And you'll need to pay those liabilities in the future, so you'll need to know how many assets you'll have, which will change based on your return. So to figure out the amount funded, you need to project your returns.

Hope that makes sense!
__________________

__________________
arebelspy is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-19-2011, 01:52 PM   #62
Thinks s/he gets paid by the post
Finance Dave's Avatar
 
Join Date: Mar 2007
Posts: 1,046
Our pension is a DC and is held in a trust. It has a cash balance which is readily available to me, and the plan is portable. I'm fully vested, so I know how much I'll get. It earns interest at prime+1% while working, or prime minus .5% if you retire, leave it there, but don't collect right away.

The contributions made are 6% of your pay, including all bonus plans. I didn't make a lot of money early in my career, but I do pretty well now...so I'm trying to pad it a bit these last few years.
__________________

__________________
"Live every day as if it were your last, and one day you'll be right" - unknown
Finance Dave is offline   Reply With Quote
Old 12-19-2011, 01:55 PM   #63
Thinks s/he gets paid by the post
martyb's Avatar
 
Join Date: Nov 2006
Location: Bossier City
Posts: 2,182
QUOTE from Amethyst:

Marty, it shouldn't make any difference what grade you retire at - if you retire under CSRS at the qualifying age with the qualifying number of years, the Govt will pay 72% of your health insurance premiums (at least until Congress messes with this or you become eligible for Medicare, which is a whole other kettle of worms). Meanwhile, a GS-2 and a GS-15 have the same options for selecting survivor annuity benefits - full survivor annuity, partial annuity, etc. etc.

Also check with your HR department at work - if you're a year away from retiring, they probably have a checklist of things to do.

Amethyst




Yeah, I know about the health ins. and survivor's and all that, what I'm kind of curious about is how folks are doing after retiring on a CSRS pension, whether they felt that was enough income or if they felt like they needed to work part-time afterwards etc. I guess what I'm getting at is I'm wondering if most of the CSRS retirees here retired at higher grades or lower grades, and whether they are feeling like their pensions are adequate. Basically, the approximately 70% of my hi-three that I'll be getting will work out, after taxes, health & life insurance, and survivor's benefit reduction to be approximately what I currently take home as gross pay. However, my current gross pay is after maxing my TSP at $22,000. I guess I'll worry about it until after it's all said & done. Since there are so many CSRS'rs on here, it would be interesting to know final GS or WG grades & how many years. I'm just trying to see kind of where I fall in that group. I'm a GS-11 and will have 36 yrs when I go, if I go on time. However, I'm not "stepped out", which might be the source of my uneasiness/chicken-ness.
__________________
“Change is the law of life. And those who look only to the past or present are certain to miss the future.”
-John F. Kennedy

“Hard work never killed anybody, but why take a chance?” - Edgar Bergen
martyb is offline   Reply With Quote
Old 12-19-2011, 03:20 PM   #64
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 6,318
Quote:
Originally Posted by Tif7 View Post
Thanks for responding. It sure sucks when you don’t get what you earned! I understand why you feel the way you do. What you are doing though is judging how the current system works against an expectation of something it is not designed to do. If you want a system that guarantees your full pension benefit if your company goes bankrupt then that’s all well and good. But that is not what we have now. The system protects part of your benefit. The rest is at risk. If the company is doing fine, you get what you earned. If the company goes into bankruptcy then you receive the protected piece. If the protected piece is a fraction of what you earned then yes, that sucks. But that is not necessarily a failure of the system. Like anything else, it is far from perfect, but expecting it to provide more then it is designed to do is setting yourself up for disappointment.

T
We both agree on the above. I would like to see reforms to help insure that the working person gets what has been earned. Why we don't get those reforms is another discussion that would fill gigabytes of storage.
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 12-19-2011, 03:38 PM   #65
Dryer sheet aficionado
 
Join Date: Nov 2011
Posts: 48
Quote:
Originally Posted by arebelspy
Hope that makes sense!
Thanks for posting. I'm on a mobile with a crappy browser that's not doing so well with that link so I will have to read the article later.

After clifp posted calculations and comments it helped me understand what people were taking about. And what you just posted reaffirms that. I was totally thinking about something different.

For the benefit of everyone reading, and to be completely clear, yes, the return on assets does matter for what everyone is looking at here. I should have taken the time to understand what people were talking about, and especially what Mulligan was asking, before I posted something that was incorrect. Thanks to everyone who kept posting to get it sorted out. Sorry if I caused any confusion along the way.

T
__________________
Tif7 is offline   Reply With Quote
Old 12-19-2011, 05:24 PM   #66
Full time employment: Posting here.
arebelspy's Avatar
 
Join Date: Apr 2011
Posts: 625
Cool, no worries. Glad we got the confusion sorted out.
__________________
arebelspy is offline   Reply With Quote
Old 12-20-2011, 08:45 AM   #67
Moderator
ziggy29's Avatar
 
Join Date: Oct 2005
Location: Texas
Posts: 15,612
Quote:
Originally Posted by arebelspy View Post
"The system, which has just 46.5% of the assets it needs to cover promised payments to retirees, is counting on an 8.5% annual return, which many portfolio managers and investors, including Berkshire Hathaway Inc.'s Warren Buffett, say is unrealistically high. If TRS banked on a 7.75% return -- the rate that two other Illinois public pensions lowered their forecasts to this year -- its assets would equal only 43% of obligations."

Or perhaps you can think of it this way...

The percent funded is not an amount of current assets over current obligations. If it was, future returns wouldn't matter. This seems to be how you're looking at it.
Hey, as long as we can kick the can far enough down the road to blow up on someone else's watch...
__________________

__________________
"Hey, for every ten dollars, that's another hour that I have to be in the work place. That's an hour of my life. And my life is a very finite thing. I have only 'x' number of hours left before I'm dead. So how do I want to use these hours of my life? Do I want to use them just spending it on more crap and more stuff, or do I want to start getting a handle on it and using my life more intelligently?" -- Joe Dominguez (1938 - 1997)

RIP to Reemy, my avatar dog (2003 - 9/16/2017)
ziggy29 is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
California proposal for pension reform MichaelB FIRE and Money 88 11-05-2011 10:42 PM
Does a High Deductible Health Plan (HDHP) make sense for me? nico08 FIRE and Money 9 10-07-2011 10:44 PM

 

 
All times are GMT -6. The time now is 04:47 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.