Pension question and resentment

[dm]

My wife is a retired school administrator. She put in 14% and the district matched it. No social security. She worked for 26yrs and we were able to buy 3yrs for $75,000. She gets about 65% of the average of her 3 highest years. No health benefits and she cant work again where the retirement system is in place. I wonder how much I would have in my 401k if I was able to have all my Social Security invested in it and someone forced me to put back 14% of my pay when I first started working?

 

[MichaelB]

Most of the news on public sector pensions take some extreme and abusive cases and present them as if they were the norm for everyone. This riles people, even 'round here.

Almost all of the articles (I have seen) focus on the pensioners. Then unions. Very few look at the Governors and Mayors and legislatures that intentionally underfund pensions.

 

[haha]

I understand the public outrage but think, in many cases, it's misdirected. The outrage should be at those who created unsustainable plans or failed to fund them properly. The loopholes allowing people to "game" the system to receive huge pensions with as little as 20 years of service need to be addressed. Here in Virginia, our governor borrowed $600 million from an already underfunded state employees pension plan to balance the state budget last year. Governor McDonnell now realizes this was a mistake and has proposed big changes to get the pension plan on solid ground. Does it make sense to blame a retiring road worker or teacher for this mess?

Every time a politician attempts to get these plans more realistic the teachers, or waste collectors, or whatever threaten a strike. So IMO, yes, it does make sense to blame the retiring workers. Politicians are only responding to interest group pressure, as they have been well rewarded for doing. Also let's not forget, in most cases politicians are also government workers, with the same grandiose pensions as their co-conspirators.

Another aspect is that although people might rail at examples of egregious offenders, the more sophisticated among us may or may not care about this, and often may not see it mainly as a fairness or moral issue. It is a bread and butter issue. However, morals and fairness are how to get the public fired up, so that is what will be happening. Just like liberals like to fire up the masses to "tax those rich people". It is always easier for a realtively small, focused benefit receiving group to take advantage of a larger, more diffuse funding group. The public is worrying about jobs, their kids' braces, whether their wife or husband is going to get fed up and take off. The government worker has all these problems too, but also a much clearer vested interest in political action and/or system gaming to better their relative position.

My model in most things having to do with shaping of public opinion is the Anti-Defamation League, IMO an extremely successful public relations outfit. Of course extreme positions must often be taken. Politics is like American football, where each team is trying extremely hard to push the other team out the back of their end zone. When someone is trying to take something from you it behooves you to resist and try to create a counter-threat. More compromise would be nice, but outside of Scandinavia it seems to be rare. In America we have Newt and Nancy, and you have to play the hand you are dealt.

I believe that long term more outsourcing is the answer. Efficient, well managed groups will take over more and more functions, perhaps even services like police and fire, where an efficient cost controlling county or neighboring municipality may be able to make other municipalities offers that the voters at least will not refuse, although much more patronage is possible if things could be kept in house.

At least that is my humble opinion.

Ha

 

[donheff]

I did some college recruiting for Federal jobs in the 70s and 80s. There was a strong sense on campus that the opportunities were too limiting on the pay side. The pension was sneered at back in those days (who would stay that long anyway -- there was money to be made in the private sector). The only selling point that actually worked was a Kennedy-esque appeal to public spirit. It is a little ironic that we are now considered to have been overcompensated all along.

 

[Westernskies]

I understand the public outrage but think, in many cases, it's misdirected. The outrage should be at those who created unsustainable plans or failed to fund them properly. The loopholes allowing people to "game" the system to receive huge pensions with as little as 20 years of service need to be addressed. Here in Virginia, our governor borrowed $600 million from an already underfunded state employees pension plan to balance the state budget last year. Governor McDonnell now realizes this was a mistake and has proposed big changes to get the pension plan on solid ground. Does it make sense to blame a retiring road worker or teacher for this mess?

Actually, I think a lot of the angst, while generally warranted, is misplaced. It's the same career politicians who promised the public sector unsustainable pensions that promised the private sector undeliverable Social Security benefits. No one wants to see their retirement benefits (pension or SS) cut, but expecting the private sector to continue to fund COLA'd public pensions at 100% while cutting Social Security and Medicare benefits? It's unrealistic to think there isn't going to be a huge issue with that. Throw in the income spiking, double-dipping, and cushy health benefit programs that shees1, DangerMouse, and Forrest mentioned, and you've got a ticking time bomb- unfortunately, these excesses are the exceptions that prove the rule to many.


I don't think anyone is blaming the retiring road worker or a teacher for the mess we are in, but also don't feel that they should be exempted from the financial equation, either. We collectively elected the idiots that got us into this mess; we need to collectively share in the burden to fix it.

I also don't believe this is a a question of a premeditated class warfare plan as Khan suggested; we all worked for our benefits, paid into the system in some form and expect promises made by our government(s) to be honored; unfortunately, it's becoming obvious that isn't going to happen.

 

[MichaelB]

Blaming public employees for pension problems is like blaming homeowners for the housing crisis. In each case they were willing participants and therefore in part, responsible. In neither case, however, were they enablers. That clearly rests with our elected and appointed leadership.

 

[haha]

I did some college recruiting for Federal jobs in the 70s and 80s. There was a strong sense on campus that the opportunities were too limiting on the pay side. The pension was sneered at back in those days (who would stay that long anyway -- there was money to be made in the private sector). The only selling point that actually worked was a Kennedy-esque appeal to public spirit. It is a little ironic that we are now considered to have been overcompensated all along.

Perhaps for elite graduates looking to power jobs, but I sincerely doubt that the average superintendent of schools, or office worker in the county planning depratment, was humming we shall overcome as s/he went to work.

Anyway, isn't the definition of sclerosis to not change with the times, to not respond to situations as they currently are?

 

[Purron]

I sincerely doubt that the average superintendent of schools, or office worker in the county planning depratment, was humming we shall overcome as s/he went to work.

True. Most also weren't thinking "Let me take this guvmit job so I can rip off the taxpayers 30 years from now".

 

[73ss454]

DW's boss was the superintendent of a small school district in NY. He retired with 180K+ pension and the next day was sttting in the same seat at $1200 a day.

Great work if you can get it, but is it fair?

 

[haha]

True. Most also weren't thinking "Let me take this guvmit job so I can rip off the taxpayers 30 years from now".

Agree.

 

[Westernskies]

DW's boss was the superintendent of a small school district in NY. He retired with 180K+ pension and the next day was sttting in the same seat at $1200 a day.

Great work if you can get it, but is it fair?

Fair? What's that got to do with anything?

Same situation here in PHX- the Police Chief retired with a "one-time payment" of $562,000 and a $90K+pension , then went back to work two weeks later as "Public Safety Manager" at $193K since it's illegal to double-dip in the "same job"...



Lawsuit pending, resentment building...

 

[ziggy29]

As has been said already, what resentment and outrage there is should be toward the policy makers, toward those promising benefits to the sky, those who didn't properly fund the pension plans each year.

Having said that, the growing backlash is largely due to the perception of diverging retirement prospects of the private sector pensionless and the public sector pensioner. Those on the so-called "have not" side have seen their retirement prospects trashed in the last decade; their wages haven't kept up with inflation, their own former pension plans have been frozen in large numbers (if they existed at all), 401K company matches are being suspended, the market has ravaged their 401K balances -- and on top of that, they hear about budget crises asking them to pay more or receive less in service to protect the retirement security of other people when no one cared about protecting theirs.

This is where the resentment comes from. Again to reiterate, it's not at the individual pensioner, or shouldn't be. I also think politicians, the media and Corporate America benefit from a polarized society in many ways, not just political partisanship but in ways like private sector versus public sector, younger folks versus older folks, et cetera. If they can successfully divide and conquer us, they can keep screwing all of us and one group of ordinary folks will be too busy screaming at other ordinary folks to realize we should be banding together against the elites in the power structure.

 

[donheff]

Double dipping is not generally allowed in the Federal Government but I don't see any unfairness about it. It is prohibited to limit costs and discourage early retirements. If someone retires from Megacorp after 42 years with a big (earned) pension he or she can turn around the next day and take a Federal job at full pay. Same with a state or local retiree taking a Federal job. If a Fed retires after 42 years (max earned pension) and turns around and takes the same job that Megacorp guy took he gets the pay for the new job minus the total amount of his pension. What is fair about that?

 

[Purron]

Fair? What's that got to do with anything?

Same situation with here in PHX- the Police Chief retired with a "one-time payment" of $562,000 and a $90K+pension , then went back to work two weeks later as "Public Safety Manager" at $193K since it's illegal to double-dip in the "same job"...



Lawsuit pending, resentment building...

This is a prime example of the worst kind of pension rip off. Laws need to change and new people need to be elected. Have you ever thought of running for a local office Westie? You're a smart guy and could work to make sure this never happens again. I doubt you'd want to do this, but you and your neighbors should support local politicians who will be change agents.

 

[sheehs1]

DangerMouse...I totally agree with you and what you said happens a lot.
"I think another thing that might bother people a bit is when the recipients of these very generous pension plans retire on a $200k a year pension then come back the next day as a contractor. If these kind of generous benefits were being offered to a CEO of a publicly listed company everyone would be outraged."
It is exactly what the guy from North Carolina did. He "retired from his high paying state position and starting pulling out retirement benefits...while creating a company on the side. He was hired back by his board as a contractor at a higher rate of pay. He was still pulling his car allowance too !!! The Attorney General got involved and ruled that "he had not retired" since he was doing the same work as before. The fact that this man was more than slapped on the wrist...(in fact they have investigated criminal charges) says a lot for North Carolina...but how many are really caught??
Personally...I have a problem with the guarantee of the public pension...when there is no guarantee in the mass public sector. I believe it is an entitlement. Those of us who do not have retirement guarantees are funding pensions for those that do. How much sense does that make? AND my daughter is a teacher so ...I put her in the same boat. Granted she is a first year teacher...but her district paid the 5% this year into her pension. I believe she should contribute. Another poster here mentioned Virginia. We are in Virginia and yes..our governor... has plans to change the system. For teachers, the district can mandate the teachers contribute 5% of their pay...but only if they give them a 3% raise. It hasn't passed yet to my knowledge.
An additional point is that these public pensions came about at a time when public servants salaries were below the norm and the private sector. That is no longer true and has not been for quite some time.
As several in North Carolina stated...regarding the gentleman Ive been speaking about. "no one goes into public service to get rich but that is exactly what has happened".
There are also many teachers...who qualified for retirement in one state and retired drawing their pensions. They they get jobs in other states...and can qualify for a 2nd pension. All before age 65. This particular gentleman is a client of my husbands. I don't think the system was intended to be used this way. Who wrote these laws anyway!! Perhaps what has complicated it thru the decades...is that life expectancy has increased. Most would work 30 years an be ready to retire. Not so today.

 

[utrecht]

Although nobodys 401k returns are guaranteed like a pension is, lets not forget that your 401k balance will be passed down to your heirs when you die. My pension benefits will not unless I take a greatly reduced benefit, which would be counterproductive as far as this arguement goes. I can only guarantee 100% passes to my heirs if I accept a benefit that is probably now smaller than if I had a 401k instead of the pension.

 

[ziggy29]

Double dipping is not generally allowed in the Federal Government but I don't see any unfairness about it.

Frankly, the way I see it, in an era of 17% real unemployment if someone wants to take a public pension, they should be creating a job opening for someone who needs it more. Double dipping like this may not directly cost the taxpayer more, but every extra unemployed person out there does cost us all in the form of unemployment benefits and other public assistance.

So from an overall public policy standpoint, I'd say if you want the pension, give your job to someone who needs it more and get one more person off the ranks of unemployment.

 

[harley]

I don't resent the pensions, although I'm a little jealous. I don't even resent the double dipping, if it's based on putting in the time, retiring, then finding a new job. I dislike the immorality of an old boy network where you retire and come back doing the same thing (nudge nudge, wink wink, know what I mean?). That's greed and corruption, playing the system. I have the same feelings regarding spiking, where you are allowed to [-]claim[/-] work massive overtime for a couple of years, then base the pension off the artificially inflated pay. Pensions should be based off base pay. Again, gaming the system is the part that bothers me. It's wrong, those who do it know it's wrong, and if they disallowed it a lot of the resentment would be gone. IMHO.

 

[Westernskies]

This is a prime example of the worst kind of pension rip off. Laws need to change and new people need to be elected. Have you ever thought of running for a local office Westie? You're a smart guy and could work to make sure this never happens again. I doubt you'd want to do this, but you and your neighbors should support local politicians who will be change agents.

I'm on too many ignore lists to ever get elected.

 

[hakuna matata]

Very interesting! Thanks for the responses.

My wives pension is a small part of our retirement plan. But the bulk of our retirement is on our individual 401k plans. We both contribute the max each year to those. Her pension like SS is not something I use in my calculations. If they both occur we will be on a pretty good retirement but even if they both get cut or reduced we should be fine. I was just curious as to the issue and you guys have laid it out pretty well here.

According to her, in her pension plan she can't do many of the things attributed here such as doing overtime, etc to increase her pension. But I can see where someone padding or gaming the system that would/could create resentment.

For me, I made so much more in the private sector then I would have in the public sector that I never worried about the lack of a pension. I just put away my money as I knew I had to plan for myself. I know at her job most people only put the 8% mandated away, but she has put that away and as I mentioned the max under her 401k too. Is it unusual for a government agency to also have a 401k in addition to their retirement plan? I think her program is called deferred compensation but it seems to function like a 401k program--again this is seperate from her pension.

Again, thanks to all of you for your thoughts and comments.

 

[donheff]

Frankly, the way I see it, in an era of 17% real unemployment if someone wants to take a public pension, they should be creating a job opening for someone who needs it more. Double dipping like this may not directly cost the taxpayer more, but every extra unemployed person out there does cost us all in the form of unemployment benefits and other public assistance.

So from an overall public policy standpoint, I'd say if you want the pension, give your job to someone who needs it more and get one more person off the ranks of unemployment.

Fair enough but shouldn't that apply to a megacorp pensioner as well? Or to the guy with a big 401K? If you retire - stay retired and free up a job for someone else. Why does where a retiree goes to work make such a big difference? I don't mean to endorse pension ripoffs or old boy sweetheart deals - they are wrong for other reasons. I am simply talking about someone earning a pension, taking it and then going to work somewhere else (including a different state or fed job).

 

[DeborahB]

I'm just envious! I had a defined benefit plan and a 401k at several jobs, but the defined benefits did not add up to much. I took the money when I left (and rolled it into an IRA).

My last job - IT, I worked there 12 years, I got about $35K out of the defined benefit plan. Or I could have annuitized it and received ~$150 a month, maybe a bit more. I can't remember - anyhow not enough.

A lot of places have a system like my last job - the % they put in increases over time... so if you last 40 years for the same employer you do get more money. Most people these days don't stay with the same company that long.

Envy, not resentment, on my part!

OTOH I might not have learned as much about investing had I known there was a secure income stream coming.

 

[Westernskies]

Fair enough but shouldn't that apply to a megacorp pensioner as well? Or to the guy with a big 401K? If you retire - stay retired and free up a job for someone else. Why does where a retiree goes to work make such a big difference? I don't mean to endorse pension ripoffs or old boy sweetheart deals - they are wrong for other reasons. I am simply talking about someone earning a pension, taking it and then going to work somewhere else (including a different state or fed job).

Means testing for megacorp pensioner or the guy with a big 401K?

Agree with you regarding pension ripoffs or old boy sweetheart deals, but private sector jobs aren't being funded by taxpayers.

 

[ziggy29]

Fair enough but shouldn't that apply to a megacorp pensioner as well? Or to the guy with a big 401K? If you retire - stay retired and free up a job for someone else. Why does where a retiree goes to work make such a big difference? I don't mean to endorse pension ripoffs or old boy sweetheart deals - they are wrong for other reasons. I am simply talking about someone earning a pension, taking it and then going to work somewhere else (including a different state or fed job).

I'd say the difference is that the private sector has the fiduciary obligation to the shareholder or the owner of a privately held business (which is a big reason why private sector workers are being squeezed) whereas the government has the obligation to good public policy overall. Good public policy, IMO, would have as close to "full employment" as reasonably possible as one of its goals. And if someone is taking a pension, IMO they are saying they don't need the job any more and are willfully surrendering it. If the job is still necessary after someone retires from it, why not either fill it with someone who needs a job or promote people accordingly and create an entry level opening?

The same reasons many defenders of the "public sector deal" cite -- we don't exist for the profit motive but for the public good -- can also be applied here, and I think reducing unemployment is in the public good.

By the way -- I see nothing wrong with taking one pension and then moving on to a *different* job, public *or* private sector -- it's immediately turning around and keeping your old position as a consultant or contractor which fails the smell test. After all, most 40-year-olds with a military pension can't fully retire on it; certainly most of them will need to work for a few years somewhere else. In the private sector, if the shareholders and/or business owners are okay with it, it's their business. In the public sector, as a taxpayer it's partially my business as well.

It's really not a matter of taking public pensions away, but a matter of being smarter about how they are earned, how they are funded and protecting the taxpayers from excessive liability in case of pension shortfalls.

 

[Texas Proud]

Fair enough but shouldn't that apply to a megacorp pensioner as well? Or to the guy with a big 401K? If you retire - stay retired and free up a job for someone else. Why does where a retiree goes to work make such a big difference? I don't mean to endorse pension ripoffs or old boy sweetheart deals - they are wrong for other reasons. I am simply talking about someone earning a pension, taking it and then going to work somewhere else (including a different state or fed job).

If I work at mega... and retire with a pension... I can not go back to work at mega... or they stop paying the pension... (at least this was the rule at mine before they closed down the pension)...

I think it is the same for a BIL that recently retired with a pension...


So, no problem if a public employee retires and then goes back to work at someplace that is not associated with the pension... that is difficult if you are being paid from a state pension plan... that means no job that pays into that system...

Most of the examples given are people who worked, retired and are then working at the same place with the same job...


PS... my sister knew a guy who tripled dipped... but from what she said he did it was OK... he was in the AF for 20 years... retired and got a completly different job in the Fed gvmt... worked there for years and then got a job working where she did at a University... I always wondered why this guy was still working....