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View Poll Results: Which? retirement withdrawal plan would you choose
Option 1..Max out DROP plan 8 20.00%
Option 2..Forget DROP 3 7.50%
Option 3..Combine the two 8 20.00%
Too complicated. I dont know. 21 52.50%
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Old 06-15-2017, 11:10 AM   #41
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I suspect your situation will be repeated many times and with much more dire consequences as governmental pensions set up years ago begin to fail. The issue(s) were not unknown IMO. It's just that they were rarely addressed and the can was kicked ever further down the road. Suddenly, "We have seen the future - and it doesn't work" could be the new mantra.

I hope it works out for you. It will NOT work out for some of the systems around the country IMO. We could talk about the "causes" all day long, but Porky would appear very soon.

My modest, non-COLAd pension was well enough funded by Megacorp to keep it quite solvent. I have no worries about it being "honored" in the future. It just won't go very far, especially as inflation heats up. Modest as it was, shortly before I left, Megacorp changed the pension system for "new" folks and for those not yet close (enough) to retirement. The effect was dramatic if you didn't have the right number of "points" just before the change became active. Had I not left early for other reasons, I would have (like the Dallas Municipal folks) left "early" just to lock in my modest pension before it became even more modest. YMMV
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Old 06-15-2017, 11:29 AM   #42
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I tried to update a thread but its too old. I started it in 2012 and have given a couple updates. Here is a link
Poll:Complicated retirement withdrawal options
I merged the threads to ensure the continuity of the topic.

You can post to an old thread. Below the reply window the is an "old thread warning", just click that you are aware and it posts like any other.
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Old 06-15-2017, 07:58 PM   #43
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I merged the threads to ensure the continuity of the topic.

You can post to an old thread. Below the reply window the is an "old thread warning", just click that you are aware and it posts like any other.
I clicked the button and it still said "This thread is more than 305 days old. You cant reply"...or something to that effect.
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Old 06-15-2017, 08:34 PM   #44
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I am sure that I don't understand the entirety of the problem but I have a philosophical question, if there are loses to a pension plan due to poor investment returns (or choices) who should bear the weight of the shortfall? Current participants, future participants, taxpayers, all of these? Are the plans just so poorly written as not to spell out the effects of poor returns on investments or was the political will (if I can ask that) just lacking? This must frighten anyone who has framed their retirement around a pension.

I guess it doesn't sound much different than the Social Security dilemma
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Old 06-15-2017, 08:53 PM   #45
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I think you left out an option (if it is available)....

Delay starting your pension as the drop program freezes your pension...

Now, this might not be an option since you say you are going to retire and you are not getting any more years of credit...


But my friend was talked into a drop program which was a bad decision... when he hit 20 years his pct X years went from something like 2.5 to 3.2... he plans to work another 5 years.... so he has frozen his pension at 20 years or 50% of his 'wage' when he could be at 66% if he had not signed for drop.... and that is for the rest of his life!!!
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Old 06-15-2017, 09:20 PM   #46
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Sorry, but I only got up to "raised retirement age to 58 from 50" and "4% COLA seems fair" and I couldn't go any further. As a private-sector employee my entire life, who will see a $17K per year NON-cola'd pension when I hit the age of 65, I can't ever seem to find much sympathy for my brethren in the public sector.
(BTW, "4% per year" is not a COLA - it is just gravy. Unless it's set to be equal to the actual inflation rate, then it shouldn't be called a COLA, IMO.)
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Old 06-15-2017, 09:22 PM   #47
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I think you left out an option (if it is available)....

Delay starting your pension as the drop program freezes your pension...

Now, this might not be an option since you say you are going to retire and you are not getting any more years of credit...


But my friend was talked into a drop program which was a bad decision... when he hit 20 years his pct X years went from something like 2.5 to 3.2... he plans to work another 5 years.... so he has frozen his pension at 20 years or 50% of his 'wage' when he could be at 66% if he had not signed for drop.... and that is for the rest of his life!!!
The point of DROP is when you join, you dont accumulate any more years of service even though you keep working, but you start having your pension check deposited into a savings account. His pension check will be lower than if he hadnt joined DROP but he will have a lump sum in his DROP acct that he wouldnt have if he hadnt joined. Its pretty easy to calculate a break even age depending on the interest rate.

The problem my friends have is that they did the calculations based on an interest rate that they were getting and ow that it had been lowered tremendously the break even age is now much lower than it was and most of them wouldve been better off never joining DROP at all depending on how long they live. Also, there's a chance that they will have to pay back some of the interest making the problem even worse.

Luckily, I anticipated this and didnt join DROP at all.
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Old 06-15-2017, 09:26 PM   #48
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Sorry, but I only got up to "raised retirement age to 58 from 50" and "4% COLA seems fair" and I couldn't go any further. As a private-sector employee my entire life, who will see a $17K per year NON-cola'd pension when I hit the age of 65, I can't ever seem to find much sympathy for my brethren in the public sector.
(BTW, "4% per year" is not a COLA - it is just gravy. Unless it's set to be equal to the actual inflation rate, then it shouldn't be called a COLA, IMO.)
Its 4% non-compounded. After 15 years, its at 2.5% and it continues to be lower percentage wise every year. The retirement age of 50 may seem low to you, but trust me it wouldnt if you put in 25-30 years of police or fire work. You have no idea how hard on the body it is.

Also, we dont get social security so the pension is not as great as it might sound. I bet if you add your $17K pension to your social security, it adds up to right around where most public pensions are.
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Old 06-15-2017, 11:34 PM   #49
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The point of DROP is when you join, you dont accumulate any more years of service even though you keep working, but you start having your pension check deposited into a savings account. His pension check will be lower than if he hadnt joined DROP but he will have a lump sum in his DROP acct that he wouldnt have if he hadnt joined. Its pretty easy to calculate a break even age depending on the interest rate.

The problem my friends have is that they did the calculations based on an interest rate that they were getting and ow that it had been lowered tremendously the break even age is now much lower than it was and most of them wouldve been better off never joining DROP at all depending on how long they live. Also, there's a chance that they will have to pay back some of the interest making the problem even worse.

Luckily, I anticipated this and didnt join DROP at all.

Yes, I know... but the city dangled the money in his face because they have a clause that increases the annual % for the DB after 20 years... the drop is not worth it... it might have been if he kept getting the 2.5 but I doubt it...

Now, he is single and he does not have to worry about leaving money for anybody so in the end it probably will not matter.... but it was not a good decision...


When one of my sisters retired my BIL took out a lump sum and she got a lower payment... DS now knows that was a bad decision as it was money that he spent on living large... but since he passed she can see all the financial shenanigans he was doing.... lucky for her she does have a good pension and was able to sell stuff and get out of it.... OH, and her savings have doubled (or more) since he died...

Just looked... savings has gone up over 4X...
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Old 06-16-2017, 05:36 AM   #50
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Its 4% non-compounded. After 15 years, its at 2.5% and it continues to be lower percentage wise every year. The retirement age of 50 may seem low to you, but trust me it wouldnt if you put in 25-30 years of police or fire work. You have no idea how hard on the body it is.

Also, we dont get social security so the pension is not as great as it might sound. I bet if you add your $17K pension to your social security, it adds up to right around where most public pensions are.


My understanding is most private sectors don't have pensions or if they are it's a DC pension of something like 3-4% salary per year.
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Old 06-16-2017, 08:32 AM   #51
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...
Also, we dont get social security so the pension is not as great as it might sound. I bet if you add your $17K pension to your social security, it adds up to right around where most public pensions are.
You (and your employer) also didn't pay into social security.

Gotta keep it apples-apples.

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Old 06-16-2017, 08:47 AM   #52
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To make matters worse, the City is of Dallas is in a world of hurt because people are retiring in droves right now to get out before the new rules kick in Sept 1st. Just about anyone over 50 is leaving and the dept is already understaffed by like 700 officers. They are struggling mightily to recruit people due to all of this mess.

The City of San Antonio is recruiting in Dallas using billboards like this on major Dallas highways.
San Antonio uses billboards, promise of 'strong pension' to recruit Dallas officers - Story | KDFW
Utrecht, honestly, to me this is shocking! I never thought something like this would happen in Dallas, of all places.

So glad that you planned ahead and will be able to make it through all these cutbacks without having to go back to work.

I don't know anything about pensions and DROPs, or I would chime in on that too. Just wanted to convey my amazement and best wishes to you concerning the situation there. I'm glad you got out before all this hit the fan.
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Old 06-17-2017, 07:30 AM   #53
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My understanding is most private sectors don't have pensions or if they are it's a DC pension of something like 3-4% salary per year.
This is a debate that comes up over and over regarding pensions. Most private sector employers contribute to your 401k and most private sectors positions pay better than similar public sector positions. Most public sector employees get a pension which is a benefit that brings the benefit package to a somewhat level playing ground and attracts people who are willing to dedicate their life to public service as opposed to chasing signing bonuses, 401k matching, severance packages ect. (Our health insurance sucks big time also).

This isnt a debate as to whether or not a person should have a pension. The issue is working 25+ years under the promise of certain benefits at retirement that are then taken away once you get there.

This pension fund was mismanaged by morons who didnt want to lower the DROP interest rate so they took risks at a level bordering on criminal activity (and there is an FBI investigation) in attempt make profits large enough to keep paying out the interest rate on total DROP balances what began to take over the fund. AT some point it was destined to come crashing down around them. At one point DROP balances made up over 50% of the total pension fund.

Not that you would really do this, but the pension board couldve put the entire $3.3 billion into Vanguard Wellington and sat back and drank coffee and we would be dancing in the streets right now instead of trying to keep the fund from imploding.

Many public pensions have ridiculous payouts, overtime spiking and other things that make them impossible to remain viable long term. My particular pension has none of that. All they had to do was lower the DROP interest to a reasonable level and make normal conservative investments and funding levels could sustain forever. It wouldnt have needed addition funding from the city. No extra taxes. No pension obligation bonds. Nothing. But they ruined it for everyone.
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Old 06-17-2017, 07:45 AM   #54
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You (and your employer) also didn't pay into social security.

Gotta keep it apples-apples.

-ERD50
True enough but I wonder if that guy contributed at all to the $17K yearly pension hes getting? I contributed 8.5% which is now going up to 13.5%

If I took the amount of my mine and the Citys pension contributions each year and invested it at 8% return over 25 years....I would end up with a total amount that I could withdraw 4% per year and it would be almost exactly what my pension amount is. So clearly this pension fund was sustainable long term if it was managed anywhere near responsibly.

Also, I wouldve been able to give my self a raise with inflation each year which I wont be getting now so I couldve done much much better investing that same amount of money on my own instead of getting a pension. Not too mention the fact that my personal returns over the last 25 years are higher than 8%.

I also wouldve been able to pass that account on to my heirs. With the pension, my wife will get 50% when I die and when she dies, the pension fund keeps the balance forever. As I said, at this point, it clearly wouldve been better to not have a pension and just been given the money instead of giving to the pension fund.

Im only listing all of that because people with high salaries during their lifetimes always seem to make these same argument about how pensions are unfair. Just give me the money and I would be happy to not have a pension.

The DROP program and the board members unwillingness to lower the interest rate brought the whole thing down.
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Old 06-17-2017, 08:36 AM   #55
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True enough but I wonder if that guy contributed at all to the $17K yearly pension hes getting? I contributed 8.5% which is now going up to 13.5%

If I took the amount of my mine and the Citys pension contributions each year and invested it at 8% return over 25 years....I would end up with a total amount that I could withdraw 4% per year and it would be almost exactly what my pension amount is. So clearly this pension fund was sustainable long term if it was managed anywhere near responsibly.

Also, I wouldve been able to give my self a raise with inflation each year which I wont be getting now so I couldve done much much better investing that same amount of money on my own instead of getting a pension. Not too mention the fact that my personal returns over the last 25 years are higher than 8%.

I also wouldve been able to pass that account on to my heirs. With the pension, my wife will get 50% when I die and when she dies, the pension fund keeps the balance forever. As I said, at this point, it clearly wouldve been better to not have a pension and just been given the money instead of giving to the pension fund.

Im only listing all of that because people with high salaries during their lifetimes always seem to make these same argument about how pensions are unfair. Just give me the money and I would be happy to not have a pension.

The DROP program and the board members unwillingness to lower the interest rate brought the whole thing down.


Some of the things you point out are the same or even worse with SS...

With the money invested in SS and invested like you mention I would have a higher 'pension' than what I will get from SS... some say much higher...

Now, DW will get 100% of mine when I die, but I would think there is an option that your DW would get 100% of yours... not as much as the 50% option, but I bet it is there...

The big difference is that SS does have a COLA.... but a number of the pensions that have problems also have a fake COLA where there are increases of specified amounts... but yea, my mom and two sisters are on pensions that do not have COLA of any kind....


Also, my heirs will not get any money left... SS will keep the money...
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Old 06-17-2017, 08:55 AM   #56
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The problem is that if my former employer and/or the Government gave everyone the money to invest on their own, 95%+ of them would spend/waste it instead of investing it and society would have to bail them all out in one way or another when they got old.
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Old 06-17-2017, 09:06 AM   #57
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Was Dallas in the news during the last couple years for pension problems?
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Old 06-17-2017, 09:17 AM   #58
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8-10% guaranteed interest?!?!?!

That scares me as I don't see how anybody can guarantee that return in today's or even tomorrow's anticipated environment. When I read that the first words that popped into my mind were Bernie Madoff.
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Old 06-17-2017, 10:17 AM   #59
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...
This isnt a debate as to whether or not a person should have a pension. The issue is working 25+ years under the promise of certain benefits at retirement that are then taken away once you get there. ....
And in my view, this is the problem with 'promises', and a reason why we should NOT have DB-style pensions.

How can anyone know (let alone the average Joe/Jane just starting out in a career and more interested/knowledgeable about their career than financials such as this) if that promise can be kept 25+ years down the road?

Was there an insurance policy to back up the promise, as there is on private pensions (which is ironic - the Feds require insurance on private pensions, but not public pensions!)?

My pension is backed by PBGC, but I can't be certain they could deliver. And I was 'promised' retiree health care, but the value of that promise has dropped a lot. But I have no recourse, it was just a promise. Sorry!

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Old 06-17-2017, 10:38 AM   #60
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And in my view, this is the problem with 'promises', and a reason why we should NOT have DB-style pensions.

How can anyone know (let alone the average Joe/Jane just starting out in a career and more interested/knowledgeable about their career than financials such as this) if that promise can be kept 25+ years down the road?

Was there an insurance policy to back up the promise, as there is on private pensions (which is ironic - the Feds require insurance on private pensions, but not public pensions!)?

My pension is backed by PBGC, but I can't be certain they could deliver. And I was 'promised' retiree health care, but the value of that promise has dropped a lot. But I have no recourse, it was just a promise. Sorry!

-ERD50

The Feds cannot require insurance to be on the public pensions.... separation of powers...

Which is also why they could not force them onto SS....


AND, I hope it is why the Feds will not bail any of them out with our money.... I would much rather they change the BK laws like they did with Puerto Rico and the investors take a hit... it will change what states have to pay in interest since investors will change how they look at those bonds, but that is the price of doing business...

BTW, I think only fools would invest in any Illinois debt right now... I just looked and none I saw were below investment grade... and the yield on some is below 5%....




Edit to add.... I agree that we should not have DB plans... I think all should be converted to DC plans... if they put in a reasonable amount of money then history has shown that there will be enough money to match the DB plan... the problem with the DB plan is many, including spiking, an unreasonable COLA, getting a high paid job at the end and the pension paying like you made that your whole life... but the worst is the gvmt not funding the pension at the correct level... if it were a DC plan all of these go away... there is not gaming the system.... you get what you EARNED over your career.... but that is why it will not happen...
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