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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%
Voters: 40. You may not vote on this poll

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Old 06-17-2017, 09:33 PM   #61
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Originally Posted by Texas Proud View Post
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...
Or they could just stop doing all of those things and there would be nothing wrong with DB plans. There's nothing wrong with DB plans in theory. There's just too much cheating and / or corruption going on from both sides. The biggest benefit to a DB plan IMO is that if its run properly you should be able receive more money while alive because you will get nothing when no longer alive.

In other words, you can safely collect a bigger pension check than you would be able to safely withdraw from your DC plan because you dont have to worry about running out of money. Plenty enough people die young and never collect anywhere near the amount of money that they put in and that offsets for people who live very long.
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Old 06-17-2017, 09:43 PM   #62
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Originally Posted by utrecht View Post
The biggest benefit to a DB plan IMO is that if its run properly you should be able receive more money while alive because you will get nothing when no longer alive.
.
Though you can get the same thing with a DC plan and an annuity. I don't think it's any more logical for employers to be involved with paying retirement income than it is for them to be involved with health insurance. They should stick to making widgets.
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Old 06-18-2017, 02:23 AM   #63
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Interesting thread. I didn't realize at first that it was an old thread and the issues with the Dallas Pension certainly has created a lot of turmoil https://www.dallasnews.com/news/dall...ges-stillahead The pension problem is bad across the US https://www.forbes.com/sites/andrewb.../#7508ee1b157f The lawsuit outcomes and resulting actions are interesting to me because of current proposals to change/cut federal employee benefits--any changes have historically been applied to only new employees but who knows what the future may hold. Private pensions are covered by the Pension Benefit Guaranty Corporation (PBGC), which is an independent federal agency. Per Wikipedia:
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In fiscal year 2015, PBGC paid $5.6 billion in benefits to participants of failed single-employer pension plans. That year, 69 single-employer pension plans failed. PBGC paid $103 million in financial assistance to 57 multiemployer pension plans. The agency's deficit increased to $76 billion. It has a total of $164 billion in obligations and $88 billion in assets.
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Old 06-18-2017, 07:11 AM   #64
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Private pensions are covered by the Pension Benefit Guaranty Corporation (PBGC), which is an independent federal agency. Per Wikipedia:
Not all private pensions from how I understand it. Only ones that pay into the PBGC.

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Originally Posted by utrecht View Post

In other words, you can safely collect a bigger pension check than you would be able to safely withdraw from your DC plan because you dont have to worry about running out of money. Plenty enough people die young and never collect anywhere near the amount of money that they put in and that offsets for people who live very long.
When running a DB plan, companies use actuarial analysis to determine how much to fund the plan and invest it. They make educated estimates of what they will have to payout and over what time frames. So all these pensioners that die young are already accounted for.

I keep hearing how we are all going to live longer. DBP will be in problems as I'd expect that pension plans have not increased required assets to account for this decades in advance.
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Old 06-18-2017, 08:43 AM   #65
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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.
I'm sorry for your personal distress -- my mom lives on a city pension my dad earned and I'm very concerned it could be damaged someday -- but comparing what one could have had if they'd been invested with what what one should get from a defined benefit program isn't an appropriate comparison here anymore than when discussing SS or immediate annuities.

Everyone loves to play the upside of the "what if I was invested?" game but you can here crickets when the markets are in the teeth of a big bear and people are curled up in the warm embrace of guarantees. When Mr. Bear comes along, people take to the TV to excortiate the notion of "invested" social security (and rightly so in my opinion).

Risk, reward and volatility are related. You can't have equity returns, guaranteed payouts and no volatility during hard times. Not gonna happen and a better societal mix of socialized guarantees and personal investing would be better for everyone IMHO. (The evolution of the 401k from a pension supplement to the main retirement savings vehicle has been as much of a disaster as the evolution of SS from "supplemental" to people thinking they can simply retire on it.)

That's not to say these things can't be better managed by all parties.

Public unions need to stop demanding impossible payouts. No doubt being a cop/firefighter is really hard, and thank you for doing that, but we just can't afford for people (incl teachers, etc) to retire at 50...we need to find a way to rotate them into another productive service and have them continue to contribute both financially and practically. This same physical stress issue applies in many jobs. I was watching an older construction worker slamming a pick into some concrete the other day. He had my sympathy for sure.

Cities and politicians need to stop promising impossible results with no accountability (I know, a dog sees a fire hydrant...). The populace bears responsibility as we've also demanded high quality city services without always a willingness to pay the piper. Like every other job in the world, without the promised compensation, talented people would choose other careers. Good policing requires good people. Cut the pension and then pay cops $85k per year or get worse cops.

Finally, the actuaries who audit these things need to start screaming from the roof tops. Enron was a a failed Christmas club account compared to what's going on here. I participate in a "guaranteed" 529 program ... but I read the actuary report every year to ensure they're not living beyond the guarantees.

In truth, this is not fixable at this point. A lot of pain is imminent.

I don't have a pension and yes, at this point in my life, a higher income makes it easier to save. Flip side of that is the 25 years I've spent crawling the megacorp ladder and squirreling away nuts. It's the squirreling that creates comfort more than the income. Millions on high income people are SOL b/c they ate all they earned.

Again, I'm glad you personally will be ok, but I do think it's important to have these discussions. Thanks for posting your situation and having the discussion.
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Old 06-18-2017, 09:04 AM   #66
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True enough but I wonder if that guy contributed at all to the $17K yearly pension hes getting? ....
Yes, he did. But not in a way that you see in a financial statement.

Picture Company A that on average offers $100,000/year for a certain level job, and they offer a pension.

If Company B wants to attract those same people, but offers no pension, they will need to offer more than $100,000 to be competitive with Company A. That's just how markets work.

So yes, he did contribute to his pension with a reduction in salary.

-ERD50
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Old 06-18-2017, 09:32 AM   #67
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Originally Posted by samclem
Though you can get the same thing with a DC plan and an annuity. I don't think it's any more logical for employers to be involved with paying retirement income than it is for them to be involved with health insurance. They should stick to making widgets.

+1
Employers are already paying into SS and DC plans. That should be enough
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Old 06-18-2017, 07:02 PM   #68
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Yes, he did. But not in a way that you see in a financial statement.

Picture Company A that on average offers $100,000/year for a certain level job, and they offer a pension.

If Company B wants to attract those same people, but offers no pension, they will need to offer more than $100,000 to be competitive with Company A. That's just how markets work.

So yes, he did contribute to his pension with a reduction in salary.

-ERD50
Dallas PD pays considerable less than the 15 or so departments in the DFW metroplex. They've always still attracted people because its a big city with lots of opportunities and they've always offered an excellent pension. That's how markets work.

Except now, people worked for 25+ years at a lower salary are now getting a good portion of their pension benefits yanked out from underneath them.
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Old 06-18-2017, 09:54 PM   #69
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Dallas PD pays considerable less than the 15 or so departments in the DFW metroplex. They've always still attracted people because its a big city with lots of opportunities and they've always offered an excellent pension. That's how markets work.

Except now, people worked for 25+ years at a lower salary are now getting a good portion of their pension benefits yanked out from underneath them.
I don't know the full details and history behind the Dallas PD pensions, I'm just offering up a counterpoint to some specific statements that were made.

And it is a bad situation when someone is counting on a pension, and 'stuff happens'. It's why I said earlier in this thread (and previously over the years), that I wish these sorts of promises were never made. There are just too many ways they can be broken, and people get hurt.

I hope something works out in this case, for all involved.

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Old 06-18-2017, 10:10 PM   #70
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You may want to check out the Dallas Police and Fireman's pension DROP plan. Been renegotiated due to its viability. Bad management took some risky bets that really put the hurt on them.
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Old 06-19-2017, 08:12 AM   #71
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You may want to check out the Dallas Police and Fireman's pension DROP plan. Been renegotiated due to its viability. Bad management took some risky bets that really put the hurt on them.
I may want to check it out? What do you think Ive been talking about this entire time...for 5 years now?
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