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.