Risk Factor for Public Pensions?

[Tekward]

I know we discuss Social Security and discount the projected income to accommodate the risk. Have people with non-federal public pensions discounted further based upon the very shaky projections?

"Pension plans covering the employees of state and local governments are in trouble throughout the U.S. The California cities of San Bernardino, Stockton, and Vallejo filed pension-fueled bankruptcies in recent years. Illinois and New Jersey have become the poster states for public pension plan troubles, while Kentucky and Connecticut plans may be even more poorly funded."

Forbes Welcome


Where Are The Screaming Actuaries?

 

[Tekward]

A related article that is CALPERS specific. Note that the pain is planned for taxpayers and cities. No mention of pension haircuts.


"This is going to be pretty tough for a lot of cities," said Rudy Fischer, a council member in Pacific Grove, where pension costs are expected to soon consume as much as 30% of the general fund — up from 20% today. "We aren't able to do the sidewalk repairs and fix the street lights as much as we want to."


CalPERS may lower its return target; taxpayers may have to contribute more - LA Times

 

[nun]

No I am not worried about my state pension being cut as the recent reforms made have reduced benefits for new employees and protected the pensions of retirees and current employees. The state has also put legislation in place to make extra top up contributions to the plan with the goal of it being fully funded by 2030. It is currently 70% funded and rising.

 

[Tekward]

Ten states projected as "most likely to default."


https://www.nerdwallet.com/blog/cities/america-pension-crisis-2015/

 

[ziggy29]

It's possible, but more often than not, the "solution" isn't to stiff everyone collecting a pension but to create a "class system" where new hires and younger workers are going to bear the brunt of a much less generous deal than their parents and grandparents got. Like it or not, that's happening already in many other areas of the economy.

 

[eta2020]

I agree with Ziggy and Nun.

But if they will not cut 80k pension of Police Officer will they run and cut someones 20k Social Security?

 

[ziggy29]

But if they will not cut 80k pension of Police Officer will they run and cut someones 20k Social Security?

No politician would put their self in harm's way by trying to do that. Again, I doubt anyone over about 55 is in serious danger of getting their promises watered down. The young will have to endure most, if not all, of any reduction in future promises, whether from lower benefits, higher taxation while working or increased retirement age.

 

[utrecht]

When SS gets cut, Im sure it will be the same as the pension systems that are getting cut. Young people entering the workforce will have lower SS benefits to look forward to 40-50 years down the road, but I doubt people who have already paid into the system for 35+ years will take much of a hit at all.

 

[petershk]

When SS gets cut, Im sure it will be the same as the pension systems that are getting cut. Young people entering the workforce will have lower SS benefits to look forward to 40-50 years down the road, but I doubt people who have already paid into the system for 35+ years will take much of a hit at all.

I'm already 40, but most people I know (very unscientific ) pretty much expect no money from SS and no pensions from states and certainly not from private corporations. I myself run all retirement calculators with 0 SS payout.

That may shift back the other way but I think right now current retirees are largely expected to be the last group to benefit from those things.

Now... It's possible that's a function of age... Not sure what 30 year olds thought 40 years ago

Sent from my HTC One_M8 using Early Retirement Forum mobile app

 

[Greencheese]

For many states I don't think there will be a big problem with funding. But for states like Illinois that is experiencing population decline and net job losses year after year, when does it go from a slightly higher burden for all to a death spiral? Sure I can reluctantly tolerate another $200/year in taxes to get the finances in order but once the streets, lights, parks, etc... start to decline on top of my increased tax costs then what am I getting?

 

[fidler4]

They will cut those long before touching SS.
Maybe no surprise since many fireman or Police officers with High School education retire at 50 de facto multi millionaires

I would think all police officers and firefighters in California have a high school education.

 

[Youngster]

Tekward, thanks for the link. I find my state in the "A" category.

 

[Jpg1717]

I am a retired Firefighter ( college graduate),and not a millionaire. We earned our pensions ( two of my co-workers were burned to death fighting a fire last year).Eta 2020 -you should be more careful with your uninformed comments.

 

[Another Reader]

Maybe some of those police and firefighters are smarter that most university graduates.

The City of San Jose tried cutting public safety benefits. Several hundred police officers retired or moved on to other departments. Now San Jose is "The City with No Police Department." They can't even put together a full academy class.

And having sat on a civil service interview board for entry level firefighters, in my opinion the applicants are often far more capable and well rounded than the average college graduate.

 

[Youngster]

I know many firefighters and law enforcment personnel that are very intelligent. Regardless, they deserve the pesnions. I only wish I had been a firefighter.

 

[stepford]

I am a retired Firefighter ( college graduate),and not a millionaire. We earned our pensions ( two of my co-workers were burned to death fighting a fire last year).Eta 2020 -you should be more careful with your uninformed comments.

Did the rest of us not earn our pensions too? This tendency to split off public safety pensions or military pensions from criticism because uniform wearers are somehow more deserving just serves the divide-and-conquer strategy of those who'd like to see all pensions go away. If only public safety pensions remain they'll be that much easier to do away with.

Everyone who worked for a pension earned it.

 

[easysurfer]

For many states I don't think there will be a big problem with funding. But for states like Illinois that is experiencing population decline and net job losses year after year, when does it go from a slightly higher burden for all to a death spiral? Sure I can reluctantly tolerate another $200/year in taxes to get the finances in order but once the streets, lights, parks, etc... start to decline on top of my increased tax costs then what am I getting?

Not to mention lottery winnings not paid .

 

[M Paquette]

There are many risk factors for pensions, both public and private, as well as other forms of deferred compensation promised to employees in exchange for their services.

Unsubstantiated innuendo and hints of class warfare do not contribute to the discussion of this topic, however. Please do try to confine the discussion of risk factors to actual, documented risks.

Thank you for your time and attention to this matter.

 

[daylatedollarshort]

I don't have a crystal ball, but there are a lot more voters without public pensions than with public pensions, and will be a lot of voting seniors living on SS alone in the coming years, who may not be sympathetic to tax increases for other retirees with pensions who are making 4 times or more income.

I am not making a value judgement on whether this is right or wrong, but what I believe will logically happen, at least in California, where state supreme court judges are subject to voter approval, is that propositions will pass to increase pension cuts, and either the state supreme court judges will eventually uphold those cuts or get voted out of office. It has happened before in California with Rose Bird when her views on crime didn't mesh with the sentiments of the majority of voters during that era.

I think some tax increases could be kind of hidden and tolerated, but here eventually the pension shortfalls might be too extreme to hide from the voters and the taxes needed to cover then too high, and people like Chuck Reed, a big backer of pension reform, will start getting more and more followers.

 

[NW-Bound]

Here in AZ, the city of Phoenix has been trying to curb "pension spiking", where a retiree saves up sick leaves to the end to boost up his pension which is based on a few last year pays.

In a recent lawsuit, a judge ruled for the retirees, even though the city pointed out that there's no contract obligation to allow sick leaves in the pension formula. The judge said that it had been a de facto practice and could no longer be changed.

Besides sick leaves, the city has also made changes to remove calculation payouts received for unused vacation and car and cell phone allowances from the pension.

I did not know that car and cell phone allowances would be carried into retirement. Nice.

 

[rodi]

There are a lot of fixes that can be made to many public pension programs without eliminating the pension entirely. For example, fix it so that the pension is on BASE SALARY, and not gamed with OT etc. Make it an average of more than the last few years - say 5 or more... some are as little as last 2 years.

Here in San Diego they eliminated the pension for new city workers... what many voters didn't realize is that was MORE expensive for the city since they now had to pay in the employer side of SS taxes.

I'm not anti public pension (or private pension)... but I think that some people gaming the public pension system gives a bad name to all public pensioners... lets eliminate the means to game the system.

As far as firefighters and education, a friend is a firefighter here in San Diego. He has an undergraduate from Yale, MBA from Harvard, was a Navy Seal and worked for Goldman Sachs as an investment banker. He felt a calling to do public service. His family lives a middle class lifestyle... not nearly as posh as if he'd stayed on Wall Street. And he's a lot more educated than most folks I know. I don't think you can paint firefighters as uneducated.

Edited to add - looks like NW-Bound posted while I was writing this. Sounds like my fix wouldn't work in AZ...

 

[eta2020]

I don't have a crystal ball, but there are a lot more voters without public pensions than with public pensions, and will be a lot of voting seniors living on SS alone in the coming years, who may not be sympathetic to tax increases for other retirees with pensions who are making 4 times or more income.

Not 4 times but more like 8 times average SS payment.

Average SS benefit 16k a year average Southern California Firefighter benefit 130k a year retiring in 50s.

https://www.ssa.gov/news/press/basicfact.html
Newspaper probe alleges nepotism among L.A. firefighters

 

[ripper1]

I am a retired Firefighter ( college graduate),and not a millionaire. We earned our pensions ( two of my co-workers were burned to death fighting a fire last year).Eta 2020 -you should be more careful with your uninformed comments.

It is too bad, Jpg, but this misinformation is propaganda from right wing media and corporate interests.

 

[NW-Bound]

There are a lot of fixes that can be made to many public pension programs without eliminating the pension entirely. For example, fix it so that the pension is on BASE SALARY, and not gamed with OT etc. Make it an average of more than the last few years - say 5 or more... some are as little as last 2 years...

Edited to add - looks like NW-Bound posted while I was writing this. Sounds like my fix wouldn't work in AZ...

Nothing is as simple as we think, is it? Once people are given something, it is very difficult to take it back.

Hey, how the heck they were able to take away "file-and-suspend" with SS? Darn!

See how one can sue the state or city governments, but one cannot sue Uncle Sam.

 

[ripper1]

For many states I don't think there will be a big problem with funding. But for states like Illinois that is experiencing population decline and net job losses year after year, when does it go from a slightly higher burden for all to a death spiral? Sure I can reluctantly tolerate another $200/year in taxes to get the finances in order but once the streets, lights, parks, etc... start to decline on top of my increased tax costs then what am I getting?

Illinois needs to get its corporations off the dole and stop corporate welfare and they will be just fine. And if they are afraid they will pick up and leave....well...I don't think the grass is any greener on the other side.