Should publicly funded pensions start later?

[kyounge1956]

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Originally Posted by clifp Remember it is the income the pension fund loses at 8% or 7.75% compounded at 8 years 60 to 52, plus the income from next years distributions compounded over 7 years etc. That is how I came up with the 21K+ in lost earnings. Now if we assume 0% percent earning than you are correct sometimes in the mid 80s the higher payments for a late retirement are more expensive than longer lower payments for early retirement. For simplicity lets just consider taking a pension at 52 at 34.5% of base vs taking it at age 60 at 46% of base. If we use the 7.75% assumed earnings rate my spreadsheet shows that a $25,000 pension started at age 52 will have cost the pension fund $332K+ in total distributions (200K) and lost income by age 60. The person who waited until age 60 will see a 33% increase pension to $33,333/year but with any reasonable interest the pension fund could easily pay the increase from the $332K that would have remained in the fund from the early retiree. In fact the difference in cost from the pension fund is huge at age 85 the early retiree cost the fund over $4 million in total distributions and lost income vs $870K for the pension taken at 60. Now you are correct that having older worker retire to be replaced by younger lower paid employees maybe helpful to the overall city budget. However, from viewpoint of the pension fund early retirees are extraordinarily expensive.

I finally had time to recreate my spreadsheet tonight. I used two actual pension estimates that were prepared by the retirement office. Both were done the same year, so they both assume the same base salary. One was for retirement at age 52, the other for continuing to work until age 57, then retiring. I calculated the annual and cumulative payments by the fund, assuming I retired at age 52. I compared this to retirement at age 57 and a rougher estimate for retirement at age 60. For these later retirements, I assumed I continued to contribute to the fund, using my actual salary, and including projected increases in the contribution rate next year and 2012. I also included the employer match, which I suspect you omitted. Before I added the employer match, my estimate of the accumulated non-paid pension, its earnings, employee contributions and their earnings was within a few thousand dollars of your ~$332K. The difference was because I used my estimated pension, which at age 52 would have started a bit higher than $25K, and I included the 1.5% compounding COLA on the pension. I don't know if you did or not. When I added the employer match to the spreadsheet, the accumulated excess at age 60 was significantly larger than your estimate of ~$332K.

The revised spreadsheet does not support my earlier thought that it would cost the pension fund less overall if I had retired at my earliest eligible age of 52. At age 57 or 60, the assumed 7.75% earnings on this accumulated excess are greater than the difference between the age 52 pension and the larger pension due at a later retirement date.

I then re-ran the spreadsheet using pensions calculated from my actual salary through date, and for the next few years using projected inflation rates I got from an informational presentation by our union during a recent vote on a tentative agreement for a contract extension. It turns out that the results are rather sensitive to inflation rates. If the CPI stays as low as projected until I retire, it's advantageous to the pension fund for me to delay, and even more so if I were willing to keep slogging away until age 60. But if the CPI were go back up to historic rates of 3.5% or so for the next several years, the COLA provision of the contract would raise my base salary enough that the difference between age 52 & age 57 pensions would exceed the assumed 7.75% earnings on the "cushion" of accumulated extra contributions and non-paid pension. It would take longer than my statistical life expectancy to wipe out the entire accumulated excess, but the higher the inflation, the bigger my starting pension and the faster the cushion gets wiped out.

Another factor that enters into this balance is the employee's number of years of service. I've been using 34.5% of my base salary for my pension at age 52, because when I was 52 I had 23 years of service. But the very earliest it's possible to retire from the City of Seattle is age 52 with 20 years of service. If I had been 3 years older when I was hired, I'd have hit that right on the nose. My pension would then have been 24% of base salary vs 50% at age 57 with 25 years. Even with inflation at 2% or less until age 57, the cushion would be exhausted by the time I was 71, which is well under my statistical life expectancy. I suspect that the outcome was also strongly influenced by the increased contributions. It's getting very late so I'm not going to investigate further right now, but I suspect that if the expected increase in contributions doesn't happen, or is delayed a few years, the balance would tip toward early retirement, because there would be a smaller amount of accumulated excess contributions.

I can't say as a general rule that early retirement would cost the pension system less, but I can say that this would happen under some circumstances. I haven't gone through the table and checked every possible combination. My guess is that if I did, I might find a few more spots where early retirement costs less than delaying. If there are fewer of these oddballs than the more expected outcomes where delaying retirement costs less, raising the minimum age might result in an overall savings in the Seattle pension system. But it's impossible to tell if this is true without checking, and it would be unwise to assume that raising the minimum age to receive benefits will result in savings for every pension system under all circumstances.

[FinanceDude]

Here's a cheery way to start the day...........

Super-sized pensions, and a doomsday scenario - The Red Tape Chronicles - msnbc.com

I realize this is not the norm, but its still a "wow" moment for me..........

[Texas Proud]

Quote:

Originally Posted by kyounge1956 I finally had time to recreate my spreadsheet tonight. I used two actual pension estimates that were prepared by the retirement office. Both were done the same year, so they both assume the same base salary. One was for retirement at age 52, the other for continuing to work until age 57, then retiring. I calculated the annual and cumulative payments by the fund, assuming I retired at age 52. I compared this to retirement at age 57 and a rougher estimate for retirement at age 60. For these later retirements, I assumed I continued to contribute to the fund, using my actual salary, and including projected increases in the contribution rate next year and 2012. I also included the employer match, which I suspect you omitted. Before I added the employer match, my estimate of the accumulated non-paid pension, its earnings, employee contributions and their earnings was within a few thousand dollars of your ~$332K. The difference was because I used my estimated pension, which at age 52 would have started a bit higher than $25K, and I included the 1.5% compounding COLA on the pension. I don't know if you did or not. When I added the employer match to the spreadsheet, the accumulated excess at age 60 was significantly larger than your estimate of ~$332K. The revised spreadsheet does not support my earlier thought that it would cost the pension fund less overall if I had retired at my earliest eligible age of 52. At age 57 or 60, the assumed 7.75% earnings on this accumulated excess are greater than the difference between the age 52 pension and the larger pension due at a later retirement date. I then re-ran the spreadsheet using pensions calculated from my actual salary through date, and for the next few years using projected inflation rates I got from an informational presentation by our union during a recent vote on a tentative agreement for a contract extension. It turns out that the results are rather sensitive to inflation rates. If the CPI stays as low as projected until I retire, it's advantageous to the pension fund for me to delay, and even more so if I were willing to keep slogging away until age 60. But if the CPI were go back up to historic rates of 3.5% or so for the next several years, the COLA provision of the contract would raise my base salary enough that the difference between age 52 & age 57 pensions would exceed the assumed 7.75% earnings on the "cushion" of accumulated extra contributions and non-paid pension. It would take longer than my statistical life expectancy to wipe out the entire accumulated excess, but the higher the inflation, the bigger my starting pension and the faster the cushion gets wiped out. Another factor that enters into this balance is the employee's number of years of service. I've been using 34.5% of my base salary for my pension at age 52, because when I was 52 I had 23 years of service. But the very earliest it's possible to retire from the City of Seattle is age 52 with 20 years of service. If I had been 3 years older when I was hired, I'd have hit that right on the nose. My pension would then have been 24% of base salary vs 50% at age 57 with 25 years. Even with inflation at 2% or less until age 57, the cushion would be exhausted by the time I was 71, which is well under my statistical life expectancy. I suspect that the outcome was also strongly influenced by the increased contributions. It's getting very late so I'm not going to investigate further right now, but I suspect that if the expected increase in contributions doesn't happen, or is delayed a few years, the balance would tip toward early retirement, because there would be a smaller amount of accumulated excess contributions. I can't say as a general rule that early retirement would cost the pension system less, but I can say that this would happen under some circumstances. I haven't gone through the table and checked every possible combination. My guess is that if I did, I might find a few more spots where early retirement costs less than delaying. If there are fewer of these oddballs than the more expected outcomes where delaying retirement costs less, raising the minimum age might result in an overall savings in the Seattle pension system. But it's impossible to tell if this is true without checking, and it would be unwise to assume that raising the minimum age to receive benefits will result in savings for every pension system under all circumstances.

A great analysis.... but it also misses the point that if you could not start your pension until you reached 60 and left employement at 52... they save a lot of money...

Since you did not put all numbers down... I will sum up your long post to say that if you worked from 52 to 60 the difference in the pension payouts is close enough to be a wash (some assumptions make it lower, some make it higher)...


Sorry to say, but with the long term budget issues etc. etc.... I think that the DB plan as some have it now is going the way of the Dodo bird.. will there still be a plan Yes... I think so... but not like before...

[kyounge1956]

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Originally Posted by Texas Proud A great analysis.... but it also misses the point that if you could not start your pension until you reached 60 and left employement at 52... they save a lot of money...

I think you just reinforced the point I've been making. Most employees are not going to leave employment at 52 if they can't draw a pension until 60, and any proposal which depends for success on the assumption that large numbers of employees will do so is IMO doomed to failure. There is no reason to suppose that employees would do that. They need either their pay or their pension to live on and are not going to give up the pay until they can draw the pension, unless forced to do so by the employer pursuing a policy of laying people off before eligibility. I am reasonably certain that for the employer to do so would be a form of illegal age discrimination.

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Since you did not put all numbers down... I will sum up your long post to say that if you worked from 52 to 60 the difference in the pension payouts is close enough to be a wash (some assumptions make it lower, some make it higher)...(snip)

Not a wash for me personally. In my own situation, unless the CPI jumps up to 8% or so right now, and stays at least that high until I retire, it is better for the pension fund if I delay my exit from the workforce. Unless inflation is that high, it will take longer than my statistical life expectancy to exhaust the "cushion". Luckily for the pension fund, I've already missed the boat for retiring at age 52.
Possibly a wash for the pension fund, depending on how many years of service a 52-year old employee typically has. Is that what you meant?

[Texas Proud]

Quote:

Originally Posted by kyounge1956 I think you just reinforced the point I've been making. Most employees are not going to leave employment at 52 if they can't draw a pension until 60, and any proposal which depends for success on the assumption that large numbers of employees will do so is IMO doomed to failure. There is no reason to suppose that employees would do that. They need either their pay or their pension to live on and are not going to give up the pay until they can draw the pension, unless forced to do so by the employer pursuing a policy of laying people off before eligibility. I am reasonably certain that for the employer to do so would be a form of illegal age discrimination. Not a wash for me personally. In my own situation, unless the CPI jumps up to 8% or so right now, and stays at least that high until I retire, it is better for the pension fund if I delay my exit from the workforce. Unless inflation is that high, it will take longer than my statistical life expectancy to exhaust the "cushion". Luckily for the pension fund, I've already missed the boat for retiring at age 52. Possibly a wash for the pension fund, depending on how many years of service a 52-year old employee typically has. Is that what you meant?

Maybe it is just me that read into your posts... but I still don't think you are getting my point... so I will try again....

Option 1... they start paying a pension to you at 52 at your then current number... say "X"... they then have to hire someone else to do the job you were doing... so that salary is going out the door in addition to your pension... and this new employee is also accruing a pension... now, total cost is 2.25 to 3 "X" ... maybe higher...

Option 2... not give you a pension until you reach 60 or even 62 (heck 66 like SS)... you then continue to work until then... and your pension goes up to 1.5 "X".... but total cost is cheaper than option 1...


I am not trying to figure out if your pension cost is a little bit more or less because you have to continue to work... the total cost of providing that service is reduced big time if you go option 2....

[kyounge1956]

Quote:

Originally Posted by Texas Proud Maybe it is just me that read into your posts... but I still don't think you are getting my point... so I will try again.... Option 1... they start paying a pension to you at 52 at your then current number... say "X"... they then have to hire someone else to do the job you were doing... so that salary is going out the door in addition to your pension... and this new employee is also accruing a pension... now, total cost is 2.25 to 3 "X" ... maybe higher... Option 2... not give you a pension until you reach 60 or even 62 (heck 66 like SS)... you then continue to work until then... and your pension goes up to 1.5 "X".... but total cost is cheaper than option 1...

Maybe I have been missing your point, but I think you are missing a piece of the puzzle, most likely because I have not mentioned it previously. It appears to me that your examples have both pensions and salaries coming directly out of the same budget. I think there are government employers that do things that way, but the City of Seattle isn't one of them. In Seattle, the pension fund is separate from the general budget. Money in the pension fund can, I believe, only be used to pay benefits (i.e. pensions, disability benefits, payments to beneficiaries, and refund of contributions to non-vested employees who leave City employment) and the costs of operating the pension fund itself, i.e. paying the actuaries, the administrator and, I think, the retirement system staff (I'm not sure if these last are on the City's payroll or the Retirement System's). Theoretically speaking, the City could move money from the pension fund to the regular budget by deducting the employee contribution from employees' paychecks but "forgetting" to put the money into the pension fund, or by withholding some of the employer match, but this would be a violation of both the ordinance that established the retirement system and the City's contracts with employee unions. Assuming no lawbreaking or breach of contract on the part of the City, my replacement's salary would be paid out of the general budget, and that's why I didn't include it when estimating the effect of changes in my retirement date on costs to the pension fund. Have I got your point now?

Quote:

I am not trying to figure out if your pension cost is a little bit more or less because you have to continue to work... the total cost of providing that service is reduced big time if you go option 2....

In your two options, you only included my replacement's salary in option 1, so it's not an apples-to-apples comparison. Including the replacement's salary, the two options are:

Option 1: Retire at age 52 and draw pension immediately. Cost to pension fund=X. Cost to City budget for replacement's salary=2.35X (based on today's starting salary for someone with my job title, adjusted backwards by the COLA adjustments since the year I was 52). Overall cost=3.35X

Option 2: Work additional 8 years, then retire. Including the effect of COLA adjustments on base salary, even with low inflation, if I continued to work until age 60, my starting pension would not be ~1.5X, it would be a little more than 1.93X (using my actual salary). So, for option 2, Cost to pension fund=1.93X. Cost to City budget for replacement's salary=2.35X, plus COLA adjustments to starting salary. Using the same low guess at future CPI which I used to estimate my pension at age 60, the replacement's starting salary would go up by 9.5% between now and when I'm 60. That would make the starting salary for my replacement 2.85x, and the overall cost 4.78X.

But this comparison doesn't really tell us the total cost of providing the service, because I can't think of any way even to guess at the total cost of my replacement over time. There may be statistics on how long employees stay with the City, and on what proportion of employees stay in the same position for their entire career, vs get promoted, vs make a lateral transfer, but I have no idea where to obtain the data even if it exists, and that's what I'd need to depict a replacement with a typical employment history with the City.

[kyounge1956]

Quote:

Originally Posted by FinanceDude Here's a cheery way to start the day........... Super-sized pensions, and a doomsday scenario - The Red Tape Chronicles - msnbc.com I realize this is not the norm, but its still a "wow" moment for me..........

If you realized it wasn't the norm, why did you even bring it up? Why are you grinding this guy's axe for him? This article is just more of the same blame-game—picking out the most egregious examples of spiking and other abuses that have already been hashed and re-hashed here and elsewhere, as if all pension systems allowed them, and all government employees took advantage of them to the max. I particularly resent this blanket accusation of dishonesty by government employees:

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...pension gamesmanship is routine around the country. (snip) “There's probably as many variations as you can imagine,” said Jack Dean, who runs the Pensiontsunami.com website. “Just when I think that I've heard something amazing, I'll hear something more amazing. It goes on everywhere across the country. It’s human nature; if you can figure out a way to inflate your pension, you are going to do it. … People who make a career of it are making out like bandits.” (bold added)

Jack Dean can speak for himself as to what he'd do—the only thing I've done to "inflate" my pension is to continue working longer! and what's his proposed solution? Change DB plans to defined contribution, which even he admits is a "meager replacement for a defined benefit plan". Don't even try to return less-affected systems to financial soundness, take everyone's pension away, whether their system is failing or not.

[Texas Proud]

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Originally Posted by kyounge1956 Maybe I have been missing your point, but I think you are missing a piece of the puzzle, most likely because I have not mentioned it previously. It appears to me that your examples have both pensions and salaries coming directly out of the same budget. I think there are government employers that do things that way, but the City of Seattle isn't one of them. In Seattle, the pension fund is separate from the general budget. Money in the pension fund can, I believe, only be used to pay benefits (i.e. pensions, disability benefits, payments to beneficiaries, and refund of contributions to non-vested employees who leave City employment) and the costs of operating the pension fund itself, i.e. paying the actuaries, the administrator and, I think, the retirement system staff (I'm not sure if these last are on the City's payroll or the Retirement System's). Theoretically speaking, the City could move money from the pension fund to the regular budget by deducting the employee contribution from employees' paychecks but "forgetting" to put the money into the pension fund, or by withholding some of the employer match, but this would be a violation of both the ordinance that established the retirement system and the City's contracts with employee unions. Assuming no lawbreaking or breach of contract on the part of the City, my replacement's salary would be paid out of the general budget, and that's why I didn't include it when estimating the effect of changes in my retirement date on costs to the pension fund. Have I got your point now? In your two options, you only included my replacement's salary in option 1, so it's not an apples-to-apples comparison. Including the replacement's salary, the two options are: Option 1: Retire at age 52 and draw pension immediately. Cost to pension fund=X. Cost to City budget for replacement's salary=2.35X (based on today's starting salary for someone with my job title, adjusted backwards by the COLA adjustments since the year I was 52). Overall cost=3.35X Option 2: Work additional 8 years, then retire. Including the effect of COLA adjustments on base salary, even with low inflation, if I continued to work until age 60, my starting pension would not be ~1.5X, it would be a little more than 1.93X (using my actual salary). So, for option 2, Cost to pension fund=1.93X. Cost to City budget for replacement's salary=2.35X, plus COLA adjustments to starting salary. Using the same low guess at future CPI which I used to estimate my pension at age 60, the replacement's starting salary would go up by 9.5% between now and when I'm 60. That would make the starting salary for my replacement 2.85x, and the overall cost 4.78X. But this comparison doesn't really tell us the total cost of providing the service, because I can't think of any way even to guess at the total cost of my replacement over time. There may be statistics on how long employees stay with the City, and on what proportion of employees stay in the same position for their entire career, vs get promoted, vs make a lateral transfer, but I have no idea where to obtain the data even if it exists, and that's what I'd need to depict a replacement with a typical employment history with the City.

I am not missing the point... but let's use your example... where do the funds come from for the general fund and the pension fund The taxpayer... me as a taxpayer would like (within reason) the lowest cost for services provided without something blowing up...

Again, using your funds... the pension money can not be used for general expenditures.... but if your pension fund gets low... they sure are supposed to use general funds to pay the pensions...


I am not to worried about the exact cost... that is why I am not trying to calculate... but I know that paying someone a pension starting at 52 and hiring someone else to do that job that will also have a pension that starts at 52 is more expensive in the long run...

[Texas Proud]

Quote:

Originally Posted by kyounge1956 If you realized it wasn't the norm, why did you even bring it up? Why are you grinding this guy's axe for him? This article is just more of the same blame-game—picking out the most egregious examples of spiking and other abuses that have already been hashed and re-hashed here and elsewhere, as if all pension systems allowed them, and all government employees took advantage of them to the max. I particularly resent this blanket accusation of dishonesty by government employees: Jack Dean can speak for himself as to what he'd do—the only thing I've done to "inflate" my pension is to continue working longer! and what's his proposed solution? Change DB plans to defined contribution, which even he admits is a "meager replacement for a defined benefit plan". Don't even try to return less-affected systems to financial soundness, take everyone's pension away, whether their system is failing or not.

I think you misread what 'we' are saying.... at least most of what I read in the various posts... nobody is saying to 'take away your pension'... what we are saying is not to give these kind of pensions going forward...

Anything will be a meager replacement for the bad examples given... because there is no way someone could get enough cash to buy an annuity at such a high level.... but for someone who worked basically in the same job for the basic same salary etc. etc.... the pension system in most places do not seem to be 'broken'... but the potential for them to break in the future is still there...

[wcv56]

Of interest I would say 80% of present civilian workers get no pensions other than 401K and social security and no health benefits other than medi care care now days. Maybe if they capped public workers at 30% max
and when 10 years of service is obtained they start putting into a matching 6 or 8% 401K like most of the civilian sector gets this could take off much of the burden
of future generations of tax payers.

Civilian sector people who get longevity raises for years of service does not equate
to any after service cost as they will get no pensions based on salary anyways so only cost is while the person works.
Exception would probably be given to military, police and firemen but maybe they should have to put 3% of pension back into system to help long term commitments and their much earlier retirement age then the 65 years old that SS provides for the general population. just a thought at this momet after reading a bit of this topic.

I have done contract work for last 25 years with 20 of it in war zones and have never been offered any type of pension other than 401K and much of the time no match of any %.

[clifp]

[QUOTE=kyounge1956;999433
The revised spreadsheet does not support my earlier thought that it would cost the pension fund less overall if I had retired at my earliest eligible age of 52.
[/QUOTE]

Ok now I really believe you are woman.. it is rare guy that would that post this.

Seriously thanks for doing this. I was going to do redo it, be there were things I just didn't know the employee match for instance. One of the surprising things which really hadn't occurred to me was the impact of higher inflation on the pension. In general in terms of real dollars I wouldn't expect a big change if both the pension and the wages had COLA provision. However, it is somewhat common for wages to have a COLA increase, and the pension to have a COLA lite provision. For instance some pension increase at less than the CPI e.g. COLA -1%. I suppose the other situation is that wages are frozen but pensions increase, which would make early retirement even more expensive for a pension fund. For instant Hawaii's the pension increases 2.0%/year regardless of inflation so the last couple of years salaries were decreased due to furloughs but the pension benefits increased despite no inflation.

Quote:

I can't say as a general rule that early retirement would cost the pension system less, but I can say that this would happen under some circumstances. I haven't gone through the table and checked every possible combination. My guess is that if I did, I might find a few more spots where early retirement costs less than delaying. If there are fewer of these oddballs than the more expected outcomes where delaying retirement costs less, raising the minimum age might result in an overall savings in the Seattle pension system. But it's impossible to tell if this is true without checking, and it would be unwise to assume that raising the minimum age to receive benefits will result in savings for every pension system under all circumstances.

I agree that there is such a wide variety of pension that you can't make a statement that is always true that early retirement is more expense for a pension fund. My reason for making the general case, is that typically when some one says the can collect a pension of say $4K a month at 65 or take a pension of 20% less 3200 at 55, when I put the number in an annuity calculator, the younger retiree requires a large annuity. A couple of FYIs a 4K/month cola-lite pension requires $1 million at age 65 that same $1 million would only buy a $2840/month pension for a 55 year old. The Seattle pension is somewhat unusual in that purchasing an annuity for a 52 years old at 34.5% base salary is less expensive than buying one for a 60 year old at 46%. Yet as we both calculated younger retiree is more expensive in most cases.

Which brings me to my larger point one of the fundamental problems with defined benefits pension and especially public pension is that the damn things have some many moving parts and are so complicated that is virtually impossible to know how much the they cost. I hate the lack of transparency. I can and have claimed they are severely underfunded, and cite studies saying the number is $1 trillion or $3 trillion, but the truth is I really don't know and I have my doubts that experts are that much smarter. I also believe that parties involved in managing pension have a vested interest in covering up the truth. The parties that have most to lose beneficiaries such as yourself, and taxpayers like both of us typically lack the time and/or expertise to really dig deep. We both spent a couple of hours playing with spreadsheet to arrive pretty decent answer about which cost more early or late retiring for the Seattle pension fund. However, the bigger and more important question at least for KYounger, is can I depend on the Seattle pension fund to fund my retirement? Sadly, I think the only honest answer is it depends.

I think Defined Contribution have many problems in providing a secure retirement, but the one huge advantage they have is transparency.

[ERD50]

Quote:

Originally Posted by kyounge1956 If you realized it wasn't the norm, why did you even bring it up? Why are you grinding this guy's ax for him?

I don't 'get' your response. Why does 'not being the norm' make it off-bounds for discussion? Examples like this are not unique, and to some extent they are a very real problem for the pensions systems, and therefore worthy of discussion. Should we pretend they don't exist to make you feel more 'comfortable'?

Now, if FD said that this was the norm, you'd have a right to be indignant. I think your anger is misplaced - get mad and try to make changes to the pension rules and people who support these actions like spiking. FD is just the messenger. How are these problems going to get fixed if we hide them under a bushel?

Quote:

I particularly resent this blanket accusation of dishonesty by government employees: Quote: It’s human nature; if you can figure out a way to inflate your pension, you are going to do it. … Jack Dean can speak for himself as to what he'd do—the only thing I've done to "inflate" my pension is to continue working longer!

You may not like it but he's right. I bet you go through your income taxes and take every legal deduction/credit you can, right? It is human nature to do so, and this is pretty much the same, it is playing by the rules. If the pension rules allow 'spiking' and other things, people will do them. Maybe spiking isn't available to you, but if it was, and you were offered a bunch of overtime in your final year, what would you do? Turn it down because you don't think it's right to get that extra pension, or would you take it? It would be easy to rationalize - 'hey, I'm working OT and getting paid for it and earning it, if those are the pension rules those are the pension rules.'

Again, I think your anger is misplaced.

edit/add: misplaced .... AND counterproductive. We SHOULD be bringing all these cases to light - they are all hurting the solvency of the pension systems to some degree. The more we shine a light on them, and the more we shout from the mountaintops and make people aware, the better the chance they will get fixed and improve the odds that YOUR pension will remain solvent. I honestly think you should be THANKING FinanceDude rather than beating up on him.


-ERD50

[kyounge1956]

Quote:

Originally Posted by Texas Proud I am not missing the point... but let's use your example... where do the funds come from for the general fund and the pension fund The taxpayer... me as a taxpayer would like (within reason) the lowest cost for services provided without something blowing up... Again, using your funds... the pension money can not be used for general expenditures.... but if your pension fund gets low... they sure are supposed to use general funds to pay the pensions...

You are correct that both the money going into the pension fund and the money in the general budget ultimately come from the taxpayers (except whatever fraction of the budget—unknown to me—comes from borrowing). If I understand the text of the pension ordinance, you are also correct that if the pension fund were unable to pay the promised benefits the shortfall would have to be made up from the general fund. That is why I hope that the change to the pension fund contribution rate, which doesn't require a tax increase, succeeds in putting the fund back on a sound financial footing.

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I am not to worried about the exact cost... that is why I am not trying to calculate... but I know that paying someone a pension starting at 52 and hiring someone else to do that job that will also have a pension that starts at 52 is more expensive in the long run...

But you have to calculate, otherwise you really don't know whether your conclusion is true or not. Until I did the math, I mistakenly thought early retirement would cost the pension fund less overall than delayed retirement. You have to do the math to know the cost of employees to the general fund over time. I don't have the data to do that second calculation. But without knowing both of those costs, and maybe others too, there is no way to know what combination of pay, pension, employee turnover etc actually results in the lowest total cost over time, for services provided by government.

[kyounge1956]

Quote:

Originally Posted by Texas Proud I think you misread what 'we' are saying.... at least most of what I read in the various posts... nobody is saying to 'take away your pension'... what we are saying is not to give these kind of pensions going forward... Anything will be a meager replacement for the bad examples given... because there is no way someone could get enough cash to buy an annuity at such a high level.... but for someone who worked basically in the same job for the basic same salary etc. etc.... the pension system in most places do not seem to be 'broken'... but the potential for them to break in the future is still there...

I recognize that you are not suggesting pension benefits be taken from people already retired, and I don't think the author of the article did either. IIRC you've also said you favor phasing in any changes so they have less effect on people close to retirement, but I'm not at all sure the author would agree. I get the impression he'd quite happily pull the pension rug out from under government employees only a few years from retirement.

When I wrote that the article advocates taking everyone's pension away, I was referring to current employees. I think it is accurate to say that the author of the article supports conversion of all public defined benefit pension systems to defined contribution, whether the system is fully funded or underfunded, whether it is basically sound or inherently unsustainable, whether it allows abuses or not. Probably there are some pension funds that are in such bad shape there is no real alternative but to shut them down, but there are others where it is at least possible that they can be put back in the black by internal remedies like contribution increases, changes to fund investment policies or the like. For those systems where recovery is possible, IMO that should be the goal. Don't shut down all DB systems because some of them were too far gone to be saved.

[kyounge1956]

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Originally Posted by ERD50 Quote: Originally Posted by kyounge1956 Quote: Originally Posted by FinanceDude Here's a cheery way to start the day........... Super-sized pensions, and a doomsday scenario - The Red Tape Chronicles - msnbc.com I realize this is not the norm, but its still a "wow" moment for me.......... If you realized it wasn't the norm, why did you even bring it up? Why are you grinding this guy's axe for him? This article is just more of the same blame-game—picking out the most egregious examples of spiking and other abuses that have already been hashed and re-hashed here and elsewhere, as if all pension systems allowed them, and all government employees took advantage of them to the max. I don't 'get' your response. Why does 'not being the norm' make it off-bounds for discussion? Examples like this are not unique, and to some extent they are a very real problem for the pensions systems, and therefore worthy of discussion. Should we pretend they don't exist to make you feel more 'comfortable'? Now, if FD said that this was the norm, you'd have a right to be indignant. I think your anger is misplaced - get mad and try to make changes to the pension rules and people who support these actions like spiking. FD is just the messenger. How are these problems going to get fixed if we hide them under a bushel?

I don't know why you don't get it, since I explained at length the last time you asked me. I object to the article's one-sided presentation of the issue and its depiction of extreme cases as typical.

You pointed out the last time this issue came up that I had nothing but anecdotes to support my position. What else does that article have, and why aren't you pointing out that it presents only anecdotes? Where is your demand to see the author's quintile data? Why aren't you asking what percentage of public retirees actually receive six-digit benefits or pensions larger than their last salary, or what percentage of retirement systems even permit spiking and other abuses, or what percentage of employees actually take advantage of those loopholes where they exist, or what proportion of underfunding is actually caused by this type of employee actions?

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Originally Posted by ERD50 Quote: Originally Posted by kyounge1956 I particularly resent this blanket accusation of dishonesty by government employees: Quote: It’s human nature; if you can figure out a way to inflate your pension, you are going to do it. … Jack Dean can speak for himself as to what he'd do—the only thing I've done to "inflate" my pension is to continue working longer! You may not like it but he's right. I bet you go through your income taxes and take every legal deduction/credit you can, right? It is human nature to do so, and this is pretty much the same, it is playing by the rules. If the pension rules allow 'spiking' and other things, people will do them. Maybe spiking isn't available to you, but if it was, and you were offered a bunch of overtime in your final year, what would you do? Turn it down because you don't think it's right to get that extra pension, or would you take it? It would be easy to rationalize - 'hey, I'm working OT and getting paid for it and earning it, if those are the pension rules those are the pension rules.'

If you assume that I favor utilizing every legal option that results in an increase to one's personal bottom line, maybe you don't recall my comments on this thread, or this one. And whatever you bet on how I do my taxes, you just lost. I don't pore over the tax code (or pay someone to do it for me) to find every last credit, exception, exemption and deduction for which I may be eligible, and I don't go out of my way to find opportunities to qualify for such things. Money is just not the overriding consideration to everyone that seems to be assumed by you and by the author of the article. Not everyone is willing to do practically anything that isn't illegal, in order to get more money.

Besides, the fact that something is legal doesn't make it right, and I try to do what's right, not what I can get away with. To answer your specific question, even if overtime would make my pension larger, I don't think I would take it. The reason I'm looking forward to retirement is basically that I'm burned out. I don't hate my job, or my boss, or my working conditions. I'm just tired. Working a lot of overtime would make that problem worse, and my pension will be adequate if I just keep working my regular hours. So I don't think I would do it (even if it were possible, which it isn't), but not mainly because I think it would be wrong, although I do think that.

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Again, I think your anger is misplaced. edit/add: misplaced .... AND counterproductive. We SHOULD be bringing all these cases to light - they are all hurting the solvency of the pension systems to some degree. The more we shine a light on them, and the more we shout from the mountaintops and make people aware, the better the chance they will get fixed and improve the odds that YOUR pension will remain solvent. I honestly think you should be THANKING FinanceDude rather than beating up on him. -ERD50

I would be much more inclined to thank FD if he had linked an article that included some constructive suggestions rather than one that is IMO nothing more than anti-pension propaganda. If one were to take this article at face value one would suppose that six figure pensions are commonplace, spiking and other abuses are the rule rather than the exception, that pension underfunding is caused by poorly designed systems that allow abuses and employees who take maximum advantage of them, and that the only possible solution to the problem is to eliminate DB plans altogether. I don't know if any of those things are true. I know they are not true for the one system I have any detailed knowledge of, and from my polls that they are not universal for the systems that other E-R members have knowledge of.

You asked earlier how pension problems will be solved if they are hidden under a bushel. They won't. But they won't get solved either if the causes of the problem are misidentified, and the problem depicted as insoluble, not worth solving or both, which is what this article does. It contributes absolutely nothing to keeping my pension fund solvent (since none of the abuses described in the article are permitted under our rules) and contributes everything to promoting the view that all public DB pensions are overgenerous and should be eliminated.

Now I'll tell you what I don't get. I don't get why I should let this type of disinformation go uncontested. I don't get why I should remain silent in the face of negative stereotyping aimed at me and other government employees. I don't get why I shouldn't object to this attack on the ability of my fellow employees to earn the same benefits I have. I don't get that at all.

[keegs]

k...simply how do you propose 23% of income continue to go to the top 1% with DB pensions like the one you described. ...how 1950's...

[ERD50]

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Originally Posted by kyounge1956 I don't know why you don't get it,... I object to the article's one-sided presentation of the issue and its depiction of extreme cases as typical.

I see a difference between "one sided" and presenting a particular event. If I read a news story about a fireman who is a murderer, I don't take that as a 'one sided' view of firemen. I don't see where these articles or posts are generalizing, they are pointing out an event.

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Where is your demand to see the author's quintile data?

Simply because I'm not trying to make the case that this is 'normal'. So I don't need any data. Just as I wouldn't need data on the % of fireman who commit murder. It doesn't change the fact that the event is what it is. To whatever extent it exists it should be eliminated. Surely you are not trying to say spiking (or other abuses) are OK if they only represent some small % of the total?

But you have been trying to make the case that public pensions aren't as good as people think. For that, you need data. Otherwise anecdote just gets compared to anecdote and nothing is learned.

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To answer your specific question, even if overtime would make my pension larger, I don't think I would take it.

OK, but given the opportunity, many would and do. And that leads to problems for pension funding.

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I would be much more inclined to thank FD if he had linked an article that included some constructive suggestions rather than one that is IMO nothing more than anti-pension propaganda. If one were to take this article at face value one would suppose that six figure pensions are commonplace, spiking and other abuses are the rule rather than the exception,...

Sorry, but I think it is you that is making this supposition. I'm not, and I think it would be silly to do so. Just like I would not assume that firemen commit more murders than average from a google search on the subject.

Face it, the article is about the FACT that many public pensions systems are in trouble. Of course they are going to list some of the problems. It's what journalists do, and in general I think they do a poor job, but I'll go so far as to say that article was way better than average in presenting information.

From time to time, us private sector people are told "If you think public pensions are so great, you had your chance. You made your bed, now sleep in it". Well, you chose the public sector, and you have to accept that some will lump you in with those receiving outrageous public pensions, so get used to it. Just like the vast majority of good cops have to deal with the bad image the few bad apple cops leave. What can one do, other than fight to get rid of the bad apples? Should good cops call for censorship of bad cop stories?

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Now I'll tell you what I don't get. I don't get why I should let this type of disinformation go uncontested. .... its depiction of extreme cases as typical. ...

Where is the disinformation in that article? Can you provide a quote? I thought it was reasonably balanced (giving some small allowance for the sorry state of journalism these days) - it points out these spiking problems, but also goes on to cover the more basic funding issues. Hey, a journalist needs a lead in, that's life. Just like I cringed when I saw another headline about the "zero pollution" electric car.

Here's a few lines (emphasis mine):

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As outrageous as those sunset stipends may seem, they are merely the most visible piece of what critics of generous government pensions say is a ticking time bomb of debt that is threatening to bankrupt a number of states by the end of the decade.

Doesn't "merely" and "piece" try to provide some perspective, and indicate it isn't 'typical'? There are basic funding problems with many public pensions. Isn't that a FACT?

I'm on your side in many ways. I just don't think getting upset at these stories helps your case. I think you can do better.


-ERD50

[GregLee]

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Originally Posted by ERD50 Quote: As outrageous as those sunset stipends may seem, they are merely the most visible piece of what critics of generous government pensions say ... Doesn't "merely" and "piece" try to provide some perspective, and indicate it isn't 'typical'?

It implies that the true situation is even worse than the examples given suggest.

[MichaelB]

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Originally Posted by kyounge1956 I would be much more inclined to thank FD if he had linked an article that included some constructive suggestions rather than one that is IMO nothing more than anti-pension propaganda. If one were to take this article at face value one would suppose that six figure pensions are commonplace, spiking and other abuses are the rule rather than the exception, that pension underfunding is caused by poorly designed systems that allow abuses and employees who take maximum advantage of them, and that the only possible solution to the problem is to eliminate DB plans altogether. I don't know if any of those things are true. I know they are not true for the one system I have any detailed knowledge of, and from my polls that they are not universal for the systems that other E-R members have knowledge of. You asked earlier how pension problems will be solved if they are hidden under a bushel. They won't. But they won't get solved either if the causes of the problem are misidentified, and the problem depicted as insoluble, not worth solving or both, which is what this article does. It contributes absolutely nothing to keeping my pension fund solvent (since none of the abuses described in the article are permitted under our rules) and contributes everything to promoting the view that all public DB pensions are overgenerous and should be eliminated. Now I'll tell you what I don't get. I don't get why I should let this type of disinformation go uncontested. I don't get why I should remain silent in the face of negative stereotyping aimed at me and other government employees. I don't get why I shouldn't object to this attack on the ability of my fellow employees to earn the same benefits I have. I don't get that at all.

Well said.

[Nords]

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Originally Posted by keegs k...simply how do you propose 23% of income continue to go to the top 1% with DB pensions like the one you described. ...how 1950's...

Should we be surprised that the rich have figured out ways to get richer?