Under funded pension plan tidal wave ...

[youbet]

I believe our government should operate with the same fiscal discipline that successful individuals exercise. In my household it means we don't spend what we don't have. Oh and we don't retire with '20 years in'.

Isn't the real issue for us private sector folks Fed gov't pensions and SS? With state, county and municipal pensions, eventually those that contributed to and earned the pensions are the ones that will get screwed. When the local gov't runs out of money in the fund, refuses to contribute more (common in Illinois where pension funding holidays are the norm) and simply stops paying.


With the fed employees, they'll always be paid because the fed gov't can simply "print" money through deficit spending. Private sector folks will pay the bill through taxes or inflation, whichever it takes.

 

[Texas Proud]

First of all, I don't know any public employees who retired after 20 years. The fiscal discipline you speak of would have been governments being responsible for their portion of money they were supposed to put into pensions yearly. Instead they took pension holidays and used the money for services, roads, bridges, what have you. That is why Illinois had an artificially low flat tax of 3% for years.

Fire and police do it all the time....

I met a few when a coworker's spouse was in LE.... some were pretty young....

 

[youbet]

Fire and police do it all the time....

I met a few when a coworker's spouse was in LE.... some were pretty young....

How about the military? And SS? It only takes 40 quarters to get SS for a worker. And a divorced spouse can collect SS if she/he was married ten years but never worked a minute or contributed a penny. What a ripoff!


And the MegaCorp I worked for offered vested pensions with ten years of service. That sucked! To say nothing of start-ups who offer stock packages to early-on employees who then become zillionaires after only a few years?


I tell ya, all this not having to work until FRA is killin' us!

 

[purplesky]

With all due respect- it is the height of simplicity
- Spend more than you take in and eventually your Greece. The only complexity are the poor retirees of Chicago, Detroit will and have fought for what is due them. There's a problem though...

Oh the municipality can say we agree to pay 95% of your pension but what happens when the populace up and moves... No income (tax base), no assets of note equals no pension. Simply put: Can you name one ghost town that is paying pensions?

I believe our government should operate with the same fiscal discipline that successful individuals exercise. In my household it means we don't spend what we don't have. Oh and we don't retire with '20 years in'.

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You are an individual and you can control your household. I do the same.

Its the "take in" part that gets complicated for large states like Illinois.
Many things have happened in our economy and society in the last 35 years that have helped us get to this bad fiscal place.
Its easy to point fingers now.

I just think comparing your own personal household budget to a State budget with millions of people involved is not realistic.

 

[mpeirce]

You are an individual and you can control your household. I do the same.

Its the "take in" part that gets complicated for large states like Illinois.
Many things have happened in our economy and society in the last 35 years that have helped us get to this bad fiscal place.
Its easy to point fingers now.

I just think comparing your own personal household budget to a State budget with millions of people involved is not realistic.

Of course it's different in lots of ways, but ultimately it comes down to will, personal or political.

Here in Ohio (not far from Illinois with much same the economic issues) the last governor was accumulating the largest deficits ever and had drawn down the "rainy day fund" to nothing. A new governor was elected who had quite different priorities. He eliminated the deficit and rebuilt the rainy day fund to around $2B.

It can be done, it just takes the will to do it.

 

[ziggy29]

First of all, I don't know any public employees who retired after 20 years.

It is common in the military. I started my IT career working for Lockheed in 1987. We had a LOT of folks there who enlisted out of high school, put in their 20, then retired and went to work for Lockheed while receiving a military pension as early as 38.

Some of them were actually "triple dipping" -- spent 20 in the service, then 10-20 as a Lockheed employee, then retired from Lockheed and stayed there as a contractor while taking in two pensions. (And they had a high hourly rate since they had no benefits, but they had plenty of retiree benefits.)

I don't blame anyone for doing anything legal that benefits them. And it's not clear to me that the taxpayer is worse off overall than if they stayed retired and let someone else have that job. If anything, it probably put them in a higher tax bracket and they paid more taxes.

 

[ripper1]

Of course it's different in lots of ways, but ultimately it comes down to will, personal or political.

Here in Ohio (not far from Illinois with much same the economic issues) the last governor was accumulating the largest deficits ever and had drawn down the "rainy day fund" to nothing. A new governor was elected who had quite different priorities. He eliminated the deficit and rebuilt the rainy day fund to around $2B.

It can be done, it just takes the will to do it.

Unfortunately the political will here in Illinois is non exist. They really only want to appease lobbyists and special interest groups that can line the pockets of their wealthy elite friends. I hope I didn't offend any of the moderators. I am referring to Illinois politicians only and not intending to offend any of the members of this distinguished panel.

 

[HFWR]

Unfortunately the political will here in Illinois is non exist. They really only want to appease lobbyists and special interest groups that can line the pockets of their wealthy elite friends.

Which they can spend after their sentences are up...

 

[youbet]

Which they can spend after their sentences are up...

Blagojavich was the worst of the pension fund plunderers. He just yesterday received a favorable court ruling regarding the beginning of the process to reduce his sentence.

 

[steelyman]

Since much of the discussion in this thread has centered on IL-specific issues and retirement income. I want to add one more thing I thought of this week.

IL has a flat tax, currently 3%. That IS spelled out in one of the Articles of the Constitution (the language used is "non-graduated rate").

One can think what they like of that but political stomping of feet is best taken outside, not on this forum, I imagine.

But my naive thought is that this would apply if taxation of retirement income were considered. Again, everyone is entitled to their personal opinion, of course.

 

[Texas Proud]

Since much of the discussion in this thread has centered on IL-specific issues and retirement income. I want to add one more thing I thought of this week.

IL has a flat tax, currently 3%. That IS spelled out in one of the Articles of the Constitution (the language used is "non-graduated rate").

One can think what they like of that but political stomping of feet is best taken outside, not on this forum, I imagine.

But my naive thought is that this would apply if taxation of retirement income were considered. Again, everyone is entitled to their personal opinion, of course.

Just curious as I do not know.... is this a flat tax RATE or flat tax?

IOW, are there exemptions and deductions.... like the first $10K or $30K is not taxed... and if you get $X per dependent off etc. etc.....

If so, then it is not really a flat tax.... as someone who makes under that level pays nothing and someone who pays over pays something... but, nobody would actually pay 3%.... some might get close, but never there...


OR, is the 3% paid from the first dollar... which would mean it really is a flat tax.... as everybody pays not matter what.... as an example, a sales tax is a flat tax as everybody pays it if you buy a taxable item (less any cheating).....

 

[steelyman]

All my files are currently packed away and in storage due to moving, but my recollection is that there are exemptions and so on.

There are plenty of Illini here, though, so they can provide better info than that.

 

[JoeWras]

$2125 exemption.

Even if retired, this may come into play if you have investment income. In the old days of high interest rates, Dad had to file. Last few years of microscopic interest rates -- he didn't have to file because non-retirement income was below the exemption number.

 

[Texas Proud]

$2125 exemption.

Even if retired, this may come into play if you have investment income. In the old days of high interest rates, Dad had to file. Last few years of microscopic interest rates -- he didn't have to file because non-retirement income was below the exemption number.

I would have thought there would be one, but DANG..... that is awfully low...

But then again, they exempt pensions (from earlier posts)....

 

[Greencheese]

Just curious as I do not know.... is this a flat tax RATE or flat tax?

IOW, are there exemptions and deductions.... like the first $10K or $30K is not taxed... and if you get $X per dependent off etc. etc.....

If so, then it is not really a flat tax.... as someone who makes under that level pays nothing and someone who pays over pays something... but, nobody would actually pay 3%.... some might get close, but never there...


OR, is the 3% paid from the first dollar... which would mean it really is a flat tax.... as everybody pays not matter what.... as an example, a sales tax is a flat tax as everybody pays it if you buy a taxable item (less any cheating).....

It was a flat tax based on 3% then raised to 5% for 3 years and now reset back to 3.75% of your earnings. Essentially its the # from the top of page 2 of your 1040 federal return and then you subtract dependents and a few other small random things that most people don't deal with. Afterwards you just take that number times 3.75% and you're done.

 

[ripper1]

Speaking of pension tidal waves the city of Chicago Pension Reform was struck down and ruled unconstitutional by a local judge and now will assuredly go to the Illinois Supreme Court where I believe it will also be shot down. Too many pension holidays by legislators there has come home to roost. Time to pay the piper. Let's start at the top with wealthy elite and corporations.

 

[Siestatime]

Speaking of pension tidal waves the city of Chicago Pension Reform was struck down and ruled unconstitutional by a local judge and now will assuredly go to the Illinois Supreme Court where I believe it will also be shot down. Too many pension holidays by legislators there has come home to roost. Time to pay the piper. Let's start at the top with wealthy elite and corporations.

1+. Seriously.


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[Sunset]

While planning retirement finances, I knew that Illinois wasn't going to tax my retirement income. But now, nine years into retirement, I'm finally realizing what an attractive situation this is for retirees. DW's pension = no state tax. My future MegaCorp pension = no state tax. My SS = no state tax. TIRA withdrawals = no state tax. Upcoming RMD's = no state tax. Roth conversions = no state tax. Etc.

I'm certainly not looking forward to anything that would change this situation, but sometimes it does seem too good to be true.

But FL and a bunch of other States have that plus zero tax on dividends, capital gains, earnings, or put another way: zero State tax....

 

[rayinpenn]

Before you plan your retirement in tax free Illinois I suggest you consider:

The most poorly funded state in America, Illinois only funds 43.4 percent of its pensions. It has an unfunded liability of $82.9 billion, with 20.7 percent going unfunded for each person. I suggest that money has to come from somewhere and it isn't rocket science.

1. Reduced and differed benefits
2. Higher taxes
3. Reduced services & layoffs


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[ripper1]

Before you plan your retirement in tax free Illinois I suggest you consider:

The most poorly funded state in America, Illinois only funds 43.4 percent of its pensions. It has an unfunded liability of $82.9 billion, with 20.7 percent going unfunded for each person. I suggest that money has to come from somewhere and it isn't rocket science.

1. Reduced and differed benefits
2. Higher taxes
3. Reduced services & layoffs


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As to your point 1: The court has spoken in plain language that legislators do not understand that benefits cannot be reduced. 2: Yes, higher taxes and let's start at the top with wealthy elite and corporate welfare. 3: I guess that is inevitable.

 

[steelyman]

I don't know if it got much airplay outside of IL, but one of the attorneys arguing on behalf of state employees who had filed suit to protect their benefits had an interesting point to make to the Supreme Court justices regarding the State's defense in the Pension Reform case.

He said the State was trying to use the Lizzie Borden defense: "I know I killed my parents, but have mercy on me. I'm an orphan."

 

[Texas Proud]

As to your point 1: The court has spoken in plain language that legislators do not understand that benefits cannot be reduced. 2: Yes, higher taxes and let's start at the top with wealthy elite and corporate welfare. 3: I guess that is inevitable.

The only problem with your #2 answer is that both of these can move much easier than the middle class...


So, unless there are benefits that exceed taxes paid, I would bet that would happen.... (note: benefits do not always mean money).

 

[ripper1]

Illinois also cut its income tax rate by 25% in January. So they don't have a leg to stand on with its police powers argument.

 

[Mulligan]

Before you plan your retirement in tax free Illinois I suggest you consider:

The most poorly funded state in America, Illinois only funds 43.4 percent of its pensions. It has an unfunded liability of $82.9 billion, with 20.7 percent going unfunded for each person. I suggest that money has to come from somewhere and it isn't rocket science.

1. Reduced and differed benefits
2. Higher taxes
3. Reduced services & layoffs


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My friend moved across the dirty old Mississippi to Illinois recently when he got married and was bragging about the 3k in state taxes he saved on his pension. Until he got his property tax statement and found it to be about $3k higher than his previous home in MO. The savings evaporated pretty quick....


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[rayinpenn]

In my humble opinion Illinois will find a way to reduce benefits in the years to come. It is inevitable as the spring, summer fall and winter. They are in too deep but there is one hope...

Freeze benefits and pray for inflation.


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