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Old 03-10-2010, 10:33 AM   #21
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(snip) The other issue that I always have with these articles is the utter uselessness of them given the large number of defined benefit setups out there. Not a lot in private practice any more, but there are huge numbers of government employees that might be quite well prepared for retirement with less than $50k in cash depending on benefits, prepaying mortgages, etc. (snip)
I haven't read the original article yet—it may well be as useless as you think, but if so, I doubt that it's because it failed to take public pension systems into account.

I'm an employee of my local city government who will be receiving a DB pension, and $50K of retirement savings in addition to even my maximum possible benefit would be totally inadequate. I keep hearing about these gold-plated public-employee pensions that pay as much after retirement as was earned before, with full COLA and subsidized medical insurance on top of that, but I certainly don't have that sort of a pension coming, and I wonder how many public employees actually do. Don't get me wrong, I'm extremely glad I will have that pension coming, because without it I'd probably never be able to retire at all, because I procrastinated so long before I got serious about saving. But even if I stick around for the maximum benefit at 30 years of service, it won't cover all my expenses, even to start off with, it isn't fully COLA'd, and it doesn't include medical insurance. And my expenses are not that high—I'm single, will be debt-free, will relocate to a lower-cost-of-living area at retirement, and don't plan any expensive pursuits like world travel.
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Old 03-12-2010, 04:08 PM   #22
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I wonder how many public employees actually do. Don't get me wrong, I'm extremely glad I will have that pension coming, because without it I'd probably never be able to retire at all, because I procrastinated so long before I got serious about saving. But even if I stick around for the maximum benefit at 30 years of service, it won't cover all my expenses, even to start off with, it isn't fully COLA'd, and it doesn't include medical insurance.
Should've started service in another city.

Houston has the this pension annuity:

https://login.hmeps.org/WebBenefitCa...y_Service.aspx

So, 30 years, with a final average pay of $60,000, comes to $53,000 at age 55 (if starting at age 25). Medical is offered at the same group rate that the city employees pay. It is COLA'ed but only when the fund can sustain the increased payout.

That's a lot better than non-pension people can do, even when figuring the increased pay that private sector employees make. Of course, you have to stick with an employer for 25 years.
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Old 03-12-2010, 04:52 PM   #23
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Medical is offered at the same group rate that the city employees pay.
Is that for life? I thought all city employees had the same health plan and there were different rates for active and retired. HPD allows an exchange of accumulated time to create a bank that is used to pay health care in retirement, at the active employee rate, but that is limited to 5-years.
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Old 03-12-2010, 05:06 PM   #24
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Is that for life? I thought all city employees had the same health plan and there were different rates for active and retired. HPD allows an exchange of accumulated time to create a bank that is used to pay health care in retirement, at the active employee rate, but that is limited to 5-years.
You're correct; my mistake. There are different rates for active and retiree. It looks like retirees pay ~4.5x what active employees pay. The HMO retiree contribution (the PPO is more for both groups) for those <65 is ~$150/month.

It appears to be for life. The 5 year "bank" may be only for the top-up.


I should add that new Houston employees have a lower, tiered, payout percentage.
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Old 03-13-2010, 05:02 AM   #25
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Originally Posted by eridanus View Post
Should've started service in another city.

Houston has the this pension annuity:

https://login.hmeps.org/WebBenefitCa...y_Service.aspx

So, 30 years, with a final average pay of $60,000, comes to $53,000 at age 55 (if starting at age 25). Medical is offered at the same group rate that the city employees pay. It is COLA'ed but only when the fund can sustain the increased payout.
That sounds like a pretty good deal, but I'd have to move to Texas

The Houston calculator wouldn't let me in, so I put the same parameters in the calculator for my system. With 30 years of service and $60K earnings, my pension would be $36K/year, partially COLA'd. For those who retire before Medicare eligiblity, retiree medical coverage is available (at I think lower rates than in the open market but more than employees pay).

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That's a lot better than non-pension people can do, even when figuring the increased pay that private sector employees make. Of course, you have to stick with an employer for 25 years.
I wonder...City employees here pay 8.03% of our paycheck into the pension system, with an equal amount added by employer, and IIRC this amount is considered to grow at 5% annually (for purposes of calculating a lump sum amount for some of the payout options). Right now my accumulated contributions amount to between $155 & $160K. With that kind of money, could I buy an annuity that would pay the same as my pension does? Is my pension really better than other people could do if they saved 8% as soon as hired, with an employer match (which I assume could be done in most 401k plans), or is it just better than most people actually do do, because they save too little, too late, and/or invest unwisely?
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Old 03-15-2010, 07:13 PM   #26
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I think the pension is better, because most people don't save that much. The pension forces them to do so. You can't stop saving when you want to buy a house, car, big screen TV, then neglect to start saving again. You also can't keep taking loans on your pension to buy new cars, vacations, and big screen tvs.

Best: you have the pension AND you make yourself save that kind of $.
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Old 03-15-2010, 07:42 PM   #27
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Should've started service in another city.

Houston has the this pension annuity:

https://login.hmeps.org/WebBenefitCa...y_Service.aspx

So, 30 years, with a final average pay of $60,000, comes to $53,000 at age 55 (if starting at age 25). Medical is offered at the same group rate that the city employees pay. It is COLA'ed but only when the fund can sustain the increased payout.

That's a lot better than non-pension people can do, even when figuring the increased pay that private sector employees make. Of course, you have to stick with an employer for 25 years.
To be fair now, many government employees do not get social security. So when comparing retirees compensation one might want to subtract what others could get through SS. It's still a sweet deal for government workers, just not as sweet as the above discussion seems.
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Old 03-15-2010, 08:06 PM   #28
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To be fair now, many government employees do not get social security. So when comparing retirees compensation one might want to subtract what others could get through SS. It's still a sweet deal for government workers, just not as sweet as the above discussion seems.
Good point. In this case, though, Houston municipal employees do pay into and receive Social Security. Houston's pension is certainly on the right side of the "pay-out" curve.

City's pension shortfall closer to $1.5 billion | Page 1 | Chron.com - Houston Chronicle

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In theory, options include cutting other parts of the city budget, ending or modifying the pension program for new employees, reducing health benefits for retirees or possibly making city employees pay more to stay in the pension program, if such an action is permitted under a recently adopted state constitutional amendment.
A sign of things to come.
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Old 03-15-2010, 10:53 PM   #29
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Most of us have struggled at some point in our lives with debt. We have allowed our budgets to spin out of control from time to time. It is obviously one of life’s experiences many of us have in common. But despite the commonality, this is one subject that is clearly not a popular topic for discussion. Men in particular tend to avoid talking about it.
I think men in general have trouble with anything that is laden with affect, that has possibilitites of guilt or regret or a shameful feeling that we are not fully in control.

Today I was walking along behind a couple of young women wearing super-tight jeans, just enjoying the way they walked. Then I tuned into their conversation. One was telling the other about how the guy she was dating seemed to have a lot of health issues, but that she thought he was not sick but just wanted to be mothered. I though to myself, if we men could be so frank about what is going on socially and emotionally we wouldn't get ourselves so tied in knots, or screw up our relationships so mightily.

Women seem to be more ok with the fact that they are not always in control, not always the best informed person in the room. They seem to understand better that long term positive results are often not the outcome of winning a lot of little skirmishes. At their best, they may be thinking generations into the future.

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Old 03-18-2010, 03:37 PM   #30
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I think men in general have trouble with anything that is laden with affect, that has possibilitites of guilt or regret or a shameful feeling that we are not fully in control.

Women seem to be more ok with the fact that they are not always in control, not always the best informed person in the room. They seem to understand better that long term positive results are often not the outcome of winning a lot of little skirmishes. At their best, they may be thinking generations into the future.
That's a gosh-darn astute observation. I can't claim to have chick-like zen, but I have learned the importance of knowing the difference between what I can control and what is beyond my control. Not that I always manage to suss it out before I have worked myself up into a state, as they say. But it does provide a easing of the mind when I go from "how can I control this" to "okay, how do I pick up the pieces after".
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You're correct; my mistake. There are different rates for active and retiree. It looks like retirees pay ~4.5x what active employees pay. The HMO retiree contribution (the PPO is more for both groups) for those <65 is ~$150/month

It appears to be for life. The 5 year "bank" may be only for the top-up.
Not a top up thing, just a PD thing. I don't know how long you've worked for the city, but every 5-7 years since I can remember it has changed its thinking about the accumulation of leave time. It goes from "Oh God, look at all that unfunded liability we'll have to pay out on retirements", to "We're understaffed and have no money, let's find a way to encourage employees to defer their leaves." It was department specific at times, so I think we wound up with our own unique situation.

I did just dodge a bullet on it all today. Payroll dude calls to say that with the new insurance rates going into effect 5/1 that I'll be out of it because of a $2 a month shortfall in the bank's payout rate. Which means no more employee rates, which equates to a bump in my monthly health insurance premiums of about 1500%. So, I'll drop the dental indemnity (no interest in the DHMO) and pay for our own dental care in the future. I figure I can get a hell of a lot of tooth fixing based on the money I'm saving on healthcare premiums.
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Old 03-18-2010, 09:23 PM   #31
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most of my co-workers claimed they were saving little if anything for retirement when the topic came up in conversation. They claimed their expenses were too high to save anything.

I tried to help a few of them "see the light" but I doubt that I had any effect.
What was their plan? Die in harness?
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Old 03-18-2010, 09:32 PM   #32
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What was their plan? Die in harness?
No plan! Just thinking day to day. Oh, and a lot of them seemed to think that they could probably survive on their FERS pension when the time came (this pension is only partially-COLA'd, 1%/year of service). These were not stupid people, either, so I just can't understand it.
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Old 03-19-2010, 05:27 AM   #33
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No plan! Just thinking day to day. Oh, and a lot of them seemed to think that they could probably survive on their FERS pension when the time came (this pension is only partially-COLA'd, 1%/year of service). These were not stupid people, either, so I just can't understand it.
DW has a SIL like that; she just won't think about the numbers. Her thoughts on retirement are "Well, we'll have his National Guard pension". Sure. That will buy groceries if they live on rice & beans.

Another favorite line when her income dropped substantially because of the recession: "Well, he'll just have to work more overtime."

It didn't occur to her to make any effort to reduce spending, like maybe not buy another new car this year to replace the two-year-old one that was running fine. And at the moment they're on a trip to FL because "We needed to get to warmer weather".

Drives DW nuts!
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Old 03-19-2010, 10:24 AM   #34
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Lest it be thought that this is purely an American phenomenon, here's an article published yesterday that suggests many of us up North are also living in denial: "What level of pensions do Canadians really want?".

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Are Canadians willing to give up enough current consumption during their working lives to enjoy the level of consumption after retirement that is provided by a 60% or 70% pension? Their actions suggest they are not. This may be simply because they thought they were saving enough to meet this goal. Or it may be that conventional assumptions about the desired trade-off between consumption during working years and post-retirement consumption are wrong for many, or most, Canadians.
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Old 03-19-2010, 10:28 AM   #35
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No plan! Just thinking day to day. Oh, and a lot of them seemed to think that they could probably survive on their FERS pension when the time came (this pension is only partially-COLA'd, 1%/year of service).
You might have been able to do that with a CSRS pension, but I can't imagine doing that with a FERS pension. The FERS pension is probably the prime example of the "three legged stool" approach to retirement with pensions, personal savings and SS.
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Old 03-19-2010, 10:54 AM   #36
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You might have been able to do that with a CSRS pension, but I can't imagine doing that with a FERS pension. The FERS pension is probably the prime example of the "three legged stool" approach to retirement with pensions, personal savings and SS.
Exactly. These were all physicists and chemists, too, so if they bothered to read about their retirement thay would surely be able to comprehend that fact of life.

Some examples...

One of them is single, 38, drives a newish Corvette, and spends a lot. She is aggressively chasing a husband but requires her dates to be doctors or dentists so her retirement plan is the last thing on her mind. Or maybe that is her retirement plan.

Most were guys in their 50's or early 60's with stay-at-home wives who (according to them) spend a lot. Most recently finished putting their kids through college and have a long way to go in paying off the mortgage. They have between $0 - $50K saved but think that is OK because they like their jobs and have the tiny pension and SS coming.

One had a house destroyed by Katrina. Need I say more. Insurance paid about half what it cost to re-build, and that took years. So, she and her DH bought a second house in 2006 and are now saddled with both. Like many across the country these days, they are trying to sell but things are slow. Their two kids are on the verge of going off to college. Can we say $$$?

I could go on.... but you get the picture. "Life is what happens while you are making other plans." Though it may not sound like it I really care about these people and hope they work things out eventually.
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Old 03-19-2010, 04:41 PM   #37
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I can believe it. I have tried unsuccessfully to get my younger brother to start saving for retirement. He is 28 and I have tried to warn him that the sooner he starts the easier it will be. If he starts now then he will have compound interest working for him. He told me he doesn't plan on ever retiring, because he wants to spend it all now.
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Old 03-19-2010, 05:00 PM   #38
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I can believe it. I have tried unsuccessfully to get my younger brother to start saving for retirement. He is 28 and I have tried to warn him that the sooner he starts the easier it will be. If he starts now then he will have compound interest working for him. He told me he doesn't plan on ever retiring, because he wants to spend it all now.
Same story with my 2 younger sisters, and they are now aged 38 and 48. I know that the 38 yr old has a mortgage and no other debt, and no credit cards either, but they have no emergency savings to speak of and their mortgage is variable and she and her DH know they will be stretched if rates rise a lot. They also have an 11 year old daughter. The best they can foresee is to keep on working as long as they can and rely on the UK equivalent of SS when the time comes as our parents did. (Neither of them has a private pension of any sort).

I suspect that the older sister is in a similar position.
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Old 03-21-2010, 01:16 PM   #39
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guys in their 50's or early 60's with stay-at-home wives who (according to them) spend a lot.
Whose fault is that? If their wives spend more than they can afford, it is time for a serious chat.

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I really care about these people and hope they work things out eventually.
By the sounds of it, fat chance of that.
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