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Old 01-11-2009, 07:44 AM   #61
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Originally Posted by leftbucket View Post
Soup and pasadena,

From one youngun to others...

Just curious, but have you considered getting a job with a solid
pension? That seems to be what you're looking for. (Soup,
I think you said your job had a pension, but you don't
expect it to be around...)

I preach the virtues of pensions to anyone who'll listen, but
it seems like everyone I talk to under the age of 50 could care
less. You guys are reading this site, so I'm assuming you're
more interested in the subject. Just about every private
sector job has some kind of corollary in the public sector.
So I'd like to hear your experience, what's holding you back
from making the switch?

-LB
Much to my surprise, I have stumbled into a job that offers a pension that I know without any doubt the employer will be around to pay. So rooty-toot. Its an undeniably good thing, but there are two main wrinkles:

1) It is entirely possible that any employer offering a pension changesthe rules mid-game. Curtailments walk among us.

2) For me to be able to get anything from the plan,I'd have to stay here at least 15 years. Considering I have never stayed anywhere in my career longer than 3.5 years, its hard to take any comfort in the idea of the pension.

So I certainly like the idea and I will likely take into consideration the possibility of a pension before I make any moves from now on, its not an ideal solution for many of us.
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Old 01-11-2009, 07:51 AM   #62
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I'd be willing to donate a kidney for some good investment advice
Your kidney might be the best investment of all!

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Old 01-11-2009, 11:38 AM   #63
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Quote:
Originally Posted by leftbucket View Post
Soup and pasadena,

From one youngun to others...

Just curious, but have you considered getting a job with a solid
pension? That seems to be what you're looking for. (Soup,
I think you said your job had a pension, but you don't
expect it to be around...)

I preach the virtues of pensions to anyone who'll listen, but
it seems like everyone I talk to under the age of 50 could care
less. You guys are reading this site, so I'm assuming you're
more interested in the subject. Just about every private
sector job has some kind of corollary in the public sector.
So I'd like to hear your experience, what's holding you back
from making the switch?

-LB
Hey LB, I may come across like a worry-wart and potential organ-for-cash donor but I actually do work for a government job in California which has a DB pension plan. Since its a public office with many of its benefits written into law, its about as secure a pension as you can get these days. My conservative estimate is that if my salary increases only 3% a year for the next 30 years, I will retire early at age 58 with an annual payment of 100K with COLA and free health care. If I can live another 20 years, the DB pension will be worth about 2.5M conservatively, if I can live longer even more.

You will not find any disagreement about public service from me. Yes, you will not get paid the supposed market average for your job versus the private sector, but the benefits and DB pension cannot be beat. Many offices have 9/80 or 4/40 schedules, 20+ PTO days off per year (to start), paid health coverage for family dependents, etc.

LB, maybe I'm just being greedy. My goal in 30 years is to have 2M worth in my DB pension (looking good), 2M in my 457/401K plans (hmmm) and 2M in RE through my primary residence or cash-flow properties. Its a long time horizon and much can change but that's what I'm looking for.
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Old 01-11-2009, 12:47 PM   #64
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Chapter 2: The Dawn of Social Security 1935-1954
"Living Large on a $1 a day in America in your Golden Years"

Perform mind numbing tedious task for 5 1/2 days a week. Get sick, die; collect Social security. The brilliance behind the Social Security system was when it was first implemented on average men died before collecting.
clifp - minor point overall, but this is so oft repeated (and misleading), that I thought I'd straighten it out. That statistic is based on life expectancy at birth, which is far different from life expectancy of someone who has been in the work force until age 65 (and survived childhood diseases).

Life Expectancy for Social Security
Quote:
... the average life expectancy at age 65 (i.e., the number of years a person could be expected to receive unreduced Social Security retirement benefits) has increased a modest 5 years (on average) since 1940. So, for example, men attaining 65 in 1990 can expect to live for 15.3 years compared to 12.7 years for men attaining 65 back in 1940.

Number of Americans Age 65 or Older

1940 9.0 million

2000 34.9 million
only about 4x the number of people above 65 in 2000 than in 1940. That was less than I would have guessed.

-ERD50
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Old 01-11-2009, 02:01 PM   #65
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Interesting discussion.

I have only a little bit of RE experience, mostly buying terrible looking logged over plots from small loggers who needed to turn it for working capital, cleaning it up with a bulldozer short-platting and reselling to someone who wanted to build a house. Worked out fine, but you sure don't do it from your home office. Also, these people are smarter now.

As for putting aside enough money from saving from a normal job to achieve a reasonable retirement swag by middle age, I can't see it with today's interest rates unless you reach out to risk. Maybe by trading enjoyment in your youth and prime years for earlier retirement it might be possible. This would be such a stinky bargain for me that I never considered it.

If you are entreprenurial and can get a business going that might really fly that is likely the best way.

But for for someone who is more analytical than entreprenurial, I'd say a pretty agressive equity investment program is likely best much of the time. It should be opportunistic, such that one always compares returns likely to be achieved in different areas and with different vehicles.

From my POV the last 10 years have definitively proven that an unchanging allocation to equity index funds is a loser. It makes no sense to ignore valuation, or to be so agnostic about valuation that you cannot say, "this is likely a good investment at this time". or "I think this is overpriced, I will pass for now."

I know some recently have decided to go to equity allocations that are so small that 3-4 years ago I don't think they would have been put forward on this board.

IMO, if you are going to use stocks, use a good slug of them now. We can't know the future, but we can see that for the most part equities got pretty cheap last November, and some of them at least are still pretty cheap. If we say "what about 1929-'32, or "what about Japan", all I can answer is plan to keep working, or alternatively wait until you are comfortable again and buy some high priced stocks. Then experience a crash, then keep working.

In investing, comfort is expensive.

Ha
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Old 01-11-2009, 05:35 PM   #66
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Quote:
Originally Posted by leftbucket View Post
Soup and pasadena,

From one youngun to others...



I preach the virtues of pensions to anyone who'll listen, but
it seems like everyone I talk to under the age of 50 could care
less. You guys are reading this site, so I'm assuming you're
more interested in the subject. Just about every private
sector job has some kind of corollary in the public sector.
So I'd like to hear your experience, what's holding you back
from making the switch?

-LB
Quote:
PasadenaDC
Hey LB, I may come across like a worry-wart and potential organ-for-cash donor but I actually do work for a government job in California which has a DB pension plan. Since its a public office with many of its benefits written into law, its about as secure a pension as you can get these days. My conservative estimate is that if my salary increases only 3% a year for the next 30 years, I will retire early at age 58 with an annual payment of 100K with COLA and free health care. If I can live another 20 years, the DB pension will be worth about 2.5M conservatively, if I can live longer even more.

You will not find any disagreement about public service from me. Yes, you will not get paid the supposed market average for your job versus the private sector, but the benefits and DB pension cannot be beat. Many offices have 9/80 or 4/40 schedules, 20+ PTO days off per year (to start), paid health coverage for family dependents, etc.

LB, maybe I'm just being greedy. My goal in 30 years is to have 2M worth in my DB pension (looking good), 2M in my 457/401K plans (hmmm) and 2M in RE through my primary residence or cash-flow properties. Its a long time horizon and much can change but that's what I'm looking for.
I'm not sure if I should be encourage that young(er) people are smart enough to figure out what wonderful gravy train public pensions are; or depressed that these lucrative state and local defined benefits pensions are going to bankrupt us.

I think the legacy costs we are seeing for the Detroit 3, are a sneak preview of what we will be seeing for most state and local governments in the not too distance future. Federal pensions are in somewhat a better financial shape and generally less generous (except for military) than state and local pensions.

California is basically bankrupt. The yields on my long-term CA Muni bond (which I bought a decade ago when I was a resident) are over 6% roughly twice a comparable treasury bill for good reasons. Prop 13 demonstrates the taxpayers in the state will and can revolt. So while the pension benefits are probably mostly written into law that can change. In fact, I argue they must change.

No criticism intended PasadenaDC but it seems crazy that a relatively secure job (that doesn't require risking bodily injury or death) should let somebody work for 30 years and than enable them to retire for another 20 and more likely 30 years at a salary close to 100K a year.

In a wired global economy, why can't your job be outsourced to India at fraction of the price? I think it very smart for you also to plan on real estate and investment for your future retirement. Because I think as society we are going to have to accept that we will either be saving more, or working more, or consuming less. The smart hard working folks in India, and China and the rest of the developing countries, aren't going to let us do anything different.
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Old 01-11-2009, 05:42 PM   #67
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I'm not saying everyone should but anyone with reasonable business skills CAN do it. Your friends invested the same time I did. The difference is that I did not "jump" into multiple properties. I'd guess they bought in a new development that had no rental history and did not have a fixed mortgage and were counting on short term appreciation. I bought in an established area with mortgages I could afford and where I knew the rental market. I have not had a day of vacancy and rents are stable plus as a bonus I'm up almost $400K.

Now if you go to your spouse saying "little Billy won't stop using my best 9 iron to bang on my porsche" then you probably shouldn't be a landlord. You probably shouldn't have kids either but I don't see anyone advocating that here. YMMV
I usually tell little Billy to use the sand wedge for this.
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Old 01-11-2009, 05:50 PM   #68
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I usually tell little Billy to use the sand wedge for this.
Crowbar is even better.
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Old 01-11-2009, 05:52 PM   #69
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I usually tell little Billy to use the sand wedge for this.
I thinking maybe you'll be changing your name to bestEXwifeever. And have full custody of little Billy!
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Old 01-11-2009, 05:58 PM   #70
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I thinking maybe you'll be changing your name to bestEXwifeever.
It's my sand wedge, I can have little Billy bludgeon my car with it if I want to!
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Old 01-11-2009, 06:14 PM   #71
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I'm not sure if I should be encourage that young(er) people are smart enough to figure out what wonderful gravy train public pensions are; or depressed that these lucrative state and local defined benefits pensions are going to bankrupt us.

I think the legacy costs we are seeing for the Detroit 3, are a sneak preview of what we will be seeing for most state and local governments in the not too distance future. Federal pensions are in somewhat a better financial shape and generally less generous (except for military) than state and local pensions.

California is basically bankrupt. The yields on my long-term CA Muni bond (which I bought a decade ago when I was a resident) are over 6% roughly twice a comparable treasury bill for good reasons. Prop 13 demonstrates the taxpayers in the state will and can revolt. So while the pension benefits are probably mostly written into law that can change. In fact, I argue they must change.

No criticism intended PasadenaDC but it seems crazy that a relatively secure job (that doesn't require risking bodily injury or death) should let somebody work for 30 years and than enable them to retire for another 20 and more likely 30 years at a salary close to 100K a year.

In a wired global economy, why can't your job be outsourced to India at fraction of the price? I think it very smart for you also to plan on real estate and investment for your future retirement. Because I think as society we are going to have to accept that we will either be saving more, or working more, or consuming less. The smart hard working folks in India, and China and the rest of the developing countries, aren't going to let us do anything different.
Good points clifp, however I wouldn't get too hung up on 100K number. Depending on how your project inflation, we're looking at 45-50 grand in today's dollars and purchasing power. The State is technically bankrupt due to its budget needing to be balanced each and every year versus Federal which can just print more money and find foreign buyers on it. But the coffers of CALPERS and CALSTRS are both solvent and depending on which actuarial report you read above 80% funded toward future liability, even after the market's recent poor performance.

Prop 13 was a 1% cap on property taxes, no? How does this relate to DB pension plans and the State where almost 250,000 Californians work? I guess that it is possible that some of these city, state, municpal jobs are shipped overseas but can't say that this scenario seems very realistic. General and safety members alike.

All entitlement programs can and will change, which is why I always encourage fellow DB pension plan participants to setup other investment vehicles to fund their respective retirement coffers. Based on my understanding of DB plans, the biggest threat to their longevity isn't the PO'd taxpayer, but rather rampant inflation and managing spiraling health care costs. These are the two biggest threats not only to DB plan participants but anyone looking for ER as a whole.
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Old 01-12-2009, 07:57 AM   #72
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Among the students I know from my undergrad, we have all changed jobs at least once, and some will be on job #3 when they get out of graduate school.

I haven't figured out exactly what the solution is, but right now I am thinking of something like a modified Wellesley allocation (35/65):

35% dividend stocks
30% government, mortgage, corporate bonds
25% TIPS
10% junk bonds
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Old 01-12-2009, 07:02 PM   #73
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Clifp-

I really think the actual pensions are not the problem so much as pension
fraud and healthcare benefits. Multipliers can be changed, age qualifiers
modified, and new tiers created, but you really can't make up for years
that you never funded the system. Nor can you realistically promise
to pay for healthcare benefits for life when you have no control over
the cost of those benefits. Generally speaking, public pensions in
right to work states that typically provide no healthcare promises
are in pretty good shape, even now.

As far as Generation Y and later figuring out about the great deal
public pensions are, from my experience, you needn't worry.
Almost no one of the younger generation cares. The "young
dreamers" section of the ER forum is the extreme minority.
I'm concerned that if no one in this generation of workers cares
enough, eventually, this good thing will be lost.

-LB
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Old 01-12-2009, 10:23 PM   #74
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As far as Generation Y and later figuring out about the great deal public pensions are, from my experience, you needn't worry.
Almost no one of the younger generation cares. The "young
dreamers" section of the ER forum is the extreme minority.
I'm concerned that if no one in this generation of workers cares
enough, eventually, this good thing will be lost.

-LB
I weep bitter tears to hear of this.
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Old 01-12-2009, 10:53 PM   #75
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Among the students I know from my undergrad, we have all changed jobs at least once, and some will be on job #3 when they get out of graduate school.

I haven't figured out exactly what the solution is, but right now I am thinking of something like a modified Wellesley allocation (35/65):

35% dividend stocks
30% government, mortgage, corporate bonds
25% TIPS
10% junk bonds
Did you look at your company's pension plan in detail? If it's a cash balance plan, then you can get the vested balance when you leave.
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Old 01-12-2009, 11:14 PM   #76
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Clifp-



As far as Generation Y and later figuring out about the great deal
public pensions are, from my experience, you needn't worry.
Almost no one of the younger generation cares. The "young
dreamers" section of the ER forum is the extreme minority.
I'm concerned that if no one in this generation of workers cares
enough, eventually, this good thing will be lost.

-LB
Hum, I guess you are right that Young Dreamers are minority among minorities. Still I am concerned that we are in for a conflict, when the "I don't need to save for retirement cause I got a government pension" public employees meets the "hell no we want pay taxpayers", a minor revolt could break out. Hopefully, I'll be dead by then.
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