Pandemic of pension woes is plaguing the nation (CNBC)

[ziggy29]

Quote:

Originally Posted by Mulligan Just a generalization, but I think people who work (ed) in private industry are a little more savvy to the expectation of possibly being "screwed over" sometime. Government workers tend to be more trusting of what is promised, thus more likely to get caught with their financial pants down. I know if my pension went "poof" today, I would have to go back to work full time again until God knows when.

I think this is probably right. A lot of people who chose government work specifically chose to sacrifice *some* earning potential for benefits and security, too. So pensions and retiree health insurance, among other things, may have been among the primary factors in choosing where to work.

[Texas Proud]

Quote:

Originally Posted by Katsmeow Because many people may have worked an entire career on the basis of receiving a pension and planned financially accordingly. To pull the rug out form under people at the end of the career is fundamentally unfair. It is one thing to change it going forward for new employees. It would be something else entirely to change it for those who perhaps worked in a field with a lower salary in part because of the pension plan.

I am not suggesting that the pension be pulled out from under them at the end of their career.... if they are there... then the pension they have earned to date should be honored... all of it...

But, say that I started to work at a job on Sept 30th... and on Oct 1st they changed the pension plan.... should I not have my pension plan changed just because I was 'promised' something better Sure, this is the extreme case... but I STARTED on the old pension plan and they should not pull the rug out from under me!!!! So, back it up one year.... can we change that person 5 years? 10 years? Where do we stop

That is why you make a change for everybody going forward.... again.. it changes NOTHING on what the person has already earned.... in the end, the long time employee should still be OK since he/she has a good number of years under the old pension....

Quote:

Originally Posted by Mulligan I agree with you Kat, and I am currently drawing a pension, so I have a bias toward that viewpoint. In referring to Texas's post he is correct, also. Just a generalization, but I think people who work (ed) in private industry are a little more savvy to the expectation of possibly being "screwed over" sometime. Government workers tend to be more trusting of what is promised, thus more likely to get caught with their financial pants down. I know if my pension went "poof" today, I would have to go back to work full time again until God knows when.

As my post above says, I am not for making people who currently receive a pension take it on the chin.... heck, even someone with many years under a current system might not get hit that hard with any change... I think that when someone puts a post down like I did they just jump to the opinion that we should just stop paying out pensions at all.... NO, that is not what I said or would want...


The other thing that some people don't seem to get is that if you can control the money, you have a decent chance of actually having MORE money than the pension (that is, unless the pension is SO good that it should not be there anyhow).... why just jump to the conclusion that the employee would be destitute

[Katsmeow]

Quote:

Originally Posted by Texas Proud As my post above says, I am not for making people who currently receive a pension take it on the chin.... heck, even someone with many years under a current system might not get hit that hard with any change... I think that when someone puts a post down like I did they just jump to the opinion that we should just stop paying out pensions at all.... NO, that is not what I said or would want... The other thing that some people don't seem to get is that if you can control the money, you have a decent chance of actually having MORE money than the pension (that is, unless the pension is SO good that it should not be there anyhow).... why just jump to the conclusion that the employee would be destitute

I don't really disagree much with what you say in this post. I think there are a variety of things companies can do. One option is to continue with the pension plan for people who were employed before X date and then do something difference people employed after that date (that is basically what DH's megacorp did - he was well within the group that continued on with the pension plan). Some places will additionally freeze pensions and not accrue any more after a certain date. In DH's case, his pension wasn't frozen. I think that freezing is more appropriate for people who have been there awhile but not those late in the career.

I do also agree that some people can do better investing the money themselves. However, I also think that the reality is that most people don't do better when given the choice to contribute to retirement plans versus receiving a traditional pension. Many people are just not going to contribute to the plan at all, or won't contribute enough, or are going to make bad investment choices. The thing about a traditional pension plan is that it is pretty painless. You don't have to do anything. You could paid $X and you get the pension if you stay a certain amount of time. It isn't like you would get paid a higher salary if you said you didn't want a pension. Essentially people are saved from themselves. It might be better for you personally to be paid more money and invest your money for retirement. But, for employees as a group I think they they as a group will end up with more retirement income with a traditional pension.

[Mulligan]

Quote:

Originally Posted by Texas Proud I am not suggesting that the pension be pulled out from under them at the end of their career.... if they are there... then the pension they have earned to date should be honored... all of it... But, say that I started to work at a job on Sept 30th... and on Oct 1st they changed the pension plan.... should I not have my pension plan changed just because I was 'promised' something better Sure, this is the extreme case... but I STARTED on the old pension plan and they should not pull the rug out from under me!!!! So, back it up one year.... can we change that person 5 years? 10 years? Where do we stop That is why you make a change for everybody going forward.... again.. it changes NOTHING on what the person has already earned.... in the end, the long time employee should still be OK since he/she has a good number of years under the old pension.... As my post above says, I am not for making people who currently receive a pension take it on the chin.... heck, even someone with many years under a current system might not get hit that hard with any change... I think that when someone puts a post down like I did they just jump to the opinion that we should just stop paying out pensions at all.... NO, that is not what I said or would want... The other thing that some people don't seem to get is that if you can control the money, you have a decent chance of actually having MORE money than the pension (that is, unless the pension is SO good that it should not be there anyhow).... why just jump to the conclusion that the employee would be destitute

I can only go with my experiences and who I know. But I don't know anyone who is retired or about to who have worked in our system that wouldn't be destitute shortly without their pension. All through our working lives in our system they clearly told you, that if you worked your 30 years, your take home retirement pay would equal your working check. 11 to now 14.5% was taken out and matched by employer over the career. Most people never really saved as that was what your pension contribution was for. Plus with no SS, and WEP even if you did, the pension was/is the retirement for most. Just to clarify, Texas, I am in agreement with you and never thought you were implying pensions should be cut. Being on this forum and reading about recent events concerning pension troubles have definitely opened my eyes, but I am past the point of doing anything about it except save a few extra bones and hope the system doesn't fail!

[Chuckanut]

Ideally, we would find a way to make pensions portable and protect what is earned from problems and decisions beyond the control of the worker. Until that time comes, the best thing is for the worker to get the cash and make one's own pension.

[Fermion]

On the other side of the argument, the money to replace what was not saved by the pensioner and entity they work for has to come from someone else. We don't know their situation either. Some bonds might have been held in a account that someone is relying on for retirement. A person with a small 401K or just SS might not be able to handle an increase in real estate taxes so that pensioners can be made completely whole. Fairness has to work both ways.

[steelyman]

Hmmm. The "entity they worked for" may have not saved, while the pensioners did (no choice).

[Fermion]

Quote:

Originally Posted by steelyman Hmmm. The "entity they worked for" may have not saved, while the pensioners did (no choice).

Certainly in some cases, although I question if enough was actually saved by either party. I think a common amount for a 401K match is 6% by the employee and a 3% or 6% match by the employer. This will not buy you a decent annuity at the end of 30 years of service for the company assuming a real return of 5% on your investments.

If the pension only required a similar amount from the pensioner, then it could be the plan was flawed from the start.

What did a typical pension take out of pay on the pensioner side? Was it something around 6% or closer to a realistic number, like 15%?

Ok I see a previous post that said 11% to 14.5% was the contribution amount, so this is getting more reasonable. It still doesn't compare to a person who saves 15% in a 401K and a further 6.4% in SS, ie 21.4%, which is almost double the lower end of the amount taken out of the pensioner paycheck.

[steelyman]

More than 6%.

Edit: there may be a confusion between "pension" and retirement account (like 401K). There was no match on the retirement account but contributions to be made on the pension plan. That's the issue.

[Fermion]

Quote:

Originally Posted by steelyman More than 6%. No match.

No match? The only money that has gone into the pension system is by the pensioners? Well there is your problem. Seems like there should have been a strike 20 or 30 years ago to fix this.

[steelyman]

I was incorrect/inexact in my prior post and have edited it.

[steelyman]

Here's my "takeaway" for the Young Dreamers out there: do fund your 401(k)s to the max and listen to the advice you find at places like here. I saved a stupid amount (like 50%) the last few years I was working and that's the reason I am annoyed (and not freaking out) over things like pensions. That money is yours and under your control.

Start saving now if you possibly can.

[samclem]

Quote:

Originally Posted by Chuckanut Ideally, we would find a way to make pensions portable and protect what is earned from problems and decisions beyond the control of the worker. Until that time comes, the best thing is for the worker to get the cash and make one's own pension.

Yep. Fully fund your 401K, take it with you as you move around, be sure to factor in the generosity of any employer match when selecting an employer, and if you want a monthly check, buy an annuity when you stop working. Make your own pension.

[pb4uski]

Quote:

Originally Posted by Chuckanut Ideally, we would find a way to make pensions portable and protect what is earned from problems and decisions beyond the control of the worker. ....

Yes, it is called a defined contribution plan. It is portable (you can roll it into your IRA after you terminate). It is protected from problems and decisions beyond the control of the worker because the worker controls it.

Now if we could just get people to make contributions to it and not treat it as a kitty for cars, boats, vacations, etc.......

[Walt34]

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Originally Posted by pb4uski Now if we could just get people to make contributions to it and not treat it as a kitty for cars, boats, vacations, etc.......

That is a huge issue for a lot of people. Every time some "crisis" comes up the only source of money they have is the 401(k) or whatever other funds they can get their hands on. My older sister used to manage a 457 account for a DC area county and that was a frequent occurrence that she spent a lot of time trying to talk people out of doing.

One young guy she worked with she had to almost literally drag him by the scruff of the neck down to the HR office to get him signed up for the company's 401(k). His prior retirement plan? "Win the lottery."

I suspect it will take an entire generation of people retiring with nothing but SS, or not even that, to get the generation behind them on board with planning for their own retirement.

[Chuckanut]

Quote:

Originally Posted by Fermion Ok I see a previous post that said 11% to 14.5% was the contribution amount, so this is getting more reasonable. It still doesn't compare to a person who saves 15% in a 401K and a further 6.4% in SS, ie 21.4%, which is almost double the lower end of the amount taken out of the pensioner paycheck.

Failure to add in the 6.4% in SS to the the 14.5% pension contribution makes an unfair comparison. It must be added to the pension saver's amount just as it was added to the 401K person who pays 15%. There are a few government institutions where employees do not pay SS tax, but they are an exception these days, IIRC.

[Fermion]

Quote:

Originally Posted by Chuckanut Failure to add in the 6.4% in SS to the the 14.5% pension contribution makes an unfair comparison. It must be added to the pension saver's amount just as it was added to the 401K person who pays 15%. There are a few government institutions where employees do not pay SS tax, but they are an exception these days, IIRC.

Why? In this thread people were saying all they had was their pension, they didn't have SS. I assumed that meant they didn't pay into SS.

[Mulligan]

Quote:

Originally Posted by Fermion Why? In this thread people were saying all they had was their pension, they didn't have SS. I assumed that meant they didn't pay into SS.

For me anyways with the system that contributes 14.5% and is matched 14.5%, I was not allowed to pay into SS. I have had various part time jobs and such over the years that have taken SS taxes. If I did not have a public pension I would be eligible for almost $500, but WEP knocks it down to a little over a $100. My system is probably pretty safe. They have an independent board that has the authority to assign mandatory contribution increases from both sides on a yearly basis without political influence to maintain system integrity. The last policy change was capping COLA to 2% fixed each year, so it wouldn't surprise me if things got bad the next next would be yearly multiplier reductions for incoming people if ever needed instead of increasing contribution rates. At some point it gets to high for both sides.

[pb4uski]

Quote:

Originally Posted by Walt34 ....I suspect it will take an entire generation of people retiring with nothing but SS, or not even that, to get the generation behind them on board with planning for their own retirement.

I agree. I think that we are the former and our kids may be the latter. At least based on DD, DS and some of my nephews.

[packrat44]

Quote:

Originally Posted by Walt34 One young guy she worked with she had to almost literally drag him by the scruff of the neck down to the HR office to get him signed up for the company's 401(k). His prior retirement plan? "Win the lottery." I suspect it will take an entire generation of people retiring with nothing but SS, or not even that, to get the generation behind them on board with planning for their own retirement.

Shortly after starting a new job about 30 years ago I had ask a co-worker if she and her husband invested for their retirement. The answer was to the affirmative. She said every payday they took $20, drove to the state line of a nearby state and purchased power-ball lottery tickets. She was stone sober serious this was a viable retirement plan.