Downshifting Life to Fastrack FIRE - Early 40's Corporate Lackies

[FinanceDude]

Quote:

Originally Posted by Milton clifp can speak for himself; but I suspect that he meant that it was outrageous that the elected politicians (who are ostensibly the guardians of the public purse) would offer/approve such a sweatheart pension. I didn't infer any criticism of flyfishnevada from his post.

Maybe the taxes the govt collects on casinos allows them to do this??

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It is a continuing mystery to many voters why public servants enjoy such good deals (job security, indexed pensions, decent salaries, handsome vacation entitlements, full benefits, etc.) relative to the private sector. As government deficits mount, I suspect that the situation will gradually change ... it is no longer sustainable.

It IS unsustainable, so all those folks that are govt employees close to the guaranteed pension ages and such should take a HARD look at ER because the benefits will be cut, and not just a little bit........

[donheff]

Quote:

Originally Posted by Milton It is a continuing mystery to many voters why public servants enjoy such good deals (job security, indexed pensions, decent salaries, handsome vacation entitlements, full benefits, etc.) relative to the private sector. As government deficits mount, I suspect that the situation will gradually change ... it is no longer sustainable.

I find it amusing that people find government benefits so mysterious. Al you need is a sense of history. When I entered the Federal Civil Service in 1974 the general perception was that Federal salaries were low relative to the private sector. The benefits were pretty good, but not great compared to big, stable corporations like IBM. By the 80's Feds were completely demonized. College recruiting was extremely difficult. I can remember kids asking why in the world they should consider a Federal career when they could make far more in the private sector. The Federal pension was viewed as pretty generous but also as "golden handcuffs" that forced civil servants to stay with the government once they had reached about a decade of Federal employment. The absence of a 401K plan and the lack of portability was viewed as a disincentive. The replacement FERS system combined Social Security, the TSP (a 401K look alike) and a substantially reduced defined benefit plan, with reduced COLAs. The whole package was intended to match the best of private sector practices.

The FERS system was treated as a recruitment tool offering many of the benefits the private sector was offering. Many of my co-workers opted to convert from the CSRS to FERS to take advantage of the portability and greater TSP component. Even so, throughout the late 80s, early 90s, recruitment still remained a bear. I well remember "Workforce 2000" predicting recruitment calamities if the Feds could not make their salaries more competitive. Along comes a little recession and jobs are scarce everywhere -- by, by Workforce 2000 fears. Later in the dot com boom Fed employment once again looked like a backwater. Money was to be had in the private sector. Recruitment once again a bear, salaries perceived as non-competitive. Boom, a crash and suddenly those of us who stayed in CSRS were prescient and our salaries suddenly seemed generous. The civil service was golden. The current recession makes that seem even more the case.

The bottom line is that governments at all levels have historically been perceived as under paying employees and the benefits package has been viewed as balancing the pay to a degree. I agree with the OP that entering into such a contract 30 years ago was not a reprehensible choice and offering such a contract was not lunacy at the time. Governments need to attract good employees and they need to offer a compensation package sufficient to do so.

[yakers]

IMHO the shift on the Federal level from CSRS to FERS probably did defuse citizen resentment. Now all Federal civil service get social security and a 401K type package. I see that as likely to evolve for state & local governments, I am surprised it has not happened yet. I am happy to be one of the old CSRS types, I had an opportunity to convert to the new system and there were times in the 80s & 90s when I had to wonder why I did not as all those TSP (401k) accounts had grown beyond my benefit package. Recently my intelligence has seemed to improve As to the regular pay package at NASA they could not come close to the salaries of the defense industry and silicon valley. Every scientist I knew was there because they wanted to and had turned down better paying jobs. NASA set up a lot of commercial, university and research center contracts to provide better pay try to capture the talent. Executives in the Federal government left for double (and in once case, a friend of mine, for 10 times) the pay. They were already working 80 hour weeks and had plenty of responsibility for mission success just not profitability. The MD head of the medical operation gets paid $135K to $150K period, no bonuses, profit sharing or even fancy trips (all Federal travel is coach). In Europe national govt executives get paid comparable to industry. The head of the US Fed is the lowest paid federal bank manager of any major country.
Now I understand that a lot of folks see someone hired by the local city (especially) county and state governments and wail about civil service pay & benefits but it just isn't true on the Federal level. If wages get too far below industry you will first get only lesser quality people and eventually corruption, look at how low civil service pay works in 2nd & 3rd world countries.

[Milton]

Quote:

Originally Posted by donheff I agree with the OP that entering into such a contract 30 years ago was not a reprehensible choice

I also agree. One cannot really fault a union for advocating the best possible terms for its members.

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Originally Posted by donheff offering such a contract was not lunacy at the time.

Time will tell.

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Originally Posted by donheff Governments need to attract good employees and they need to offer a compensation package sufficient to do so.

This begs the question whether an attractive compensation package actually results in engaged, service-oriented government employees. Unlike the private sector, there is no competition so 'clients' / 'customers' have no other options, and market forces generally have no impact.

[stoutboy]

I agree completely. I don't get the outrage and misplaced anger at state/fed workers. Instead of the sour grapes, they should try to get state/fed jobs themselves. And this whole business about 'unsustainability' is bunk. Why aren't these same people complaining about CEO pay and bonuses? Why aren't they angry about the atmospheric disparity in pay of CEOs compared to workers? Or Wall Street shell games? Our economy has become one where we don't produce anything. Our 'wealth' is dodgy financial instruments and 'products'. That's what's really unsustainable in our economic system. Instead, it seems many on these forums are all to happy to join the race to the bottom. Good on you for your pension, says I.

Quote:

Originally Posted by donheff I find it amusing that people find government benefits so mysterious. Al you need is a sense of history. When I entered the Federal Civil Service in 1974 the general perception was that Federal salaries were low relative to the private sector. The benefits were pretty good, but not great compared to big, stable corporations like IBM. By the 80's Feds were completely demonized. College recruiting was extremely difficult. I can remember kids asking why in the world they should consider a Federal career when they could make far more in the private sector. The Federal pension was viewed as pretty generous but also as "golden handcuffs" that forced civil servants to stay with the government once they had reached about a decade of Federal employment. The absence of a 401K plan and the lack of portability was viewed as a disincentive. The replacement FERS system combined Social Security, the TSP (a 401K look alike) and a substantially reduced defined benefit plan, with reduced COLAs. The whole package was intended to match the best of private sector practices. The FERS system was treated as a recruitment tool offering many of the benefits the private sector was offering. Many of my co-workers opted to convert from the CSRS to FERS to take advantage of the portability and greater TSP component. Even so, throughout the late 80s, early 90s, recruitment still remained a bear. I well remember "Workforce 2000" predicting recruitment calamities if the Feds could not make their salaries more competitive. Along comes a little recession and jobs are scarce everywhere -- by, by Workforce 2000 fears. Later in the dot com boom Fed employment once again looked like a backwater. Money was to be had in the private sector. Recruitment once again a bear, salaries perceived as non-competitive. Boom, a crash and suddenly those of us who stayed in CSRS were prescient and our salaries suddenly seemed generous. The civil service was golden. The current recession makes that seem even more the case. The bottom line is that governments at all levels have historically been perceived as under paying employees and the benefits package has been viewed as balancing the pay to a degree. I agree with the OP that entering into such a contract 30 years ago was not a reprehensible choice and offering such a contract was not lunacy at the time. Governments need to attract good employees and they need to offer a compensation package sufficient to do so.

[HsiaoChu]

I agree totally. When i went into education in '71, I started at a pay which was in some case 1/3 less than any of my friends who went into business. My sister in law now works for Wells Fargo. She has less education than I, and after only 30 years on the job compared to my 40, makes almost double what I do. You all pay for HER GENEROUS pension benefits through increased consumer costs, and she is only middle management. But people in PA are sceaming that teachers get this terrific deal.

Heck, our pension deal was all we had at all during most of our careers. And besides, if you look at government statistics regarding education level and salary, the average across the usa puts a Masters Degree at about $64K a year, and thats not with 40 years employment.

IN Pa, the educators have been dutifully paying into their pensions system at 6.5 - 8% of their gross salaries for every year of their employment. The State and the school districts agreed to pay a part of the system too. But in 2001, the state and the districts decided to stop paying into the system; even though they knew by law they would have to make it up. Well, now the piper has come to collect, and the populace that went along with the districts and the state in shirking their legal agreement, now want to shirk even more.

But in PA they cannot. Its the law, and its written into the state constitution. and its been through the courts enough time that everybody knows they can't break it. They can change it for new employees but not for those already in the system.

A recent letter to the editor of my local paper said that teachers need to fund their own pension system and pay for their own health care. Guess what? Teachers have been funding their own pension system full according to what the law said from the beginning. And guess what? We have to pay for our portion of health care just like everybody else.

I wonder how many of the complainers about the costs of teacher pensions actually saved 6-8% of their salaries from the time they first started to work, like every educator was required by law to do. I'd bet that not more that 10% maximum.

Z

[haha]

Quote:

Originally Posted by donheff The bottom line is that governments at all levels have historically been perceived as under paying employees and the benefits package has been viewed as balancing the pay to a degree. I agree with the OP that entering into such a contract 30 years ago was not a reprehensible choice and offering such a contract was not lunacy at the time.

This neglects the fact that usually those pensions have been sweetened over the years. Perhaps not the federal ones, but most states and municipalities have been. Then there are all the little tricks- underpriced year buyups, "spiking", etc. etc.

I can understand liking it if you have it, and fighting for it's continuance. Just the usual "I'm alright Jack!" But the idea that "I entered into a contract..." is bogus. How many large corporate employees have seen their pensions and retiree health care very seriously amended? DId they not enter into a contract if government workers did?

The government is right now very busily trying to get mortgage holders to accept very negative changes to their contracts. Do you remember what happened to GM and Chrysler bond holders? The Feds crammed concessions down their throats. Conditions change, reality changes, and most everything other than government pensions adapts to these harder circumstances.

US voters are likely more or less powerless in this, but when things get tight enough there are plenty of outside stakeholders who might have something to say about US public finance. The IMF has never been shy about shutting off unsustainable pension schemes in countries that get into trouble.


Ha

[eridanus]

Quote:

Originally Posted by stoutboy I agree completely. I don't get the outrage and misplaced anger at state/fed workers. Instead of the sour grapes, they should try to get state/fed jobs themselves. And this whole business about 'unsustainability' is bunk. Why aren't these same people complaining about CEO pay and bonuses? Why aren't they angry about the atmospheric disparity in pay of CEOs compared to workers? Or Wall Street shell games? Our economy has become one where we don't produce anything. Our 'wealth' is dodgy financial instruments and 'products'. That's what's really unsustainable in our economic system. Instead, it seems many on these forums are all to happy to join the race to the bottom. Good on you for your pension, says I.

Hey, I'd take that pension, too. Retiring at 43 with $60,000 sounds pretty sweet.

These "same people" are complaining about CEO pay and bonuses and pay disparity and Wall Street shell games. Well, at least I am.

Reality sets in, however. If you want to see more reality, look at the austerity measures in Greece. (To paraphrase the Economist, why would Germans who retire at 67 help support a Greek economy where they can retire at 62?)

[Milton]

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Originally Posted by stoutboy I don't get the outrage and misplaced anger at state/fed workers. Instead of the sour grapes, they should try to get state/fed jobs themselves.

Fair enough. But I suspect that most people would agree that not everyone can work for government; we need a viable private sector to pay the bills.

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Originally Posted by stoutboy And this whole business about 'unsustainability' is bunk.

Time will tell. Personally I think that globalization will ensure substantial declines in the average standard of living in developed countries. There are plenty of intelligent, well-educated people in, for example, China and India, who are willing to work hard for a fraction of the wages demanded by employees in America/Australia/Canada/England/etc. So jobs will migrate, or wages in the developed world will fall ... either way, unions' demands are unsustainable in the medium to long term.

[stoutboy]

Quote:

Originally Posted by Milton Fair enough. But I suspect that most people would agree that not everyone can work for government; we need a viable private sector to pay the bills. Time will tell. Personally I think that globalization will ensure substantial declines in the average standard of living in developed countries. There are plenty of intelligent, well-educated people in, for example, China and India, who are willing to work hard for a fraction of the wages demanded by employees in America/Australia/Canada/England/etc. So jobs will migrate, or wages in the developed world will fall ... either way, unions' demands are unsustainable in the medium to long term.

Union demands are the least of our problems. What needs to change is the diseased Wall Street ethos, runaway executive compensation, and a host of other things related to the change in our economic focus from the production of actual goods and services to one where our 'wealth' is largely generated from financial shell games and ponzi schemes. To paraphrase the late great John Houseman, we need to 'make money the old-fashioned way. Earn it.'

[youbet]

Quote:

Originally Posted by Zarathu I wonder how many of the complainers about the costs of teacher pensions actually saved 6-8% of their salaries from the time they first started to work, like every educator was required by law to do. I'd bet that not more that 10% maximum. Z

Zarathu,

Not disagreeing with the rest of your post, but you may not be correct on this last point. If the "complainers" you referenced above had jobs within the SS system (almost everyone), they were contributing the 6% you mentioned. And like you teachers, they were required to do so by law.

[HsiaoChu]

You bet: yeah PA teachers pay the social security taxes too. I don't hear any of the pension complainers being willing to cut back their social security pensions because they are too expensive for everyone to pay for NOW. Its pretty much the same. Everyone that paid into that system is on a federal pension, its called Social Security.

The deal is that you pay into the system all your working life, and you get a pension after your working life.

Milton: When you globalize jobs, you reduce everything to a common denominator. And since the common denominator for much of the planet is abject poverty, then there is no doubt that except for the very wealthy who know how to protect their candy, the rest of the developed world will drop to the common denominator.

It is what it is.

[Milton]

Zarathu, you have correctly understood my point.

My plan is to be one of the (relatively) very wealthy, with well-protected candy.

[HsiaoChu]

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Originally Posted by Milton Zarathu, you have correctly understood my point. My plan is to be one of the (relatively) very wealthy, with well-protected candy.

ROTFLMAO! Good LUCK WITH THAT!

[youbet]

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Originally Posted by Zarathu You bet: yeah PA teachers pay the social security taxes too. I don't hear any of the pension complainers being willing to cut back their social security pensions because they are too expensive for everyone to pay for NOW. Its pretty much the same. Everyone that paid into that system is on a federal pension, its called Social Security.

-

OK. Public system teachers contributing to SS varies from state to state.

I do think that where the bitterness or jealously springs from is that, frankly, teacher pensions (at least in Illinois) are a much, much better deal for the recipient than SS. Here a teacher does not pay into SS. Their pension contribution is a similiar amount to what others do pay into SS. Yet, they collect about 3X as much and start collecting at an earlier age. It's just a much, much better deal won by a powerful union and strong political connections. I'm surprised you are surprised that people are jealous of your benefits. They're a sweet, sweet deal, especially for folks who benefitted from extreme levels of spiking. Why wouldn't people be envious? They wish they would be allowed to contribute and collect from your system but are denied.

My advise to DW is always the same. Keep collecting. Keep your mouth shut about it. Smile while folks aren't looking.

What's the point of rubbing it in people's faces?

[donheff]

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Originally Posted by youbet - OK. Public system teachers contributing to SS varies from state to state. I do think that where the bitterness or jealously springs from is that, frankly, teacher pensions (at least in Illinois) are a much, much better deal for the recipient than SS. Here a teacher does not pay into SS. Their pension contribution is a similiar amount to what others do pay into SS. Yet, they collect about 3X as much and start collecting at an earlier age.

Yup, this was a big problem in the perceptions of the Federal CSRS system. The switch to FERS fixes that and, yet, the overall package is still pretty decent. Of course I read the prospectus so I took advantage of my grandfather status and stayed with the old system.

[HsiaoChu]

I don't have any problem understanding how people could want what they didn't arrange to have for themselves. My FIL worked for 40 years driving the train to work at 6 am and not coming back until 8 at night and often went into Philly on Saturdays. He worked that schedule and also went to school for his MBA early in his career. He worked his tail off, and ended with a huge pension. Way more than mine and his salary when he retired in 1985 is still almost double of mine here in 2010.

But I didn't choose to do that. I chose other things. I graduated college with huge loans and had to work in a decrepit work environment in the inner city to get them taken off as a part of a program that permitted it back then. During this time I worked a 9 hour day and then took evening classes 3 days a week every week for four years so that I could have a job that while its pay wasn't great, it did have a good pension system. I labored in the job which is very lonely and not terribly high paid for my experience and education for almost 33 years so far. But it wasn't luck that I have a sweetheart pension. I knew dang well what the endpoint was since my parents did the same. And so I've worked hard and taken the time, and chose wisely in regards to my retirement.

My sister in law is 10 years younger than me. She works for a major bank. She's just middle management. But she's making double what I make now after 40 years, and her pension will be more than I ever made, and they will also pay for her healthcare, which my system doesn't. But she works 6 days a week every week, and can't even avoid having office conferences when she's on vacation. I wouldn't want that.

People can get what they want if they are willing to work for it and willing to persevere with difficult sometimes boring jobs with bosses who were spawned from hell. And when people do save the money its their responsibility to keep abreast of how to do it safely. I have little patience for people who kept all their money in the market as they approached retirement, and then lost it in a major downturn. Heck, any money management book tells you that within 12-15 years of retirement you get a large portion of your funds out of volatile investments and into safe ones.

I know a young lady who works as a teacher, and a behavior specialist, and is also in the reserves. She's the cutest little button of a girl you could find, and you'd never know that she's a non-com who's done two tours of Iraq in her short years. She hates the army reserves, but she's doing it simply because she'll get an army pension in addition to SS and her teacher one in 25 years when she retires. They're pestering her to be an officer, but she knows that would mean more tours of yucky places, but it will mean more money.

I have another friend who is planning big time but doesn't get much more than 5 hours of sleep a night. He worked 20 years for the Philly police, now working on 20 for another police agency, and works nights at another job in the shipping industry. Could I do that? Nope. But he'll be getting three different pensions and SS.

You work for it you can have it. You plan who you work for, you can have it. Its not free, its never free. And people who didn't do any planning or working when they wished they didn't have to, don't deserve to have the same rewards offered to the people who did.

So yeah.... I see it every day. You don't work in mental health services for 40 years and not see it. Surprised.... yeah it still surprises me after all these years.

[HsiaoChu]

SS isn't an investment system, like most pensions are. Its a pyramid system. They take money from the people who are working to pay for the people who are retired. The vast majority of people who pay into pension systems have investment. My pension system has been paid into by me, and through agreements reached with the state and the districts they also paid something into the system. Even though the system did lose some in the market crises, They currently have enough from market gains to supply everyone who is currently retired and will be retired in the next 5 years or so. The problem for my system is that the government enacted into law that 85% of the people currently in the system have to have funds for, even though many of them are more than 25 years from retirement.

What many people don't know in my state is that the State Police and the State Employees are actually in the same exact system. The lawmakers can't make substantial changes in one without changing the others. And the public employees and State police also have their health care 100% paid for when THEY retire, which we do not. So you don't hear about anyone talking about short changing the State Police. I wonder why? ;-)

Everybody knows that you are giving the government your money for those who are currently retired and hoping they have enough when you retire. Pensions are different.

[youbet]

Zarathu,

You seem unusually concerned by what other folks think about the public pension system to which you belong. While it's likely these pension systems will be changed (less generous) in the future, as is being debated in Illinois right now, it's very unlikely current participants will have their benefits reduced. Much like the CSRS to FERS change for fed employees, state and municipal employees will be grandfathered IMO.

Take a breath, it'll be OK!

[HsiaoChu]

Quote:

Originally Posted by youbet Zarathu, You seem unusually concerned by what other folks think about the public pension system to which you belong. While it's likely these pension systems will be changed (less generous) in the future, as is being debated in Illinois right now, it's very unlikely current participants will have their benefits reduced. Much like the CSRS to FERS change for fed employees, state and municipal employees will be grandfathered IMO. Take a breath, it'll be OK!

Actually, its a big debacle in PA. The state in its infinite wisdom decided to defer any payments into the system for Teachers, Public Employees, and State Police back in 2001. And so while the districts continued at a lower level the state didn't. Now they have a piper to pay. The reality is that its written into the state constitution, and its already been through the courts.

But what is interesting is that with current funds, the teacher part of the system is perfectly capable of paying the retirement of all the current retired and everyone who will retire in the next 10 years or so AT THE LEAST. But the law says that the system must be at least 85% fully funded for everyone who is vested, which means it includes those people who have only been teaching for 2 years and are only 24.

So probably there will be changes, but they won't affect me, and even if they simply stopped the whole defined benefit system, I would still get the pension that was agreed to along time ago for me(33 years).

So I'm not concerned for myself. And I won't even be living in the area(I'll be out of state) when it all comes about, but many people don't understand what is going on now or what has happened.

And I'm just doing my Hyde Park Stool ranting. Nobody here on early retirement cares. Heck people here would like to retire at 22! But don't you have to work first? I know for example that I'll never be retired for as long as I worked unless I live to be 102!!