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

[youbet]

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Originally Posted by Zarathu And I'm just doing my Hyde Park Stool ranting. Nobody here on early retirement cares.

Well I care and understand the situation. My DW is a retired Illinois teacher. She's not into planning the $$$ so I'm the one who keeps an eye on the pension system for her. It's a mess here. Currently only 52% funded. There are a variety of reasons varying from underfunding by the state to union negotiated rules that dramatically increased payouts. These included allowing folks to buy years cheap, spiking and unfunded early retirement packages.

Now an influential state rep is pushing to change the system for new hires so that a bail out now would not likely have to be repeated a few years down the road.

I like the Wisconsin system. It's a nice compromise. A retiree can never receive less than the original amount they receive by formula at retirement. But future increases depend on market performance of the system portfolio (NOT inflation based cola's). And, for folks who received increases in prior years, they can receive a reduction if the market flops, but not below their original amount. This is calculated on a five year rolling average to keep from jerking folks around too much. So there is a bit of pain sharing. Portfolio performs well due to a good economy, the annuitant gets more. Portfolio performs poorly due to a crappy economy, the annuitant gets less, but with a floor level of the original amount. By law, their system must be funded 100%. Google up Wis State Retirement System and check it out.

[HsiaoChu]

Thanks for replying, youbet. The PA system is one of the best for teachers in the country. And the management of the fund is pretty super so even in lean years they make good money. Of course they lost a good bit when the whole market collapsed. But they are coming back.

We expect that the defined benefit plan is dead for new hires after 2012, but that's not much of an issue for me since I'll be dead by the time the kids who are working with me now are retired. But it is PA. Last year our legislature didn't have a state budget until October(supposed to happen by June 30), and it typical for inability to accomplish anything. So the likely hood of them actually helping the districts is small. If the market continues to stay the way it is, then they'll make more money and the increased to districts won't be as great as some fear. But people don't remember that up until 1996 districts paid as much as 20% of the bargaining pact into the pension fund because of a previous debacle back in the 70's. People learn and then they forget because new people come in who refuse to listen to history. The new people just won't admit that things are the way they are.

[donheff]

Quote:

Originally Posted by youbet Well I care and understand the situation. My DW is a retired Illinois teacher. She's not into planning the $$$ so I'm the one who keeps an eye on the pension system for her. It's a mess here. Currently only 52% funded. There are a variety of reasons varying from underfunding by the state to union negotiated rules that dramatically increased payouts. These included allowing folks to buy years cheap, spiking and unfunded early retirement packages.

That's the entire Il State system, not just the teachers, isn't it? My brother ERd from that system when they offered him a double nickle early out that he couldn't refuse (5 years service/5years age). His wife followed last year as a teacher. They both worry that they may be relying on ERISA in their old age.

[Milton]

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Originally Posted by Zarathu I'll never be retired for as long as I worked unless I live to be 102!!

Sounds like you're on the wrong board. The Boomers Retirement Forum might be of more interest.

[HsiaoChu]

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Originally Posted by Milton Sounds like you're on the wrong board. The Boomers Retirement Forum might be of more interest.

Why?

[youbet]

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Originally Posted by donheff That's the entire Il State system, not just the teachers, isn't it? My brother ERd from that system when they offered him a double nickle early out that he couldn't refuse (5 years service/5years age). His wife followed last year as a teacher. They both worry that they may be relying on ERISA in their old age.

Not sure Don. I know there are five separate retirement systems for teachers. My DW is with TRS, which I believe is the largest and at 52% funded is in the best shape. The other systems are the Chicago Teachers System, one for state university people... and a couple more I can't remember. The politicians want to combine them so the worse offenders of underfunding/over-withdrawing look better when it averages out. Great.........

My DW also took the 5/5 early out.

Did you mean PBGC (not ERISA) as the guarantee if the state funds run dry? For most teachers that would really hurt as their pensions are usually greater that the PBGC maximums.

As I mentioned above, both inadequate funding and over-withdrawing are at issue here. The inadequate funding comes from politicians trying to balance budgets by saying they'll withhold pension funding but make it up "later." Yeah, right. The over-withdrawing is from groups of stakeholders, usually their unions, negotiating early outs where you buy years at incredibly cheap rates or spiking. Spiking was so prevalent and outlandish that it created quite the scandal when the media finally got a hold of it.

All in all, it's a mess. And another reason why we need rules which force politicians/gov't to pay as they go. As I mentioned above, the Wis systems mandates 100% funding and increases/decreases (but not below the original amount) based on market performance. It looks a lot better than what most states have.

[youbet]

Quote:

Originally Posted by Zarathu We expect that the defined benefit plan is dead for new hires after 2012, but that's not much of an issue for me since I'll be dead by the time the kids who are working with me now are retired.

I see it that way too. The current system in Pa and Illinois have certainly been beneficial for recipients, almost to the extent of "too good to be true." But these systems have no safety valve to ease up benefits if the economy staggers, tax revenues fall and tax payers are truly suffering and unable to pay more. The built in assumptions that economic times will always be getting better may be coming to an end and making long term commitments based on those assumptions would be a folly. Plans with mandated, real-time 100% funding and no COLA's (only market performance increases/decreases) will allow long term sustainability.

The younger folks will have a tougher row to hoe in terms of getting to FIRE. Of couse the changes haven't happened yet and, who knows, perhaps with the significant political clout of these organizations they won't for a while yet.