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

[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]

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]

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]

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.

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]

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]

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]

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]

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]

-

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]

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!!

 

[youbet]

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]

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]

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]

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

Why?

 

[youbet]

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]

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.