Time to get serious!!!!

[mickeyd]

We all know social security is on life-support and any politician that tells you otherwise just wants your vote. Wake up--the money's gone!

90% of the pension plans of the S&P 500 companies have under-funded pension liabilities. These are the best of the best and they can't pay-what does that say about the rest of them?

The Pension Benefits Guaranty Corporation-the guys who bail out the companies that can't pay their pension liabilities, they're in need of a bailout, too--so much for the guarantee.

There's no immunity from the crisis for government employees either. Individual local governments are taking out billions of dollars in bond debt to cover their pension liabilities-how long do you think taxpayers will stand for that?

Get used to the fact that the only money you'll have to survive on is the money you save and invest right now.

It's time to get serious!

 

[Marshac]

Individual local governments are taking out billions of dollars in bond debt to cover their pension liabilities-how long do you think taxpayers will stand for that?

I don't think that's really a fair statement unless you have personally reviewed the pension funding formulas for every state and local government. I know that in my state, benefits have been radically cut back (think 30% for 30 years of service, not 80% for 20), so I know they have 'fixed' the pension system here in terms of unfunded liabilities.

On the whole however, I agree with you, and don't include my state pension, or SS into my eq while planning. I wonder though, how many here have tested their plans against a decrease in pension or SS benefits? When the PBGC takes over a pension, they don't pay out 100% of benefits, they pay out significantly less, so even if the PBGC can remain solvent (they have a LOT of red ink), would you be ok on those reduced benefits?

 

[ESRBob]

Marshac,
Would be interested to know your state? I am sure it is difficult for you and colleagues personally to have this cut in your pension benefits, and probably has pushed ER out some years for you?

It does, however, represent a single point of light in an otherwise dark landscape form the pov of the citizens/taxpayers.



MickeyD;
The thing that has changed my mind on SS during the last few months, reading these posts and other things in the news, is that in effect, the SS Surplusses which are supposed to be keeping the system solvent are in fact all gone - spent -- and will be until 2017 when the crossover happens. I guess that is the definition of buying a bond from the US Treasury, but it would have been nice to think that while the SS Surplusses were piling up, other parts of the budget would be held in check. Instead, we have had years of Washington spending the normal budget, and then spending the SS surplusses, and then telling us that Federal Spending was either in surplus ( a couple brief years) or deficit based on having just spent all the SS money, too.

So all we really have to support SS is a whole lot more new debt which will get issued after 2017, and paid for by our kids.

At least if they go with some private accounts system, there will be transparency in Washington about what our real federal deficit is, and maybe people will get serious about saying enough-is-enough and pushing for spending cuts. I don't love the private accounts, but I love even less the present system of spending all the SS surplusses for current goodies, then calculating the budget deficit as if the SS surpluses were tax revenue just like the income tax. It gives a very false view of how solvent we are. (btw, dems and gop both use the same figleaf. If it were done in the private sector people would be in jail for this).

 

[Marshac]

 It does, however, represent a single point of light in an otherwise dark landscape form the pov of the citizens/taxpayers.

Speaking as a taxpayer, I agree. Also speaking as a taxpayer, we need to figure out some way to change the system to encourage government saving rather than last-day-of-the-budget-use-it-or-lose-it spending.

I should clarify though- there was no 'cut' in the pensions, but rather removal of the old plan 1 system. All new hires in the past few years (myself included) come on under plan 3 which is 1% * Years. As an employee, it really does suck knowing that those that came a few years earlier have such a sweet deal. For my plan 3 retirement, I really don't see the benefit of such a small pension, and would rather see some sort of 401k match instead. It would remove any long-term liability for the state, and is MUCH easier to budget for.

 

[mickeyd]

We Americans are stuck forever with some form of SS lets face it. Dems will not allow FDR's plan go away and they are reluctant to let the GOP make major alterations to "their" plan. U.S. politics is a nasty biz, but we have to deal with it.

Prez Bush has a unique situation. He alone has to be the one to make the necessary changes to bail it out. I do not believe that a real fix has been created or even been calculated. These are just trial baloons to see who is on board and who is not.

The most recent poles suggest that most Americans do not think that there is a SS crises. So we may have to wait until the entire system is months away from caving in (2017?) before the DC crowd decides that it is time to get crackin'.

Why Bush? The next Prez will be the "new guy" in office for 4 years and will be politically weak for 4 years and then if/when he (she?) is reelected in '08 for the 09-12 term, that Prez will have to start the fight again but only have a few years to get it all turned around.

If they do it this year or next, they will have over 10 years to get it under control. Not easy, but more time on the clock to figure it all out.

 

[Spanky]

There's no immunity from the crisis for government employees either. Individual local governments are taking out billions of dollars in bond debt to cover their pension liabilities-how long do you think taxpayers will stand for that?

Well, you said it. The government also raises your income and property tax to cover pension expense while the private sector must generate profits to pay or fund pension plans.

 

[Spanky]

I should clarify though- there was no 'cut' in the pensions, but rather removal of the old plan 1 system. All new hires in the past few years (myself included) come on under plan 3 which is 1% * Years.

Hmm, you might be working for the wrong state. New Jersey pays about 1.8% times years. http://www.state.nj.us/treasury/pensions/estimate.htm

Service Retirement -- Service Retirement is available to any active PERS or TPAF member age 60 or older. No minimum years of service are required. The annual retirement allowance is based on the following formula:
(Years of Service/55)(Final Average Salary) = Annual Retirement Allowance

For example, if you have 30 years of service and the final average salary of $80,000, your annual pension is $43, 636 [(30/55)*($80,000)]. It is not bad at all.

P.S. The rate is even higher for fire fighters and police officers.

Well, the new plan as you stated is not that bad. After 30 years of service with a final salary of $80,000, you still get $24,000 per year (1% * 30 * $80,000). This is much better than the 401K match (25% to 75% of your own contribution up to 6% of your salary).

 

[Ol_Rancher]

.. And to think all this time I thought the Texas Teacher Retirement system paid low benefits.

The formula I retired on is years of service + age = 80
to collect full benifits ( no early reduction)

2.25 % X years of service X (average of final 3 years salary) = $27,000/year in my case less premium payments for retiree health coverage ($240/month) which includes prescription coverage less co-pays

When I qualify for Medicare the premium drops ..

The only 'catch' is that the benefits have no cola and any increase or decrease is dependent on a stingy legislature that meets every other year and is Republican dominated.

I worked for one of only 10 school districts in the state at that time, that paid into social security. Thank goodness!

I am not complaining .. I often read how so many private employer pensions are reduced. Disgraceful.

I retired at age 53 when the numbers above = ed 80

Moved out of Austin Taxes $$$$ to a very rural county much more affordable and certainly more beautiful and tranquil.

Since the move, I am spending less that my pension benefits ... this may last for some years without a benefit increase and my portfolio should spin off enough gains to make up any difference by then ...

 

[Spanky]

Ol' Rancher,

Are you also qualified for social security later?

Spanky

 

[Ol_Rancher]

Spanky,
Yes, I will qualify for S.S. benefits. Will take them at 62. Estimated monthly benefit then (3 years out) will be $1081/month, more than enough to offset the lack of pension cola. However, I am prepared for benefit reduction by congress.

I live below my means, always have. No debts, no mortgage. I have 10 years of cash assets to carry me through another market crash.

When I am 59 1/2 in October, I will move all retirement 403b accounts monies into taxable fund accounts. Taxes will never be less than they are now. While Bush is president, I urge those in my position to do likewise. Just move enough money to avoid higher tax bracket each year for the next three years.

I hope by then the spector of continued inflation will evolve, such that, investments to counter this enemy of retirees will be more apparent.

Will consult the more knowlegible members of this forum at the time for each move.

 

[RockMiner]

In peering through the clouds of obfuscation and deception offered by our politicians on the SS issue, only
one thing seems clear to me...most americans in the 50+ age group desperately need this program to help fund their retirement.  Working longer is a nice fairy tale but most employers don't want you after 60, and there are only so many openings for minimum wage W-mart greeters and baggers.

Since mass indigence/hunger is not a politically acceptable result, the SS program will be there, Q.E.D.

For planning purposes, I'm assuming those (near 50) with decent savings will see about 50% of what is currently represented (after means testing etc)  I hope this is a worst case scenario.

 

[Marshac]

TIAA-CREF did a study awhile back that looked at social security income and the overall poverty level for seniors.

http://www.tiaa-crefinstitute.org/Publications/resdiags/issue77.pdf

It's a good read.