How is it "early" if you can't get your money?

[nun]

Factors that get me to ER at 50

1) No children
2) No debt
3) Frugal lifestyle
4) Saving 50% of my gross income (as I have no children and an ex wife who didn't want alimony)


Factors that may make retirement difficult, no children

 

[Milton]

Factors that may make retirement difficult, no children

How so? Please elaborate.

 

[nun]

How so? Please elaborate.

Well I suppose as I get older I'll think "what might have been". I'll long for days on the porch with the "yung 'uns" scampering around and for a son or daughter that can look after me as dementia sets in.

Seriously, I'm not a fan of children and right now (at 49) I have plenty of friends and I'm healthy so everything's great. But I can see I might be lonely as I age without close family.

 

[Nords]

But I can see I might be lonely as I age without close family.

Some of us may envy you for being able to age without having to cope with close family...

Actually we had a choice whether or not to procreate. The frustration was the lack of choice over parents & in-laws.

 

[kyounge1956]

You are looking at a very narrow description of a ponzi scheme. if you want to stick to the textbook definition, then no DB plan is a ponzi scheme.

Actually, it was the dictionary, not a textbook, and yes, I think using the commonly-accepted meanings of words is better than Humpty Dumpty's method. (“When I use a word,” Humpty Dumpty said, in a rather a scornful tone, “it means just what I choose it to mean—neither more nor less.” from Through the Looking-Glass, by Lewis Carroll) If you use your own definitions instead, it's going to be difficult for the rest of us to understand what you mean and respond appropriately, to what you are actually saying. For example, if you'd stuck to the dictionary, I wouldn't have mistakenly thought you were suggesting that all DBPs engage in criminal conspiracy to cheat employees and retirees out of their money.

However, no DB plan also exists sole on the money that is invested. (snip)

That may be an accurate picture of the current condition of the average pension fund, but it's not so at all times for all funds. I have been keeping an eye on the state of the Seattle pension fund for some time now. It was at the 100% funding level in 2007, and before that, in or around 2001. I'm sure Seattle's is not the only DBP plan that has ever reached the full funding level. There may even be some well managed plans that are there now.

So.... since the plan requires state money(money from state taxes) and School District money(money from local taxes), essentially they are using money from people who are working right now to pay the retirement benefits of people who are retired now.

In a ponzi scheme its similar. You use money that you get from investors right now, to pay for the benefits of people who have money in your fund, to prop it up. Whenever money is used to pay for benefits, and that money comes from people in the same real time, then in my opinion is kind of ponzi like. Its not a strict definition. (snip)
Hsiaochu

I think I now see the parallel you are drawing between a pension plan and a ponzi scheme, although IMO it's clearer to describe a plan in that condition as "underfunded" than "ponzi-like". It's an undesirable state of affairs to be sure, but I don't think that it will inevitably result in the plan going broke. If there is more coming in from all sources—investment earnings, employee contributions, and employer match—than is being paid out in benefits, the excess will accumulate in the fund, which will eventually (one hopes) get back to the 100% level.

 

[Milton]

I think using the commonly-accepted meanings of words is better than Humpty Dumpty's method. (“When I use a word,” Humpty Dumpty said, in a rather a scornful tone, “it means just what I choose it to mean—neither more nor less.” from Through the Looking-Glass, by Lewis Carroll).

Good quotation!

If there is more coming in from all sources—investment earnings, employee contributions, and employer match—than is being paid out in benefits, the excess will accumulate in the fund, which will eventually (one hopes) get back to the 100% level.

Pretty big "if" though, isn't it?

 

[kyounge1956]

(snip) If there is more coming in from all sources—investment earnings, employee contributions, and employer match—than is being paid out in benefits, the excess will accumulate in the fund, which will eventually (one hopes) get back to the 100% level.

(snip) Pretty big "if" though, isn't it?

You're right, it is a big "if", but at least it's there. I just want to inject a note of hope if I can, for anyone whose pension system is underfunded at this time. That's a bad thing, but "underfunded" does not necessarily mean "doomed". Sometimes in my crazier moments I even think of running for a position on the pension board. I would like to see a change in the investment policy that will keep the retirement plan from being so vulnerable to market downturns. The actuaries say the Seattle system can get itself back into a financially sound condition by significantly increasing employee contributions and employer match. The exact amount of the increase has not AFAIK been determined yet. Our current union contract says under these conditions it can go up as much as two percentage points (i.e. from ~8% to ~10%). That is less than the actuaries' recommendation. Maybe under our next contract contributions and employer match will go up still further. But I don't think we'll have the option of a big increase in contributions next time there's a market crash—that would send too big a slice of the total payroll into the pension fund. So IMO, the only way for the system to survive the next market crash is for it not to be hit as hard as it was this time (lost about 27% overall IIRC). To me, that means we need to use a more conservative asset allocation with less stock market exposure, which will be a "hard sell" when trying to raise the funding level, because of the perception that stocks always return more than bonds over the long term. And the "floor COLA" ordinance needs to be rewritten or even repealed, because as it currently stands it triggers an automatic (and unfunded) increase in benefits every time the funding level gets up to 100%, which in practical terms has meant "every time there's a stock market bubble", and of course, the bubble bursts right after the increase in benefits goes into effect.