Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Pension Adjustments
Old 12-31-2016, 06:44 AM   #1
Recycles dryer sheets
 
Join Date: Nov 2006
Posts: 334
Pension Adjustments

It's a frightening thought - to need an adjustment of ER calculations due to pension mismanagement:

http://www.nytimes.com/2016/12/30/bu...ollection&_r=1

"As troubled pension funds go, the New York State Teamsters Conference Pension and Retirement Fund, with some $1.3 billion in assets, is by no means the largest. Neither is it in the direst financial shape, even though just 44.8 percent of its obligations are funded.
But given that participants in this fund may face benefits cuts of at least 20 percent, learning what went wrong could be instructive not only for other imperiled retirement funds but also for taxpayers who may have to cover the shortfalls."
__________________

Tekward is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-31-2016, 06:49 AM   #2
Administrator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: lumpen slums of cyberspace
Posts: 30,798
i think over the next decade we're going to see many more of these. Some will be expected, others a surprise. Very troubling.
__________________

MichaelB is online now   Reply With Quote
Old 12-31-2016, 06:55 AM   #3
Thinks s/he gets paid by the post
 
Join Date: Apr 2011
Posts: 2,739
401k's with good investment choices put you, not someone(s) else in charge of your retirement & you can see where you're at at all times & you can't blame anyone else.
gerntz is offline   Reply With Quote
Old 12-31-2016, 07:02 AM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 12,085
Quote:
Originally Posted by MichaelB View Post
i think over the next decade we're going to see many more of these. Some will be expected, others a surprise. Very troubling.
When the tide goes out, you can see who was swimming naked. I think Buffet said that .
__________________
You probably mean principal not principle. Judgment only has one "e".
travelover is offline   Reply With Quote
Old 12-31-2016, 07:06 AM   #5
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 12,085
Quote:
Originally Posted by gerntz View Post
401k's with good investment choices put you, not someone(s) else in charge of your retirement & you can see where you're at at all times & you can't blame anyone else.
True, but as we have frequently discussed here, Joe Average can barely handle a week to week budget, let alone plan and adequately fund a 401(k) without some serious nannying. If SS was not mandatory, the streets would be full of impoverished old people, who all planned to put away something, someday.
__________________
You probably mean principal not principle. Judgment only has one "e".
travelover is offline   Reply With Quote
Old 12-31-2016, 09:29 AM   #6
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
Chuckanut's Avatar
 
Join Date: Aug 2011
Location: West of the Mississippi
Posts: 9,954
Quote:
Originally Posted by travelover View Post
True, but as we have frequently discussed here, Joe Average can barely handle a week to week budget, let alone plan and adequately fund a 401(k) without some serious nannying. If SS was not mandatory, the streets would be full of impoverished old people, who all planned to put away something, someday.
I have mentioned this before, but I had a neighbor in his 50's whose retirement plan was to be a waiter. That is he was waiting for an Uncle to die so he get the man's gold coin collection (valued at $50,000 back in the 80's) which he had been 'promised'. Then he would retire and move someplace cheaper where he could live off selling the gold coins and his SS benefits.
__________________
The worst decisions are usually made in times of anger and impatience.
Chuckanut is offline   Reply With Quote
Old 12-31-2016, 09:40 AM   #7
Thinks s/he gets paid by the post
 
Join Date: Aug 2014
Location: Chicago West Burbs
Posts: 1,304
This possibility was one factor in my decision to take the money from my defined benefit plan and roll it into my IRA's. Having control of my money may not be the paper-wise decision. When they can give your benefit a 20% (or more) haircut, then how do you enter that into your evaluation. I feel for all those who have defined benefit plans and are needing 100% of it to be there. Obviously, 401K plans are a different breed and have their own gotcha's.
CRLLS is offline   Reply With Quote
Old 12-31-2016, 10:24 AM   #8
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,859
Define benefit pension plan management must be transparent and held to very high fiduciary standards. Unfortunately that is not often the case. Many plans have systemic problems like declining membership, but there's no excuse for poor management. Ideally mortality credits, economies of scale and the buying power of the plan should allow them to pay higher retirement incomes than defined contribution plans. In MA there are a couple of state pension plans that are examples of the good and the bad. The bad is the transit workers plan that is opaque, poorly managed and thought to be severely under funded.

https://www.bostonglobe.com/business...0tK/story.html

Contrast that with the Massachusetts State Employees Retirement fund that is managed my PRIM (Pension Reserves Investment Management) board. They are very open and publish regular audits. The state workers fund is 65% funded with a goal of 100% funding buy 2030 with the legislature making extra contributions to make up for amounts they failed to contribute in the past.

PRIM Board

I just used about 20% of my retirement funds to buy into the MA state pension and because of the openness of PRIM, commitments from the legislature, recent reform legislation and active retiree and state worker unions I feel confident that the MA state pension fund is a good place to be.
__________________
So we beat on, boats against the current, borne back ceaselessly into the past.

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-31-2016, 10:46 AM   #9
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 12,085
Quote:
Originally Posted by nun View Post
......... Ideally mortality credits, economies of scale and the buying power of the plan should allow them to pay higher retirement incomes than defined contribution plans.........
I enthusiastically agree. It is too bad that annuities in general suck, because the opportunity is there for them to be a really nice alternative to defined contribution plans.
__________________
You probably mean principal not principle. Judgment only has one "e".
travelover is offline   Reply With Quote
Old 12-31-2016, 12:50 PM   #10
Thinks s/he gets paid by the post
Teacher Terry's Avatar
 
Join Date: Jun 2014
Posts: 4,622
NV is very open about our pension funds and it is written into the constitution that even a governor/legislature, etc can not borrow any $ from it. One governor tried but failed. So I am confident with our pensions being there.
Teacher Terry is offline   Reply With Quote
Old 12-31-2016, 01:21 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 24,800
Quote:
Originally Posted by travelover View Post
.... If SS was not mandatory, the streets would be full of impoverished old people, who all planned to put away something, someday.
Agreed... which is why OASDI was formed to prevent that to begin with... so it is that rare government program that is working as intended.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.

Retired Jan 2012 at age 56...target 65/35/0 AA
pb4uski is offline   Reply With Quote
Old 12-31-2016, 02:13 PM   #12
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,859
Quote:
Originally Posted by pb4uski View Post
Agreed... which is why OASDI was formed to prevent that to begin with... so it is that rare government program that is working as intended.
MA is a state that does not contribute to the SS part of FICA, just Medicare. So MA state retirees do not get SS. Right now the state mandates that most employees pay 11% of salary into the fund and there is a state match of 5%. So the contribution side is good deal for MA taxpayers. However, many people in MA don't know this and when it is pointed out that the funding is much like their 401k plan their argument often evaporates.

Additionally if MA replaced the state define benefit pension fund with a defined contribution scheme, I believe that MA would have to start paying 6.2% FICA tax for SS. So the state contribution cost would be higher by 1.2% plus any matching contributions. In fact I think that being part of SS and having a DC plan might be better for MA state employees, but people start arguing the other way when I point out that it will cost the MA tax payer more to do that.

They don't usually manage to continue the argument in to the areas of unfunded liabilities, risk and projected pension return which are all valid areas of concern for s DB plan, but manageable if approached sensibly.
__________________
So we beat on, boats against the current, borne back ceaselessly into the past.

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-31-2016, 02:28 PM   #13
Thinks s/he gets paid by the post
Teacher Terry's Avatar
 
Join Date: Jun 2014
Posts: 4,622
NV does not pay into SS either. So if you retire after 30 years of work it is a better deal. But for those of us that started later in life and retired after 15 we lose most of our SS. I did not realize this when I first moved here for a job and probably wouldn't have come if I had known.
Teacher Terry is offline   Reply With Quote
Old 12-31-2016, 02:38 PM   #14
Moderator
rodi's Avatar
 
Join Date: Apr 2012
Location: San Diego
Posts: 10,359
Fortunately (or unfortunately) my pension is not a big part of my budget... About $460/month.... So if it goes away, I'll survive. Plus it's small enough to likely be covered under the PBGC.

My sister (a teacher) is absolutely counting on her pension. She contributes to it through payroll deductions - so it's not a "freebie"... She has some SS (reduced) and some IRA money - but the pension will be the biggest part of her retirement income when she retires in 2 years... Her pension is CalSTRS - which has some issues. Fortunately, she and my BIL are saving (IRA, 457, etc) and will have the mortgage paid off by the time she retires.
__________________
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 7%, rental income 18%
rodi is offline   Reply With Quote
Old 12-31-2016, 03:50 PM   #15
Thinks s/he gets paid by the post
Teacher Terry's Avatar
 
Join Date: Jun 2014
Posts: 4,622
WE contributed to our pension here also.
Teacher Terry is offline   Reply With Quote
Old 12-31-2016, 04:34 PM   #16
Thinks s/he gets paid by the post
nun's Avatar
 
Join Date: Feb 2006
Posts: 4,859
Quote:
Originally Posted by Teacher Terry View Post
NV does not pay into SS either. So if you retire after 30 years of work it is a better deal. But for those of us that started later in life and retired after 15 we lose most of our SS. I did not realize this when I first moved here for a job and probably wouldn't have come if I had known.
I have 18 years of SS earnings and 10 years of non-SS earnings so my SS will be reduced by WEP. I've used the WEP calculator in the SSA website and it looks like my SS will be reduced by only 5%
__________________
So we beat on, boats against the current, borne back ceaselessly into the past.

Current AA: 75% Equity Funds / 15% Bonds / 5% Stable Value /2% Cash / 3% TIAA Traditional
Retired Mar 2014 at age 52, target WR: 0.0%,
Income from pension and rent
nun is offline   Reply With Quote
Old 12-31-2016, 05:53 PM   #17
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
 
Join Date: May 2005
Posts: 15,330
I remember reading about another California muni where there was stupid decisions made and many people getting way out of proportion pensions...

IIRC, there were 8 making over $200K per year, more then what they were making when working... they increased the multiplier from 2X to 3X per year and also did a secondary plan.... why To keep up with the police who was keeping up with the state troopers....


The article was listing some different cities where the pension cost were over 20% of their budget!!!

This is not like Illinois where they just did not fund the plan, this is just a stupid pension plan from the get go.... you need to be able to fix the stupid plans...
Texas Proud is offline   Reply With Quote
Old 12-31-2016, 05:59 PM   #18
Thinks s/he gets paid by the post
Car-Guy's Avatar
 
Join Date: Aug 2013
Location: Citizen of Texas
Posts: 3,645
Glad my pension plan had a lump sum option. And am glad I took it. Wish SS had such an option too.
Car-Guy is online now   Reply With Quote
Pension Adjustments
Old 12-31-2016, 08:12 PM   #19
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 12,085
Pension Adjustments

Quote:
Originally Posted by Car-Guy View Post
Glad my pension plan had a lump sum option. And am glad I took it. Wish SS had such an option too.


I think paying out SS in a lump sum would be an absolute disaster. Can you imagine how many people would either get scammed out of it or just blow through it outright?
__________________
You probably mean principal not principle. Judgment only has one "e".
travelover is offline   Reply With Quote
Old 12-31-2016, 08:29 PM   #20
Thinks s/he gets paid by the post
Car-Guy's Avatar
 
Join Date: Aug 2013
Location: Citizen of Texas
Posts: 3,645
Quote:
Originally Posted by travelover View Post
I think paying out SS in a lump sum would be an absolute disaster. Can you imagine how many people would either get scammed out of it or just blow through it outright?
It could be a problem for some (maybe many) I guess, but if the payout was reasonable, I'd take it. I had the option from my Megacorp so why not from the government. It's my money, I was forced to pay into the system for 40 years, they owe it to me. Of course I'd want to get it tax deferred like my company lump sum and invest it as I see fit. I don't need or want anyone making my financial decisions, especially the US government. I mean just look how well SS has increased payments for the past two years. (basically ZERO) On the other hand, my personal conservative investments have gone up ~8 percent during the same period.
__________________

Car-Guy is online now   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
Federal pension COLA adjustments... friar1610 FIRE and Money 14 12-09-2010 05:29 PM
Adjustments to Equity/FI Ratio with Age Hydroman FIRECalc support 1 01-07-2007 07:55 PM
Domestic Adjustments after ER BOBOT Life after FIRE 59 09-27-2006 03:13 PM
More about CPI and hedonic adjustments sgeeeee Other topics 2 06-06-2005 07:56 PM
Hedonic Adjustments sgeeeee FIRE and Money 0 01-21-2005 09:57 PM

» Quick Links

 
All times are GMT -6. The time now is 07:32 AM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2020, vBulletin Solutions, Inc.
×