Pension Adjustments

[Tekward]

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

http://www.nytimes.com/2016/12/30/b...est&contentPlacement=1&pgtype=collection&_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."

 

[MichaelB]

i think over the next decade we're going to see many more of these. Some will be expected, others a surprise. Very troubling.

 

[gerntz]

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.

 

[travelover]

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 .

 

[travelover]

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.

 

[Chuckanut]

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.

 

[CRLLS]

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.

 

[nun]

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/busines...nks-million/UKOg59TaQgK4CBTtQxo0tK/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.

 

[travelover]

......... 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.

 

[Teacher Terry]

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.

 

[pb4uski]

.... 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.

 

[nun]

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.

 

[Teacher Terry]

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.

 

[rodi]

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.

 

[Teacher Terry]

WE contributed to our pension here also.

 

[nun]

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%

 

[Texas Proud]

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...

 

[Car-Guy]

Glad my pension plan had a lump sum option. And am glad I took it. Wish SS had such an option too.

 

[travelover]

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?

 

[Car-Guy]

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.

 

[Chuckanut]

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?

And after blowing through their SS lump sum in a few years they would be going to Uncle Sam with their hand out saying "Please help us".

So, unless we want to stop being a compassionate society, we should leave SS as what it is - monthly checks. I doubt if any of us want to tell a person "Sorry Joe, you blew through you SS funds, now you can live in the gutter".

 

[Car-Guy]

And after blowing through their SS lump sum in a few years they would be going to Uncle Sam with their hand out saying "Please help us".

IMO, that's why SS was put in place in the first place to force people to help themselves rather than depending on the government. Same with the ACA.

So they aren't going to offer any lump sum options. Probably best since it would cost many of us even more in taxes down the road.

 

[nun]

IMO, that's why SS was put in place in the first place to force people to help themselves rather than depending on the government. Same with the ACA.

So they aren't going to offer any lump sum options. Probably best since it would cost many of us even more in taxes down the road.

Social Security Insurance was first implemented by Bismarck....not a guy you'd naturally connect with such a system. The current US SS system is one where wealth is actually redistributed as it's a richer benefit for the lower paid, although the FICA tax cap does benefit those better paid.

Interestingly the UK has just gone to a system that is decoupled from earnings. You can get an annual National Insurance credit in lots of ways, by working and paying the tax, but also if you are unemployed but looking for work, if you are a stay at home carer, foster parent etc. The higher paid pay more in taxes, but they will get the same SS check as someone with lower earnings but the same number of contribution years. The minimum benefit check has increased substantially, but high earners will get a far smaller check. I'm happy at the changes as I've been making voluntary contributions into the UK system for the last 32 years while I've live in the US and my UK SS check is going to be bigger than under the old rules.

 

[Chuckanut]

IMO, that's why SS was put in place in the first place to force people to help themselves rather than depending on the government. Same with the ACA.

I agree. There are many people like my former neighbor the 'Waiter' who would be in poverty if not for SS.

People often forget the word "social' in Social Security. It is not a normal pension plan or retirement investment plan. It is a way to ensure that elderly people (and some others these days) have a minimum income in their old age. That's why it has bend points.

 

[gauss]

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?

Agreed. The people I know who are hurting both had good DB pensions from large Megacorps.

They both cashed them in and the sharks had their way with them. Very sad in that it was entirely avoidable,

gauss