Tell me if this makes sense

[utrecht]

All cities within Texas had 1 year from the election to exempt themselves. Austin, Houston and San Antonion did. Dallas didnt. Its too late now, but theyve shown no interest in in anyway. There was one council member who wanted to exempt out and he got no where with the rest of the City Council.

I meant "public" pension...not private.

What does "short $750 million" mean? Short from what? Thats probably the amount that we are underfunded since we are only 89% funded right now. It makes sense that we have the largest underfunding in total $$ since we have the biggest pension fund.

 

[utrecht]

Therir actuarial study showing "hundreds" of people will have one time payouts of more than $1M is a joke. We have a total of $54M in our entire DROP system. Not hundreds of millions.

They must be using some projections for how many people they "think" will go into DROP and how long they "think" they will stay in it.

They certainly dont owe hundreds of people over a million right now and even if they did, so what? Those people arent going to cash out their millions is a lump sum.

They retired for pension purposes and went into DROP. Who cares if they took their pension checks and spent it or they invested it in the DROP account? The pension fund isnt losing money if they leave it in. Its more or less breaking even.

He didnt go into detail about why Oregon is screwed up.

 

[Texas Proud]

It was not the DROP program that was killing the Houston plan, but an increase in the percent per year that someone will earn..

RetireeRobert... The problem with Houston is that the old mayor decided to bribe the workers with a pension increase (kicking the can down the road).. I think the plan was increased from (say) 2.2% per year to like 2.4 or 2.5% with NO increase in funding.. and the rate was based on final salary or something, not an average... so, the fund is not being funded with enough money to pay the anticipated pension based on that higher rate...

As an example, the mayor gave the Chief of Police a raise the week he was leaving which meant that his pension went up (and I am sure this number is off) something like $70K per year... the city counsel said not so fast, but they could not do anything fast enough and he got his higher paycheck for one week and qualified for the higher pension... they want to be able to 'fix' that kind of problem in the plan and the constitutional amendment would not allow that... but since they opted out they can change it for future people.


Now... all of this is memeory and can all be wrong...

 

[RetireeRobert]

All cities within Texas had 1 year from the election to exempt themselves. Austin, Houston and San Antonion did. Dallas didnt. Its too late now, but theyve shown no interest in in anyway. There was one council member who wanted to exempt out and he got no where with the rest of the City Council.

I meant "public" pension...not private.

What does "short $750 million" mean? Short from what? Thats probably the amount that we are underfunded since we are only 89% funded right now. It makes sense that we have the largest underfunding in total $$ since we have the biggest pension fund.

OK. Sounds like you have been doing your homework. If Dallas is locked into DROP and the Texas constitutional amendment, perhaps you have some legal safeguards. That leavesd fiscal dangers to be aware of.

I think you mentioned the Dallas P&F was a $4billion plan in assets, so $750 million short is little under 20% shortfall. Nowhere near teetering on insolvency, but not as strong as it could be either. If the City is locked in on "having" to contribute at the 27% rate, and has been contributing at that rate for 18 plus years, then I guess the plan stays solvent via City contributions. And they don't have to/can't go to workers/retirees to up their contribution rates or cut benefits.

If you have a plan for you and your wife to take advantage of 8-10% compounding of assets in the DROP program, perhaps it's ok to proceed.

I would just be real cautious---run your numbers on alternatives several times to make sure that is what you want to do. Get some good numbers whizes to go over your projections and plan. See if they can spot any flaws.

Is there anyway if you do proceed, where you get another decision point or points----to start tapping DROP, instead of letting it ride.

I would say if you do proceed and let DROP ride---MONITOR the situation twice a year. Check the laws, the current funding status, the rumor mills for any "troubles" in the DROP plan. Then if something unexpected comes up where DROP drops its allure, bail out.

With you and your wife both in DROP and exhausting your other retirement resources, CAUTION is the constant word of the day.

 

[RetireeRobert]

Therir actuarial study showing "hundreds" of people will have one time payouts of more than $1M is a joke. We have a total of $54M in our entire DROP system. Not hundreds of millions.

They must be using some projections for how many people they "think" will go into DROP and how long they "think" they will stay in it.

They certainly dont owe hundreds of people over a million right now and even if they did, so what? Those people arent going to cash out their millions is a lump sum.

They retired for pension purposes and went into DROP. Who cares if they took their pension checks and spent it or they invested it in the DROP account? The pension fund isnt losing money if they leave it in. Its more or less breaking even.

He didnt go into detail about why Oregon is screwed up.

This is how pension "reform" started in Oregon. The longknives hired some actuaries to prepare some studies projecting this and that. Then it was selectively fed to the newspapers hungry for headlines. It didn't matter much about the real details and what the well-informed knew of the situation. What mattered was some theoretical projections on a few matters to generate juicy (but misleading) headlines, and soon the populace was in a frenzy. Soon Oregon public employees became the the scapegoats to blame and start looking at as a place to cut benefits expenses.

Sounds like there is some disgruntlement in Texas about public employee pensions. Apparently, in Dallas the longknives did not get the upper hand in the headline/political wars, and the constiution put in a safegaurd Dallas did not opt out of.

Of course, if DROP is such an "asset" to the localities, why did so many opt out ask the Texas citizens who don't get public pensions.

If I were planning to commit my and my wife's financial futures to relying on DROP after depleting all other retirement resources, I would be keeping a very close and constant watch on DROP and pension developments and the political and budget situations.

This is just advice from a public worker who retired, took his pension "notice of entitlement" as the legal word on p[ension amount, then found three years later the Oregon PERS saying, "surprise, we changed our minds. Your pension is getting cut---yes cut three years AFTER you reitred".

Strange things can and have happened. Be Wary!

 

[Spanky]

A skeptical way to view any pension nowadays is Prepare Early Not Seeking Improbable Or Nonexistence.