A look at Pensions

[hopefullyoneday]

Agreed.....but during this 10 year bull run why didn't these funds sky rocket.

because the city reduced or did not increase their contributions.

 

[hopefullyoneday]

Hopefully a look at pensions, starting with public pensions, which may not seem important for those with careers in the private sector, but affects all of us in terms of public debt. Putting the current government shutdown aside for the moment, the longer view of National and Local pensions is worrisome.

Let's start by looking ar just one pension plan. The Chicago Teacher Pension Plan. Currently measured at more than 11 Billion Dollars, the plan is incurring an annual interest rate charge of @230million dollars, just to cover current obligations.

That is for just one city.
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The genesis for this comes indirectly from long term plans for a sustaining insurance policy for public service, and was created at a time when interest rates were in the double digits. Unfortunately, as time changed the investment returns, the local government did not address the construct of the pension plan, and projections were made at a too optimistic rate.

Oversimple, but essentially the basis for today's nightmare.

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If this were an anomaly, we could overlook it, and tend to our own business.
The trouble is, the problem exists in hundreds, possibly thousands of public entities. Cities, towns, counties and state tax enabled constructs.

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Private pensions are not exempt, but should be discussed on a separate thread. More food for thought and discussion, but not here. Public pensions affect all of us... in taxes, and in public services.

Our county is generally considered safe, and well managed. That is, until we look at long term pension obligations. Young police officers are looking at pensions in the $60K+ range. The numbers just don't work out.

A subject that is commonly overlooked in meetings and public elections, but a major factor in the future of our nation and our personal taxes.

Do you know how pensions obligations affect your future?

Great another pension bashing thread

 

[Rianne]

Great another pension bashing thread

Maybe so, lots of good information here. University of Illinois is losing talent by the minute because of pension cutbacks. Great profs are moving on to bigger and better pastures or they retired early, before the cuts

 

[Just_Steve]

Maybe so, lots of good information here. University of Illinois is losing talent by the minute because of pension cutbacks. Great profs are moving on to bigger and better pastures or they retired early, before the cuts

If they can't be competitive they don't deserve the talent.

 

[hopefullyoneday]

Maybe so, lots of good information here. University of Illinois is losing talent by the minute because of pension cutbacks. Great profs are moving on to bigger and better pastures or they retired early, before the cuts

Exactly, when the benefits get cut people leave then less desirable people fill their spots. Except some people cant leave certain jobs because of age requirements. No worse feeling then accepting a job with promised benefits just to have those benefits taken away and you can get another job doing the same thing because of a age requirement.

 

[hopefullyoneday]

If they can't be competitive they don't deserve the talent.

But then the students in this case suffer while the school admins still make money.

 

[aaronc879]

I don't believe that pensions made sense before and they certainly don't now with all the funding problems. I don't think it's fair or reasonable to eliminate a pension for people who were hired with a pension as part of their compensation. However, there is no reason to continue to hire more people with the promise of a pension. Increase the wage by a small amount(10%?) and maybe give a small extra 401k(or similar) contribution(maybe a few %) for all new hires and don't give them a pension. This won't fix the problem in the short-term but i'm not sure there is a fair way to do that. Excessive pensions have happened for too long for there to be an easy fix.

 

[Spock]

Either unrealistic pensions get cut
or taxes sky rocket to pay for them

(or some combo of both)

Either way somebody is going to unhappy.

 

[aaronc879]

Right, in many cases, the IL public workers did not participate in SS. Apparently, this was another power grab by the local politicians. They wanted control of all the money. It does stink.

But not all cases. My wife will get a small pension as a part year, and sometimes part-time school secretary, and she is in the Illinois Municipal Retirement Fund. That fund somehow managed to keep the politicians out of it, it is run by members, like a Credit Union. It is well funded, and she still participates in SS.

-ERD50

My Aunt worked her whole career in social work management and retired from Chicago(or IL?) with an 80% pension(at age 58) AND free healthcare AND SS. That is way too much to give to someone who isn't even working and there are worse examples from people making 6-figures and getting a similar % pension.

 

[Spock]

It used to be gov workers got paid less, with lower work expectations, in return for job security and a pension. When I graduated the university computer center offered me about 50% of what megacorp offered (and back then megacorp still had a pension).


I've read 3 articles just today about how the average gov worker is paid 5-17% more than private sector workers of the same educational background. Gov workers still don't have to work overtime, still have generous pensions, and still have job security. Needless to say private sector does not.
This particular source focuses on Fed workers. I can't find the other article back for the broader comparison. https://www.cbo.gov/publication/52637

 

[hopefullyoneday]

I don't believe that pensions made sense before and they certainly don't now with all the funding problems. I don't think it's fair or reasonable to eliminate a pension for people who were hired with a pension as part of their compensation. However, there is no reason to continue to hire more people with the promise of a pension. Increase the wage by a small amount(10%?) and maybe give a small extra 401k(or similar) contribution(maybe a few %) for all new hires and don't give them a pension. This won't fix the problem in the short-term but i'm not sure there is a far way to do that. Excessive pensions have happened for too long for there to be an easy fix.

Agree, the city council we have during the meetings stated they need to get out of the pension business. But now we are voting on a benefit change proposed by them to ensure pensions for new hires from this point forward. They could and should do exactly what you stated but for some reason they wont.

 

[hopefullyoneday]

Either unrealistic pensions get cut
or taxes sky rocket to pay for them

(or some combo of both)

Either way somebody is going to unhappy.

If you just knew what the city is overspending on other than pensions you would be furious. My city got audited and 1 of the things they found was tens of thousands of dollars worth of cell phones with plans being paid that were in a storage room not being used.

 

[hopefullyoneday]

My Aunt worked her whole career in social work management and retired from Chicago(or IL?) with an 80% pension(at age 58) AND free healthcare AND SS. That is way too much to give to someone who isn't even working and there are worse examples from people making 6-figures and getting a similar % pension.

Maybe, but that is not the employees fault. I would not turn that down if offered to me.

 

[target2019]

Dear M-I-L retired with public NJ pension, after 20 years of service. Initial amount was ~ $23K. Ending amount was over $30K (COLAs). Included health benefits for both. During the entire time (26 years), pension was underfunded. But the check always arrived.

Spouse has public pension that is also underfunded. No free healthcare, so I expect 60% is an ok funding level.

 

[Midpack]

If you just knew what the city is overspending on other than pensions you would be furious. My city got audited and 1 of the things they found was tens of thousands of dollars worth of cell phones with plans being paid that were in a storage room not being used.

With all due respect, I hope you have another more convincing example. “Tens of thousands of dollars” is absolutely trivial compare to unfunded pension liabilities. IL is up to $133.5B now...

https://www.reuters.com/article/us-illinois-pensions-idUSKBN1O62KC

The article also supports my earlier assertion that it’s not lower returns that have been the primary issue, it’s curtailing annual contributions mostly. That should be a crime, evidently it’s not. Politicians, voters and public retiree all share “blame” for the predicament, and kickin’ the can down the road year after year.

“The primary reason for the (unfunded liability) increase was, again, actuarially insufficient state contributions, which increased the unfunded liability by $3.187 billion, accounting for 66.1 percent of the total increase,” the report said.

 

[Midpack]

Either unrealistic pensions get cut
or taxes sky rocket to pay for them

(or some combo of both)

Either way somebody is going to unhappy.

Much less so for people who leave those states before...?

 

[hopefullyoneday]

With all due respect, I hope you have another more convincing example. “Tens of thousands of dollars” is absolutely trivial compare to unfunded pension liabilities. IL is up to $133.5B now...

https://www.reuters.com/article/us-illinois-pensions-idUSKBN1O62KC

The article also supports my earlier assertion that it’s not lower returns that have been the primary issue, it’s curtailing annual contributions mostly. Politicians, voters and public retiree all share “blame” for the predicament.

I was just giving and example of something overlooked as compared to my cities shortfall. So go pick someone else apart.

Its funny how you blame the employee.

 

[Spock]

Much less so for people who leave those states before...?

You don't have to move (at least for income taxes)
https://dakotapost.net/rates-services/south-dakota-residency



That will work for awhile. But I expect another Fed bailout... the PBGC sets the precedent. I think you'll have to severe ties and move somewhere off-shore.

 

[Spock]

I was just giving and example of something overlooked as compared to my cities shortfall. So go pick someone else apart.

Its funny how you blame the employee.

The "employee" is the person willing to walk out on the job (and slash the tires of those willing to keep working) in order to get the bigger benefits and rules that encourage pension stuffing during the last year on the job.

 

[Just_Steve]

The "employee" is the person willing to walk out on the job (and slash the tires of those willing to keep working) in order to get the bigger benefits and rules that encourage pension stuffing during the last year on the job.

The above just proves drinking and posting are not always compatible.

 

[hopefullyoneday]

The "employee" is the person willing to walk out on the job (and slash the tires of those willing to keep working) in order to get the bigger benefits and rules that encourage pension stuffing during the last year on the job.

Nothing wrong with chasing the buck nowadays, as there is no employee loyalty from the employer anymore.
In my city if you leave early you only get YOUR contributions with a little bit of interest and NO employer contributions. It actually helps the fund when this happens.

 

[cooch96]

I don’t have a pension myself, but the lesson I’m taking (without donning my tinfoil hat) is to avoid long term municipal bonds like lepers; stay diversified in other investments, to include real estate and foreign equities; don’t sell those silver coins just yet; keep two weeks of bottled water and food and lead on hand, in case of utility failure and/or a strike from first responders; and remember to keep emergency plans flexible.

I think we will see a period of difficult inflation alongside a bunch of negotiated settlements where many pensioners will cinch their belts while bond holders get their clocks cleaned. A return of stagflation is also plausible. I’m optimistic we won’t get into any hyperinflation scenarios.

 

[ripper1]

Just saying but back in the day when I started working for the city of Chicago in the early 80's I was told I had a dead end job. Private companies and Mega Corps were flourishing with their benefits and pensions for their employees. Zoom forward now and layoffs and no pensions for private work force. All of a sudden public employees are greedy scumbags.

 

[Chuckanut]

I've read 3 articles just today about how the average gov worker is paid 5-17% more than private sector workers of the same educational background. Gov workers still don't have to work overtime, still have generous pensions, and still have job security. Needless to say private sector does not.

FYI, I and my peers worked plenty of unpaid overtime as a teacher. I am sure it numbers in the many thousands of hours. A friend of mine who worked in IT for LA Country also worked lots of overtime to keep computer systems running. No OT for them either.

 

[hopefullyoneday]

Just saying but back in the day when I started working for the city of Chicago in the early 80's I was told I had a dead end job. Private companies and Mega Corps were flourishing with their benefits and pensions for their employees. Zoom forward now and layoffs and no pensions for private work force. All of a sudden public employees are greedy scumbags.

its funny how people think isn't it. If their not benefiting its oh poor me. I wish I had a job paying 100s of thousand of dollars a year like some people but I have the job I have I just don't want to have money taken away from me from not fault of my own.