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-   -   'Insane' even by Illinois standards? (https://www.early-retirement.org/forums/f27/insane-even-by-illinois-standards-58314.html)

Mulligan 10-13-2011 12:03 PM

Quote:

Originally Posted by youbet

There it is! The youbet "understatement of the day." Congratulations on your award! :dance:

Here in Illinois (this thread did start out being about Illinois.......) our ability to be dumb and greedy when making investments is exceeded only by our love and admiration of corruption, graft, payola, scams, machine politics and the public servants who pull them off.

Why thank you, Youbet! I haven't received an award since I went to the principals office... Wait that was for a spanking... This might be my first ever!
Seriously though my 5 closest friends who don't have pensions, are putting money in their 401k. But they have no idea how much they need or how to appropriate it properly. I couldn't beat any of them with a paddle long enough or hard enough to get them to pay attention to know what funds they are investing in or what the funds investing goals are. This spring my GF complained her funds went up "only 5%" the past quarter. I could barely get her to understand that her money would double in less than 4 years at that "only" amount.

MichaelB 10-13-2011 12:23 PM

Quote:

Originally Posted by ziggy29 (Post 1120893)
In reality, I think the greatest risk would be political risk -- resisting the pressure to increase benefits in bull markets because the pension fund is so "overfunded". Avoid that temptation (this helped ruin the solvency of some pension funds) and it becomes much more likely to survive prolonged bear markets like 1966-1982 or 2000-20xx -- and be sustainable for many decades.

+1

Quote:

Originally Posted by Bestwifeever (Post 1120901)
I could see all pensions turned into SS on steroids--no more private/municipal/state/federal pensions or social security retirement, just a mandatory contribution to a new national pension fund managed by a new agency; if you wanted to put more in, too bad, manage that on your own (like one does when they exceed limits on IRA and 401K contributions).

+1

They have tried to do this in other countries. I haven't paid too much attention but I believe Australia and the UK have some version. Chile and Argentina for sure. Some suffer from high fees, killing returns. Argentina's funds were raided - the gov't forced them to buy gov't bonds when no one else would. Still, as an alternative it is alluring.

samclem 10-13-2011 12:34 PM

Quote:

Originally Posted by Bestwifeever (Post 1120901)
I could see all pensions turned into SS on steroids--no more private/municipal/state/federal pensions or social security retirement, just a mandatory contribution to a new national pension fund managed by a new agency; if you wanted to put more in, too bad, manage that on your own (like one does when they exceed limits on IRA and 401K contributions).

Re: conversion of state/local public employee plans to federal control: I'd hate to see yet more power and control move upward. Is there some reason to believe other public employers are less adept than the feds? Any reason to protect them from themselves if they are?

Re: Conversion of private pensions: Same issue, but more so. How is this the business of the federal government?

And with the new government agency making the stock and bond purchases, we'd have increased government ownership of US private companies. Can they buy tobacco companies? Of course they should preferentially invest in "green" companies. Sometimes companies get into labor disputes, I wonder if anyone in Congress might move to disinvest from such companies at strategic times. And sometimes companies need "help" so this will be a good mechanism for accomplishing that.

Please, no.

I look at our federal government, the tremendous waste there and lack of responsiveness and accountability, and wonder why there is still some sentiment for wanting to bump things up to a higher level of centralization. The terms "federal", "national" etc still have some type of special esteem in some quarters.

Bestwifeever 10-13-2011 12:36 PM

It would be like getting private and public employers out of the health insurance business. I'm just floating that out there.

Bimmerbill 10-13-2011 12:55 PM

Does anyone believe that an employer offering a pension is a good thing?
Does anyone believe that there can be well funded and well managed pensions?

samclem 10-13-2011 01:07 PM

Quote:

Originally Posted by Bimmerbill (Post 1120925)
Does anyone believe that an employer offering a pension is a good thing?

In the abstract and starting from a clean sheet of paper: No. For all the reasons we've seen, employment (compensation now for work performed now) and the concept of guaranteed lifetime income in retirement are two separate things that each do better when kept separate.

Now, if a private employer wants to attracts and keep employees with some type of deferred compensation scheme, to include a pension, they should be allowed to do that. The mechanism to do that is with a contract, and the government should have no further interest in assuring that this contract is fulfilled than it does with any other contract. No public reinsurance, no shifting of risk to other entities. The government provides the courts for use in settling contract issues.
Quote:

Originally Posted by Bimmerbill (Post 1120925)
Does anyone believe that there can be well funded and well managed pensions?

Sure. But is there any reason to believe that a company with expertise in producing toasters will be the very best choice to meet the need for lifetime income of several thousand employees? Wouldn't we expect this to be done better if they could choose a specialized manager in an open marketplace?

youbet 10-13-2011 01:26 PM

Quote:

Originally Posted by Bimmerbill (Post 1120925)
Does anyone believe that there can be well funded and well managed pensions?

I'd point you to the Wisconsin Pension System. I'm not a member, never even lived in Wisconsin. But it's structure and operation are impressive. They fully fund each retiree's pension at the beginning per actuarial standards and, apparently, realistic investment yield expectations. Then they modulate the pension amount (including going DOWN!) to accomodate investment performance.

It really looks sustainable. Participants tolerate some payment variation but are rewarded with full funding.

I'd rather DIY, but I understand that is too stressful for some and the Wis system looks like a reasonable alternative.

Bestwifeever 10-13-2011 02:13 PM

Quote:

Originally Posted by youbet (Post 1120938)
I'd point you to the Wisconsin Pension System. I'm not a member, never even lived in Wisconsin. But it's structure and operation are impressive. They fully fund each retiree's pension at the beginning per actuarial standards and, apparently, realistic investment yield expectations. Then they modulate the pension amount (including going DOWN!) to accomodate investment performance.

Is that a state agency that administers the pension? If so, couldn't a federal agency emulate it?

ziggy29 10-13-2011 02:21 PM

Quote:

Originally Posted by youbet (Post 1120938)
I'd point you to the Wisconsin Pension System. I'm not a member, never even lived in Wisconsin. But it's structure and operation are impressive. They fully fund each retiree's pension at the beginning per actuarial standards and, apparently, realistic investment yield expectations. Then they modulate the pension amount (including going DOWN!) to accomodate investment performance.

That could work -- at least if nothing else, the state funding is a sunk (and just as importantly, known and predictable) cost each year as a part of employee non-cash compensation, and the risk to the taxpayer for "underperforming" pension funds is very limited.

youbet 10-13-2011 02:42 PM

Quote:

Originally Posted by Bestwifeever (Post 1120949)
Is that a state agency that administers the pension?

Yes.
Quote:

If so, couldn't a federal agency emulate it?
I'm sure a fed agency could emulate it........ if they could sell the constitutents on a pension plan where monthly payments are recalcualted each year based on a rolling average of fund investment performance.

youbet 10-13-2011 02:48 PM

Quote:

Originally Posted by ziggy29 (Post 1120951)
the risk to the taxpayer for "underperforming" pension funds is very limited.

Yes. By actually reducing pensions (but not below their original amount), they minimize tax payer liability for investment performance in market downturns. Of course, this means that a retiree who received big increases during several years of market run up could see those increases vanish during a prolonged downturn.

They do the calculations on a rolling average basis to keep from knee jerking folks. And there are two investment categories to chose between, one more aggressive, one less aggressive. If you go to the web site and look at historical payouts, the more aggressive fund has had some significant ups and downs over the years.

The sharing of investment risk between the retirees and the tax payers seems like a good plan. At least I'd like it here in Illinois. In our case both investment risk and shenanigan risk (spiking, double/triple dipping, etc.) are on the backs of the tax payers.

GregLee 10-13-2011 02:49 PM

Quote:

Originally Posted by Bestwifeever (Post 1120949)
Is that a state agency that administers the pension? If so, couldn't a federal agency emulate it?

There would, at least, be a problem of confidence. After years of bluster and threats to reduce Social Security benefits, certain government-hating politicians have gotten people really scared about whether they'll ever actually get any SS. If I had a nickel for every poster in this very forum saying he couldn't plan on SS payments when he retires, I wouldn't even need a pension.

steelyman 10-13-2011 03:29 PM

It's conceivable that this thread could be redirected to another current one titled "The Retirement Heist".

youbet 10-13-2011 03:54 PM

Quote:

Originally Posted by GregLee (Post 1120960)
There would, at least, be a problem of confidence. After years of bluster and threats to reduce Social Security benefits, certain government-hating politicians have gotten people really scared about whether they'll ever actually get any SS. If I had a nickel for every poster in this very forum saying he couldn't plan on SS payments when he retires, I wouldn't even need a pension.

Any lack of confidence in SS that I have has its roots in the big gov't advocates who think they can add an unlimited number of folks and increase benefits without end.

There are those who want to privatize or just kill SS. And there are those who will bring it to its knees by using it far beyond its original charter, although with good intentions I suppose. Either way, the integrity of the program suffers.

In any case, the situation with Illinois public pensions and the associated ongoing "happenings" has little relation to SS other than many Illinois public pension recipients don't participate in SS.

BLS53 10-13-2011 05:49 PM

Quote:

Originally Posted by youbet (Post 1120835)
It's very fair. But the concept is a real culture shock in many parts of the country, mine included.

Heavy duty spiking, at least for public school teachers, State of Illinois employees and City of Chicago employees has been rampant. (I can't speak for employees working for counties or smaller municipalities.) It's a major cause of pension fund underfunding.

An employee progresses to a salary of $60k over her career. And pension fund dollars are contributed by the employee and by the gov't to fund a pension based on the current formula and that level of salary. Then, suddenly, at career end the employee makes $80k, $85k and $90k for the last three years qualifying her for a much larger cola'd pension. Funds were not set aside for that level.......

Recent legislation in Illinois has subdued spiking for educators. They're now limited to having only the first 6% of raises during their final 3 years count towards pensions (with, of course, some exceptions for promotions and the like). It's causing a real uproar as generous spiking had become so common it's current limitation is being referred to as a "broken promise!" Other legislation which limits the amount "retired" public employees can work (at the same job they retired from) while collecting their pensions is also being fought. :facepalm:

The inequities are even more noticeable in small, far downstate communities, where the median household income is a little over $30K, and all the teachers live in the gated subdivision with the doctors and lawyers.

It wasn't always this way. My old high school principal is 85 years old and draws a $28K pension, and lives in the same modest house he did 40 years ago.

Maybe teachers were underpaid for a long time, but the pendulum has swung too far the other way now.

The recently retired ones I know, wear those pensions like a badge of honor, and look down on those of lesser fortune.

GregLee 10-13-2011 06:49 PM

Quote:

Originally Posted by BLS53 (Post 1121001)
The inequities are even more noticeable in small, far downstate communities, where the median household income is a little over $30K, and all the teachers live in the gated subdivision with the doctors and lawyers.

I don't understand what you're trying to say here. It's inequitable for a teacher to live in a gated subdivision? What equities are involved? Does that even make any sense?

BLS53 10-13-2011 10:26 PM

Quote:

Originally Posted by GregLee (Post 1121011)
I don't understand what you're trying to say here. It's inequitable for a teacher to live in a gated subdivision? What equities are involved? Does that even make any sense?


The subdivision is just an anecdote and isn't the issue. The issue in Illinois is the overly generous salaries and pensions, that allow working stiff teachers to live an increasingly opulent lifestyle.

The inequity is between the taxpayers and the teachers. And the fact that all government entities involved are broke, while the teachers get richer.

Not to mention the local district continually fails to meet learning achievement standards, and the teens coming out of the high school are a step above animal life. But I digress.

chinaco 10-14-2011 05:05 AM

It sure make one wonder. Hopefully someone digs deep to find out if there was some sort of Quid Pro Quo for some considerations or favors.

Is it a case of political and bureaucratic corruption?

IMO - It deserves some attention from the Justice Dept and FBI!

donheff 10-14-2011 07:04 AM

Anger at the structure and abuses (spiking, etc) of pensions makes sense to me but we are also back to the argument that teachers are overpaid. Maybe I am wrong but it feels like many people who complain about teacher salaries are all about the market when it comes to entertainers, athletes, executives, etc. Why not wait for Mr. Market to straighten things out? We are in a period of turmoil and uncertainty. Suddenly people who a few years ago were described as risk averse government drones willing to work for low wages to secure modest lifetime income guarantees are now viewed as vastly overpaid, pampered rich kids. Today there are lines to get teaching jobs and other government jobs. This too shall pass.

ERD50 10-14-2011 07:09 AM

Quote:

Originally Posted by chinaco (Post 1121047)
It sure make one wonder. Hopefully someone digs deep to find out if there was some sort of Quid Pro Quo for some considerations or favors.

Is it a case of political and bureaucratic corruption?

It is no wonder, and it takes no digging to figure out if this was Quid Pro Quo for some considerations or favors or a case of political and bureaucratic corruption. It undoubtedly was.

Quote:

That arrangement is allowed under a state law signed by Gov. Jim Thompson on his last day in office in 1991, ...

Now, making the connections to prove anything is a whole 'nother matter. Recall that it took two trials (the first was a hung jury on all but one count) to find former Governor Blago guilty of using his influence inappropriately, even though they had numerous tapes of him referring to the Senate seat vacated by Pres Obama as:

Quoting the Blagojevich Complaint: Chicagoist
(edits mine)

Quote:

ďIíve got this thing and itís (eff-ing) golden, and, uh, uh, Iím just not giving it up for (eff-ing) nothing. Iím not gonna do it. And, and I can always use it. I can parachute me there.Ē (pg 59)
ROD BLAGOJEVICH said that the consultants (Advisor B and another consultant are believed to be on the call at that time) are telling him that he has to "suck it up" for two years and do nothing and give this "(m-effer) [the President-elect] his senator. (Eff) him. For nothing? (Eff) him." '

Quote:

IMO - It deserves some attention from the Justice Dept and FBI!
Agree, and I hope they could alter those pensions. But I doubt they have anything on tape, they don't have Gov Thompson saying that these pension changes are 'effen Golden', so I don't expect anything to happen. I don't think this is on the protesters list though.

-ERD50


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