... If you've got a pension, you may very well feel it and should be at least reviewing your plans, IMO. Another thought regarding SS reform is that according to the trustees latest report the SS fund is going to broke somewhere around 2030. In that case, only 75% of benefits could be paid out for something like the next 75 years. This means those planning for SS could get hit with a 25% cut at worst. This assumes no other measures (of which there are plenty) are taken to mitigate the cuts, so it's an absolute worst case scenario (at least at this point).
The thread is not intended to be political in nature but rather to discuss in an intelligent manner the risks, real or perceived, of Private PBGC insured pensions in light of the recent changes to multi-employer PBGC pensions enacted in the budget bill.
The pension plans that are affected by this legislature are multi-employer pension plans such as the United Mine Workers and United Steel Workers. Most of the contributors for one reason or another are no longer in business because of bankruptcy or the way of the buggy whip, so therefore there are no more "pockets to pick". My father had his pension cut by 2/5ths when United Airlines went bankrupt right after 9/11. PBGC picked up the tab for the other 3/5ths. However, the political move to rescue the Big Three Automakers during the "Great Recession", resulted in moving the UAW pensioners up the food chain ahead of creditors and created in a different result. Politics will rule in the end.
I assume a 1/3 (ie 33%) haricut to SS when I enter numbers into planning/modeling tools. This is based on a somewhat conservative assumption that you mentioned about being able to pay 75% of current benefits for the long term (ie 75 year horizon).
I do not see this as a worst case scenario however. Congress could easily means test (either income based, or perhaps even asset based) and give some of us a much more severe haircut in an attempt to protect the many individuals in the lower income/asset category. A review of the Simpson-Bowles study shows many ways that the pain could be delivered.
I thought that the private pensions would be more secure than Social Security up until a few weeks ago. Now I am not so sure.
-gauss
Ah... I see... the sky is falling.
Certain topics like Obamacare,SS, and pension reform are going to include some political discussion if you want to have a complete and honest discussion.
Its unfortunate this forum falls short in this area. Head in sand.
Yea, I was referring to Simpson-Bowles, along with another analysis but can't remember where I read it. Bottom line is there are many alternatives to an across-the-board cut. I agree with your thinking that pensions and SS are fair game now, not that they always haven't been. Many have been waiting for some smoke signals on future SS cuts, and I believe this may be one important one. And yes, means testing or even income based testing would be the worst case scenario. If you run scenarios in the calculator I posted up thread, this appears to be exactly what they'e done with this new law.
At the least, we should be prudent and do as you've done (me as well) and calculate a benefits reduction into our plans.
Not the sky. Just benefits. A possible 60% benefits reduction for those under 75 and too old to change course signals great opportunities in cat food and cardboard box stocks.
I see the two as overlapping. Unfortunately, benefits reductions (or additions, in the case of the ACA) are influenced by the political process, and as such it's important to discuss from a financial planning standpoint. OTOH, IMHO, a "democrats vs. repulicans" discussion for example is meaningless to the discussion (i.e., how is that actionable?).
This is a government funded program, much like SS (or the USPS, or Amtrak, or ...). ...... Congress created the PBGC to see to it that pensions are protected. ...
The PBGC is not funded by general tax revenues. Its funds come from four sources:
Insurance premiums paid by sponsors of defined benefit pension plans;
Assets held by the pension plans it takes over;
Recoveries of unfunded pension liabilities from plan sponsors' bankruptcy estates;[4] and
Investment income.
I assume a 1/3 (ie 33%) haricut to SS when I enter numbers into planning/modeling tools. This is based on a somewhat conservative assumption that you mentioned about being able to pay 75% of current benefits for the long term (ie 75 year horizon).
I do not see this as a worst case scenario however. Congress could easily means test (either income based, or perhaps even asset based) and give some of us a much more severe haircut in an attempt to protect the many individuals in the lower income/asset category.
...
-gauss
I wonder what they will do with pensions like the one for illinois public workers that is so far in the hole there looks to be no way to fund it except bankrupting the taxpayers. It has a huge deficit now and keeps growing every year.
Pardon my asking, but how can someone be down 6.5% when the market is hitting all time highs?
worse than taxing SS and other retirement funds would be if we scrapped income taxes and went to a federal sales tax to value added tax as many countries have.