More State Pension Problems

[Walt34]

New York 94.5% funded.

I sleep well every night, keep those pension checks coming.

I'm in about the same position, and I think for the same reason. The people who manage the pension plan and its funding are also the ones who will get their pensions from the same plan. There are some minor variations for some groups but essentially it's the same nut. Last I heard ( six months ago) it was 94% funded.

I think it was you who said his plan was managed by people who were also going the be the beneficiaries of it, so it was well run and funded.

Admittedly this was pure dumb luck on my part, who thinks about retirement plans when they're 22?

 

[OldShooter]

OK update NYC police pension fund in 2013 this was the mic The policy mix targeted for the Fund in fiscal year 2013 included securities from
the following categories: U.S. Equities 39.8%, U.S. Fixed Income (core) 17.1%, International
Equities 9.9%, Emerging Markets 5.9%, Enhanced yield (Fixed Income) 4.8%, Private Real
Estate 3.3%, Private Equities 6.7%, U.S. Treasury Inflation Protected Securities 2.9%, cash
1.0%, Hedge Funds 3.2%, Convertible Bonds .6%, REITS 0.5%, Opportunistic Fixed 1.7%,
Bank Loans 1.7% & ETI .9%.. NYC has 4 or 5 pension plans the biggest are : the police , the fire, the teachers, and everyone else.

Interesting. I think that kind of allocation is becoming viewed as the "old time religion." CALPERS, for one, has ditched hedge funds completely as have other large institutional investors. There is also a strong movement towards passive investments, though not as strong as the movement by individual investors. It makes sense that institutions are slow. Would a highly-paid manager recommend an investment strategy where he and most of his highly-paid staff become superflouos?. Not willingly, I think.

Re retirement fund managers who will also be paid from the fund doing a better job than if they were not participants. Probably true, but the big variable is how much money the politicians contribute. Even Superman cannot overcome serious underfunding, and he's probably not applying for the job.

 

[Teacher Terry]

Both my sibs worked for the state of IL but they paid into SS. They are both well off so will survive fine with or without pensions. Glad ours are not from that state.

 

[Just_Steve]

Admittedly this was pure dumb luck on my part, who thinks about retirement plans when they're 22?

True words for sure.

 

[youbet]

Interestingly, despite all the funding problems, three of the top ten high schools in the entire nation are Chicago Public Schools......

Go figure.......

 

[Blue Collar Guy]

Interesting. I think that kind of allocation is becoming viewed as the "old time religion." CALPERS, for one, has ditched hedge funds completely as have other large institutional investors. There is also a strong movement towards passive investments, though not as strong as the movement by individual investors. It makes sense that institutions are slow. Would a highly-paid manager recommend an investment strategy where he and most of his highly-paid staff become superflouos?. Not willingly, I think.

Re retirement fund managers who will also be paid from the fund doing a better job than if they were not participants. Probably true, but the big variable is how much money the politicians contribute. Even Superman cannot overcome serious underfunding, and he's probably not applying for the job.

This is a huge change from how they used to invest. I can go back as far as I think 1989 and look up the financials.In those days everyone was "getting a piece of the action". Now would all be in orange jumpsuits if they did it , they had personal investment consultants that took fees, everyone got(ok not everyone, and maybe very few) got kickbacks in high fee funds. &lousey AA. when the market returned 18 % for 20 years the pension did 12 or 14 no one cried cause everyone was making money.

 

[haha]

Funding levels are different than payout levels. There is always room to create a bond issue or raise taxes to cover the gaps. And there are plenty of reasons why the above funding levels happen.

In the end, cutting pension levels is not any worse than states raising taxes on retirees. Raising property taxes, sales taxes, income taxes, etc. all add up to a lower spendable amount.

Sure, but then everyone suffers for the pensioners big payouts, and the payouts go on unmolested.

Perfect solution from the POV of the pension holder.

Ha

 

[youbet]

Sure, but then everyone suffers for the pensioners big payouts, and the payouts go on unmolested.

Perfect solution from the POV of the pension holder.

Ha

But the other way around, the pensioners suffer even though they paid their full 9.5% faithfully while the taxpayers contributed apparently nothing and, in fact, sometimes had pension fund dollars dribble into general spending accounts to keep taxes down or increase the services they received.

Perhaps some compromise might be in order?

 

[Blue Collar Guy]

But the other way around, the pensioners suffer even though they paid their full 9.5% faithfully while the taxpayers contributed apparently nothing and, in fact, sometimes had pension fund dollars dribble into general spending accounts to keep taxes down or increase the services they received.

Perhaps some compromise might be in order?

I get 2 pension checks from my job. One is my regular one for service retirement. The other is a 12k one time per year check in December. Some how the newspapers started calling it a Christmas bonus check, 13th pension check etc. The origin of the 12k was that our union lent the city several hundred million dollars to stop it from going bankrupt. This is the return on the money. Had the union kept the money we would be getting checks for 30k every December. The city turned that 500? million into 8(?) billion But the sentiment of the vocal people were that we were all crooks, and should not get the money any more. It became a court battle and they had to go to the state legislators that looked at what had happened almost 40 years ago. The 12k is now secure , there was no compromise involved in that battle ,they wanted to take it away illegally and go from 12k- zero. Govt work related pensions are not a popular topic.

 

[Texas Proud]

Interestingly, despite all the funding problems, three of the top ten high schools in the entire nation are Chicago Public Schools......

Go figure.......

From what list?

I looked up and found this... most are Texas or Arizona... none from Illinois... looking further, the top one in Illinois is ranked 40th...

https://www.usnews.com/education/best-high-schools/articles/slideshows/us-news-best-high-schools



https://www.usnews.com/education/be...orthside-college-preparatory-high-school-6601


OK... found a different list... Illinois has one... NJ is the big winner on this list...

America's Top High Schools 2015

 

[Teacher Terry]

BCG: did your BIL get screwed by a public pension or was it a private one? That is awful what happened to him.

 

[Bamaman]

My father was a civil servant working for Tennessee Valley Authority (TVA.) In the 1950's, wages were relatively low but they were promised a great pension, great vacation time and the ability to bank their unused sick leave. TVA built their own steam plants, nuclear plants and all power construction with 35,000+ employees. TVA quickly realized they didn't have the money to fund the pensions of so many employees and they privatized construction and laid off or retired about 25,000 employees. 20 years later, TVA has thrown $ billions into the pension program and it's still $ billions short of being adequately funded.

Other governmental entities simply failed to fund their pensions anywhere near a reasonable level. And there will be a day of reckoning coming for Illinois, City of Chicago and California state employees. You cannot come up with new taxation to pay for the sins of past politicians. Look at what happened to the City of Detroit employees--now living on a pittance of their original pensions. The money is just not there despite the upswing in the stock market..

I'm just thankful MegaCorp well funded our defined pension. And they went early to 401K's where I have sufficient $ to live on.

I do feel sorry for the civil servants that were promised the pie in the sky--only to know the sky's going to fall eventually.

 

[haha]

But the other way around, the pensioners suffer even though they paid their full 9.5% faithfully while the taxpayers contributed apparently nothing and, in fact, sometimes had pension fund dollars dribble into general spending accounts to keep taxes down or increase the services they received.

Perhaps some compromise might be in order?

Agree. This is a very unusual situation.

Ha

 

[Spock]

The "my pension is X% funded" all depends on what % return is assumed long term.
The following link shows what happened when MN changed the % from 8 to 4.7.
"pension has started using a rate of 4.7 percent to discount its liabilities, down from the 8 percent used previously. As a result, its liabilities increased by $16.7 billion."
http://www.zerohedge.com/news/2017-...nding-triples-after-tweaking-one-small-assump
So if you think your pension is well funded, check what assumptions they are using.
Bill Gross' advice starts to click for an Illinois pension fund | Business | stltoday.com

 

[wolf]

The old saying "trust no one" applies to everything including your retirement, I don't trust anyone that's why my retirement fund is in my own hands. Nobody making a bad move and nobody with sticky fingers, I make my own decisions and transactions, nobody to blame but myself

+1, But as I get older, I realize, most people do not have the mental discipline
you have. No advice, just an observation.

 

[Blue Collar Guy]

BCG: did your BIL get screwed by a public pension or was it a private one? That is awful what happened to him.

It was a teamsters union pension, one of the multi employer ones

 

[Teacher Terry]

It sounds like it ruined their retirement. So very sad.

 

[Just_Steve]

My father was a civil servant working for Tennessee Valley Authority (TVA.) In the 1950's, wages were relatively low but they were promised a great pension, great vacation time and the ability to bank their unused sick leave. TVA built their own steam plants, nuclear plants and all power construction with 35,000+ employees. TVA quickly realized they didn't have the money to fund the pensions of so many employees and they privatized construction and laid off or retired about 25,000 employees. 20 years later, TVA has thrown $ billions into the pension program and it's still $ billions short of being adequately funded.

Other governmental entities simply failed to fund their pensions anywhere near a reasonable level. And there will be a day of reckoning coming for Illinois, City of Chicago and California state employees. You cannot come up with new taxation to pay for the sins of past politicians. Look at what happened to the City of Detroit employees--now living on a pittance of their original pensions. The money is just not there despite the upswing in the stock market..

I'm just thankful MegaCorp well funded our defined pension. And they went early to 401K's where I have sufficient $ to live on.

I do feel sorry for the civil servants that were promised the pie in the sky--only to know the sky's going to fall eventually.

Cuts not as bad as you think.
Pittance is a bit of hyperbole.

Questions & answers on Detroit's pension problem
Underfunding of the city's pension funds and the magnitude of pension and health care benefits owed to Detroit workers and retirees was a driving factor behind the city's historic bankruptcy, which resulted in 4.5% cuts and other reductions for general pensioners and decreased cost-of-living increases for police and fire pensioners.

For Detroit retirees, pension cuts become reality
Under the city's plan, the pensions of police and firefighters are not being cut, but their annual 2.25 percent cost-of-living adjustment is reduced to about 1 percent.

General workers will endure a 4.5 percent base cut in pensions and the elimination of an annual cost-of-living increase.

 

[Blue Collar Guy]

It sounds like it ruined their retirement. So very sad.

It completely trashed it.

 

[travelover]

............General workers will endure a 4.5 percent base cut in pensions and the elimination of an annual cost-of-living increase.

I believe that they also lost their paid health care coverage, which was a significant hit.

 

[97guns]

Even private pensions are in bad shape, I have a cousin and his wife that works for united airlines, both mechanics and bbeen with the company for over 25 years. They just retired in their mid 60's


"United Air Wins Right to Default on Its Employee Pension Plans. United Airlines, which is operating in bankruptcy protection, received court permission yesterday to terminate its four employee pension plans, setting off the largest pension default in the three decades that the government has guaranteed pensions.May 11, 2005

 

[Texas Proud]

/snip/
Look at what happened to the City of Detroit employees--now living on a pittance of their original pensions.

Really? A pittance? The haircut was 4.5%... I would not call that a drastic cut where it would be considered a pittance...

The big benefit to Detroit was not having to fund COLA....

 

[NanoSour]

Really? A pittance? The haircut was 4.5%... I would not call that a drastic cut where it would be considered a pittance...

The big benefit to Detroit was not having to fund COLA....

4.5% is a great number if you're trying to convince people that the situation is not that bad. If all retired health care benefits were also taken a way, well that 4.5% could be more like a 50% total cut in benefits after health insurance is purchased prior to Medicare kicking in.

Example: city employee works 30 years from 25 to 55 years old and decides to retire with an immediate pension and full healthcare benefits. Now he/she gets 4.5% less in pension, but no healthcare and has to purchase it in the open market with reduced pension dollars. Depending on family situation, that could easily be 15K/year. And of course that pension is now fixed, but health insurance will rise significantly year over year taking a bigger bite out of the pension.

Numbers are so easily manipulated for political purposes.

 

[Texas Proud]

4.5% is a great number if you're trying to convince people that the situation is not that bad. If all retired health care benefits were also taken a way, well that 4.5% could be more like a 50% total cut in benefits after health insurance is purchased prior to Medicare kicking in.

Example: city employee works 30 years from 25 to 55 years old and decides to retire with an immediate pension and full healthcare benefits. Now he/she gets 4.5% less in pension, but no healthcare and has to purchase it in the open market with reduced pension dollars. Depending on family situation, that could easily be 15K/year. And of course that pension is now fixed, but health insurance will rise significantly year over year taking a bigger bite out of the pension.

Numbers are so easily manipulated for political purposes.

I do not know... did they lose health care?

Also, they could buy into the ACA market and get credits if their income is low... I do not see anybody that does not make a lot of money spending $15K on health insurance...


Edit to add... the one article I read says they did not lose their healthcare, so your point is moot...

BTW, I was looking forward to company healthcare and they changed the rules and dropped younger people... I was 6 months away from qualifying... not sure if they still have it or not as a number of companies are getting rid of this perk...

 

[Chuckanut]

Example: city employee works 30 years from 25 to 55 years old and decides to retire with an immediate pension and full healthcare benefits. Now he/she gets 4.5% less in pension, but no healthcare and has to purchase it in the open market with reduced pension dollars. Depending on family situation, that could easily be 15K/year. And of course that pension is now fixed, but health insurance will rise significantly year over year taking a bigger bite out of the pension.

One point. People must look at the ENTIRE compensation package to make a judgment about "pay".

I have a friend who does not not have a pension, but has contributed to a 401K with 4% match, and in addition, has at least $250,000 (as of 2014) in company stock he has earned over the years of his service. They are being bought out and he will cash in very soon. Oh, he also has a Cadillac medical plan for which he pays peanuts. Occasionally, he mentions my pension and my being 'lucky' to have it. I point out that I am not any luckier that he is to have a healthy 401K balance and over a quarter million dollars in the stock of a prosperous. We both were responsible and planned well.

What's going on with under funded pensions is, IMHO, the moral equivalent wage theft. And it's just plain irresponsible behavior towards the citizens, taxpayers, etc.

The best pension reform would be to deposit the 'pension' money monthly into an investment account that only the employee can access and control. No management, politician, bureaucrat, etc. has any further control or claim to the money.

I know, ain't gonna happen soon. Control of money = power.