Fear / Greed and AA

[Major Tom]

I may be mistaking what you are saying. Do you mean that you start out spending, say, $40K/yr, and 30 years later you are still spending $40K/yr? If so, your financial quality of life will be devastated. Even at 1%/yr inflation, you would be living on less than 3/4 what you started with. And I don't think anybody is predicting ongoing 1% inflation. At a more standard 3% you would be living on the equivalent of $16.5K per year. That's below the poverty level.

But, as I said, I may have misinterpreted your example.

I seem to recall Obgyn saying that a COLA'd pension was in his future. Depending on how big a part of his retirement plan it is, the COLA may just be his savior.

 

[Alan]

For some weird reason, my post ended up in this thread instead of the one it was intended for. As I am not allowed to delete it, I am editing it instead.

Strange

 

[Mulligan]

Evaluating counterparty exposures like this is inherently challenging. I think you want to look at a couple of things I think are more important than the pension fund's asset allocation. First and foremost, how well funded is the plan? I would check how things look more recently as the level of long term interest rates affect the measurement of how well funded pension plans are. If the plan is reasonably well funded, you probably don't have much to worry about. The second thing I would be looking at is the condition of the pension sponsor and their interest in keeping the plan funded. Is the sponsor in good shape financially? If they are, is the pension still open to current employees or has the sponsor closed the pension and looking to minimize its exposure to the ongoing liability? I would say only if the plan is materially underfunded and you are unlikely to get any help from the pension sponsor to make it up would it be worth delving into what the plan assets are invested in.

It's a teachers pension that is funded with a 14.5% contribution with mandatory district match that occurs simultaneously each month. The annual report came out recently and I was expecting to see the funding ratio of the system jump from the 17% returns it made this year. I was surprised to see that it actually dropped a percent lower to 83% prefunded. They assume 8% as needed to fully fund system. So I guess the 5 year "smoothing out process" average is what is pulling down the number as that 08-09 year is still on the books. It goes off next year so I assume the funding ratio would jump at that point.

 

[brewer12345]

It's a teachers pension that is funded with a 14.5% contribution with mandatory district match that occurs simultaneously each month. The annual report came out recently and I was expecting to see the funding ratio of the system jump from the 17% returns it made this year. I was surprised to see that it actually dropped a percent lower to 83% prefunded. They assume 8% as needed to fully fund system. So I guess the 5 year "smoothing out process" average is what is pulling down the number as that 08-09 year is still on the books. It goes off next year so I assume the funding ratio would jump at that point.

I guess I would not be too concerned about that situation. The other piece worth looking at is the ratio of incoming contributions to current payouts. If half or more of the payout I covered by incoming funds, it would take a lot to get the fund to expire before you do.

 

[Mulligan]

I guess I would not be too concerned about that situation. The other piece worth looking at is the ratio of incoming contributions to current payouts. If half or more of the payout I covered by incoming funds, it would take a lot to get the fund to expire before you do.

Brewer, I found that information. I guess you just have to look for it huh? Contributions this past year was 1.5 billion, and out going to retirees like me was 2.3 billion. Investment returns was 3.7 billion with 34 billion in total assets. So based on what you said, that is a positive, correct?

 

[brewer12345]

Brewer, I found that information. I guess you just have to look for it huh? Contributions this past year was 1.5 billion, and out going to retirees like me was 2.3 billion. Investment returns was 3.7 billion with 34 billion in total assets. So based on what you said, that is a positive, correct?

Seems to me you would have to have a prolonged disaster to run out of money in the next 20 years.