What has the world come to??!

[MRG]

I've managed to educate my DW which means even those with next to no math skills can understand. The breakthrough was when she read Millionaire Teacher. That book is simple to the extreme. It covers the required points clearly with almost no math. Most forum participants would be bored by it but it may be of use for spouses and others that aren't up to tackling Investor Manifesto.

+1 on the Millionaire Teacher, just read it as my DS asked for something simple. I ended up keeping the copy for myself, with a recommendation to her, of start here.

MRG

 

[fritz]

Here is my sentiment.

Compared to when my parents were my age, I think the finance every John and Jane have to deal with nowadays is much more complicated. In the old days, you went to work, did your work, got paid, saved a little money, and got your company pension and social security after you reached your retirement. (I know I am simplifying things, but you probably didn't need a high IQ to navigate to old age as much as we do now....) I know people invested money too, but not to the extent we do now. In this modern day and age, everyone needs to know a lot about finance. They cannot just go to work, and get paid and go their married ways. They have to think about a whole lot more about where to put money (401K, Roth IRA, Traditional IRA, bond, equities, this and that) to make sure they have money in the retirement years. I see a lot of people who post here are engineer types, and some finance, some entrepreneurs. I am in the IT field myself, and I don't consider myself stupid (well, only some of the time) but this finance stuff is very complicated and these are things I have to read books on or read blogs or come to forums like this for to learn. There is so much to know and digest. It's not just investing per se, but how about healthcare? How about Social security?

The thing is (I don't mean to sound snooty at all), I don't think the majority of the forum members here are an average, median income, average intelligent groups of folks. So I get that people here can navigate through this "do it yourself" finance world definitely much better than average. But how do people who haven't graduated from high school, or don't have an average IQ supposed to navigate through all this c*rap?? I have a college degree, and this stuff is still pretty hard for me, because there are so many moving parts to consdier! I really wonder how someone with less knowledge/education deal with this. I am originally from Japan, and majority of the people there do not have to deal with all these choices we deal with in the US.

Are there free institutions who lead *regular* folks? Many of the people cannot just pick up books and figure things out...

Thought I'd address the items (in bold) in your original post:

In the old days, it wasn't just do your job, save some money and rely on your pension and Social Security in retirement for everyone. I see the main reason for the the elimination of pensions in the private sector as the difficulty of maintaining them, the decline of unions, and the costs associated with keeping them in place. A lot of folks lost pensions in the past - company folded/bought out, or were fired/quit before they were vested. It took a long time to be vested in a pension in the good ole days.

Investing for retirement isn't all that difficult. The responses to your post about investing in index funds and living below your means will go a long way towards insuring you'll have some form of retirement when the time is right.

I personally believe that employers should not have the responsibility for managing your retirement investing. Every person should be required to set up their own individual retirement account (with a government certified investing institution ie. Vanguard, Fidelity, etc.) when they enter the working world. This would be (as originally intended) a supplemental retirement investing vehicle for Social Security - which I don't see going away anytime soon. These institutions could also tie your Social Security account reporting to their accounting as you no longer receive any reports from SS. Employers who offer to contribute to your retirement would just forward the funds to your individual retirement account as they do with your current employee 401k. This would keep you personally involved and your eye on your retirement goals as you age.

I also don't believe that healthcare should be managed by one's employer. Where you work should not determine the quality and accessibility to healthcare

I've spent a lot of time researching individual investing. I've read a lot of books on the subject and attended a few seminars. I came to the conclusion that even the smartest out there on the subject of investing can't tell you what to buy in the market tomorrow. There are a lot of professionals in various industries (insurance, financial, etc.) who will gladly take your money and manage it for you, who don't always have your best interests at heart. This is where the people who apply themselves and learn the finer details of investing come out ahead. You have your choice in this area when it come to individual investing, but leaving it to someone else always comes with a price....

 

[Which Roger]

One of the problems that people get into is that they think they need to know everything about investing... which is not true... A car is a very complex piece of equipment and almost everybody that I know can pick up how to use it pretty quickly.... the same can be said for investing.... if you WANT, it can be very simple.... as I told one guy a few years back who was just starting to save in his 401.... just put it all in a retirement dated fund.... you do not have enough to worry about.... and if he never did invest in another fund, he probably will do just fine.... He did not have to learn about how markets work, about risk, etc. etc....

Most people who do not act do so out of fear... fear that they will make a big mistake.... but their mistake was not doing anything....

I agree that people don't need to know everything about investing. Furthermore, the things about investing that are important to know (minimizing costs, having an asset allocation within your risk tolerance, etc) have nothing to do with the things that the Wall Street sales force wants you to think are important (how to pick an undervalued stock, how to get your hands on the best-performing funds), etc. The guy you refer to is a success story - he tuned out all the noise. But if one only has a sound bite education on investing, settling for the "average" performance provided by a target-date fund is counter-intuitive. The sound bites tell you to chase yield (with no mention of the additional risk), time the market, and buy all of the hottest funds.

 

[Amethyst]

You go!!!! Spot on.

I do think there is a fair amount of public-pension-baiting on the board, though, and so I refuse to rise to silly statements about everyone getting ginormous pensions. Funny that we do not have nearly as much megacorp-huge-bonus-and-generous severance-package-baiting. Everyone always thinks those are wonderful. Still, many of those high-paying companies make their money off governments, after all

Amethyst

Oh, for Pete's sake! This article is about a small number of retirees (in Lakewood and other cities of the Puget Sound region, not Seattle) who are taking advantage of a loophole in an obsolete pension plan, and about the fact that this loophole allows their former employers to provide a retirement incentive in the form of a last-minute salary hike, at small cost to the employing city, but creating a large expense for the State of Washington, which has to pay the artificially inflated pension. First of all, to the best of my knowledge, only a minority of public employees--law enforcement and fire fighters--were ever able to enroll in this plan. Second, the plan which allowed these very high pensions was replaced in 1977, and, according to the article, there are only about 200 people in it who haven't retired yet. The replacement plan does not allow "spiking", which is how the specific retirees mentioned in the article come to have such high pensions. Pension benefits under LEOFF2 are based on the 60 highest paid consecutive months' salary.

While supposedly withdrawing your original comment, you again imply that many public sector retirees draw outlandishly high pensions. Most of us didn't make as much as Bronske, McGovern or Hull when we were working, let alone after retirement. In fact, the article says these three are getting more in pension than Seattle's current fire chief is getting in salary. I'm a public sector retiree, and I'm fed up with hearing the fable of widespread six-figure public pensions repeated over and over as if it were an indisputable fact. Now you know better, and I hope next time you have occasion to mention the topic, you'll at least be more specific and not paint with such a broad brush.

 

[modhatter]

I agree that people don't need to know everything about investing. Furthermore, the things about investing that are important to know (minimizing costs, having an asset allocation within your risk tolerance, etc)

Just remember those things you mentioned:
1. Minimizing costs
2. Having an asset allocation
3. Within your risk tolerance

People totally new to this world, have no idea what "costs" are and when they learn, what is reasonable and what is not and the effects of these costs long term.

Second, "having an asset allocation". Most don't even know what that means, no less figuring out what combination would fit your risk tolerance.

Last, Risk tolerance. I don't think someone could informatively answer that question before they understood the "market" and the history of stocks bonds, and their inherent risks and advantages.

So, yes, easy for you to make these statements because you have learned all the basics. But for someone just entering this new world, they haven't a clue what your talking about or at least an "informed" understating of what your talking about.

If your family didn't teach you about the market, and your school didn't teach you, you know squat. So in the beginning you can be clueless and feel overwhelmed. Just my opinion.

By the way. I just went on Amazon and read all the reviews on the book that a couple of posters mentioned.
Millionaire Teacher. It seems just the ticket for a "newbe" I wound up ordering it for my son. I think judging from the comments that the author will do a better job than I could, and besides our kids don't think we know anything anyway.

 

[rmark]

'In the old days, you went to work, did your work, got paid, saved a little money, and got your company pension and social security after you reached your retirement.'

Actually in the old days you worked until you died or were disabled, at which time you lived with relatives. Also, less than half of all workers ever had a pension.

 

[Amethyst]

Boy, that would so not happen now. Vanguard and others would gladly take anybody's $1K, never mind their age. So that is one thing that is better today than yesterday.

I also remember many young enlisted personnel being keen to spend their enlistment bonuses on muscle cars and fancy stereos. Their First Shirts tried to get them to put the money away, but who can tell an 18-year-old what to do? Frankly, I didn't blame them much. As I got to know some of them, I learned most came from backgrounds with no luxury at all, and the gadgets and cars were the first nice things anybody in their family had ever owned.

Amethyst

I

I remember when I was a young 18 year old "slick-sleave" Airman Basic and went down to the local Merrill Lynch office in Colorado Springs. The broker wouldn't take my $1000 to open an account. Said I needed a minimum of $5000. I think he just didn't want to deal with a child. .

 

[kyounge1956]

It is unfortunate though that bonds have been yielding negative real returns for the past few years.

I think the majority of the public distrusts the stock market and yet that is the only way their 401K has a chance at matching the 8% guaranteed rate of the defined benefit pension.

There is no taxpayer bailout for the 401K if you keep it all in treasuries paying negative 1% real.

Education is needed.

Unfortunately, that 8% is not guaranteed, but rather assumed. It's what pension fund managers, actuaries et al use when they calculate the pension fund's return rate. Unfortunately, lots of pension funds don't actually achieve an 8% return, and that is part of the reason so many of them (including mine) are woefully underfunded.

 

[imoldernu]

Retirement Planning is a Generational based process, and the skills required to produce long term success, is a work in progress. Asset allocation and safe withdrawal rates are the current factors that receive the most attention, as well as the cost of healthcare, for those in the 40 to 65 age group.

It wasn't always so, and understanding a bit of the past may help put some perspective on the probability of change in the future.

A few points...
Pension was a word that covered more than what we now know as "defined pension plans. In my first job, with Sears, (late 50's), there were older employees who were retiring with substantial "pensions" which in fact were profit sharing plans, or ESOP''s (Employee Stock Ownership Plans). Two "retirees".... who were mens suits salesmen, retired with more than $300,000... a tidy sum in 1959. ($2.4 Million in today's dollars.

IRA's were not available before 1974, and then only allowed based on income, with a maximum annual investment of $1500.

Instead of bank interest rates of less than 2%, depending on the year, even bank money market rates were as high as 14%.

The FDIC guarantees were limited to $20,000 as late as 1970. The increase in the limits over the years encouraged bank savings to limit risk.

Housing Values grew quickly (before the housing bubble)... as much as 43%, nationally in the 1970's (even with inflation adjustment).

Averge College costs (tuition and fees) have increased 1120% since records were kept (1978).

The concentration of wealth, which had been nearly even until 1980, skyrocketed after that, to 155%, leaving the median income lower relative to those earlier years. Basically that means earlier savers/retirees in those years were able to accumulate retirement funds at a comparatively higher rate than the younger generation.

The same incremental increase in pay (salary) differential applied, with wages generally following inflation. Of course high technology also affected the reduction in the manufacturing wage rates.

Most of the above factors were in play, during my own working years, 1958- 1989... and helped in providing the small safety net that we use in retirement. Investing per se... stocks and bonds, was not a major part of our plan.

No real point to be made here, except for a different look at the accumulation of money for retirement...
...and to bring up the fact of change, to realize that what makes perfect sense today, could change, in the face of the rising national debt, and any longer term lag in the economy.

For anyone with a financial philosophical bent, there are some interesting alternatives to the economy as we know it today. One that catches my fancy come from CESJ.org... which offers some alternate economic theories.
Here are some of the individual subjects:

Binary Economics
The Just Third Way
Louis Kelso (ESOP Guru)
Capital Homesteading

My opinion only

 

[clifp]

Here is my sentiment.

Compared to when my parents were my age, I think the finance every John and Jane have to deal with nowadays is much more complicated. In the old days, you went to work, did your work, got paid, saved a little money, and got your company pension and social security after you reached your retirement. (I know I am simplifying things, but you probably didn't need a high IQ to navigate to old age as much as we do now....) I know people invested money too, but not to the extent we do now. In this modern day and age, everyone needs to know a lot about finance. They cannot just go to work, and get paid and go their married ways. They have to think about a whole lot more about where to put money (401K, Roth IRA, Traditional IRA, bond, equities, this and that) to make sure they have money in the retirement years. I see a lot of people who post here are engineer types, and some finance, some entrepreneurs. I am in the IT field myself, and I don't consider myself stupid (well, only some of the time) but this finance stuff is very complicated and these are things I have to read books on or read blogs or come to forums like this for to learn. There is so much to know and digest. It's not just investing per se, but how about healthcare? How about Social security?

You are right financial decisions were simpler back in the old days. Mostly cause old people didn't have any money. If we go back 50 years ago, roughly 1/3 of the population had pensions and the rest had social security. There was no 401K, IRAs, no Medicare. People worked longer and had shorter retirements due to a lower life expectancy. Now some folks were wealthy, had stocks and bonds, and real estate, like one of my grandparents, but for the most part they had money in savings accounts and not a lot of it. Like my dads parents who worked until their late 60s.

One of the biggest changes in the last 50 years, were those over 65 use to be the second poorest after under 25 group,now those over 65 is the second most affluent group after the 50 years old who are at their peak earnings.

Anyway if you have no saving or investments and just depend on Social Security like 46% of single people do, financial decisions are much easier.

Compared to the alternative all in all I am happy to have to worry about these complexities.

 

[Walt34]

Frankly, I didn't blame them much. As I got to know some of them, I learned most came from backgrounds with no luxury at all, and the gadgets and cars were the first nice things anybody in their family had ever owned.

Amethyst

That's about where I came from, and at age 24-25 I was just thrilled that I could afford my own apartment, a 4-year-old car that was paid for and didn't need to be up on jack stands every other week with me under it, and some money in the bank. It had a lot to do with why I bought an airplane and spent most of my discretionary income on that for the next two years.

Retirement was so far over the horizon I didn't give it a thought.

 

[Midpack]

Interesting thread!

Compared to when my parents were my age, I think the finance every John and Jane have to deal with nowadays is much more complicated. In the old days, you went to work, did your work, got paid, saved a little money, and got your company pension and social security after you reached your retirement. (I know I am simplifying things, but you probably didn't need a high IQ to navigate to old age as much as we do now....) I know people invested money too, but not to the extent we do now. In this modern day and age, everyone needs to know a lot about finance. They cannot just go to work, and get paid and go their married ways. They have to think about a whole lot more about where to put money (401K, Roth IRA, Traditional IRA, bond, equities, this and that) to make sure they have money in the retirement years. I see a lot of people who post here are engineer types, and some finance, some entrepreneurs. I am in the IT field myself, and I don't consider myself stupid (well, only some of the time) but this finance stuff is very complicated and these are things I have to read books on or read blogs or come to forums like this for to learn. There is so much to know and digest. It's not just investing per se, but how about healthcare? How about Social security?

A few thoughts. Life has always become more complicated for successive generations. The idyllic period you describe above would have seemed "very complicated" for someone living 100 years earlier. The rate of change seems to come more and more rapidly, and that may continue.

OTOH, the physical challenges of everyday life have become far less demanding with generations as well. Life was more physically tough for 99% of the population years ago too. Obesity was nearly unheard of long ago, everyone worked too hard and food was scarcer.

Progress takes many forms...

The thing is (I don't mean to sound snooty at all), I don't think the majority of the forum members here are an average, median income, average intelligent groups of folks. So I get that people here can navigate through this "do it yourself" finance world definitely much better than average.

It is an above average group, but not an investing elite by any means. What differentiates this group is not IQ as much, but they've figured out it's not as complicated as most people think ironically. Successful investing is not rocket science, the methodology is pretty easy - you certainly don't have to be an engineer or the like, though it helps. There are plenty of very smart people who are bewildered by investing for a variety of reasons. And I know some pretty simple folks who have done very well investing for themselves without a lot of study. They worked at it while their friends looked for an easy way out, a silver bullet.

And still more who never figure out you have to spend less than you make to have any chance at all - how much education does it take to grasp that? Almost none...

But how do people who haven't graduated from high school, or don't have an average IQ supposed to navigate through all this c*rap?? I have a college degree, and this stuff is still pretty hard for me, because there are so many moving parts to consdier! I really wonder how someone with less knowledge/education deal with this. I am originally from Japan, and majority of the people there do not have to deal with all these choices we deal with in the US.

The less educated have always led more challenging lives I'd imagine, and it's probably gotten more difficult as you suggest. Many would say more/better education is essential - but that's another thread.

 

[Khufu]

Most of the increased complexity is due to the Great Risk Shift described in a book of that title by Jacob Hacker. Over the past 30 years or so many kinds of risk have been moved from employers to employees, e.g. retirement funding, tenure of employment, cost of health insurance and availability of coverage, cost of substitutes for inadequate public education, etc. To say nothing of declining real wages for the lower half of wage earners. To take just one example Blue Cross Blue Shield was started as an insurance program by the hospitals themselves. They charged everyone the same premium and didn't attempt to segment risk by excluding pre-existing conditions. Over time health insurance providers were permitted to segment risk by excluding sick people increasing their profits no doubt but failing in their primary mission to provide access to health care.

So across the board the deck has been stacked against workers as a whole. Sure there will always be some people who manage to succeed, but that doesn't change the basic facts.

 

[Chuckanut]

I had no idea everyone in the public sector gets a $140K pension.

Dang! I need to ask them to refigure my govt pension. It doesn't amount to 20% of these numbers!!!

 

[Chuckanut]

While supposedly withdrawing your original comment, you again imply that many public sector retirees draw outlandishly high pensions. Most of us didn't make as much as Bronske, McGovern or Hull when we were working, let alone after retirement. In fact, the article says these three are getting more in pension than Seattle's current fire chief is getting in salary. I'm a public sector retiree, and I'm fed up with hearing the fable of widespread six-figure public pensions repeated over and over as if it were an indisputable fact. Now you know better, and I hope next time you have occasion to mention the topic, you'll at least be more specific and not paint with such a broad brush.

There are many people on this site whose pension and retirement package from MegaCorp are far superior to what those working in the public sector get.

One can 'prove' anything by cherry picking examples.

Oh, keep in mind that most public employees pay into their pension, anywhere from 6-14% from what I have read. So some of that payout is simply a return of their own money and the earnings on that money.

 

[Fermion]

I can point to many people who have worked for 20 years and do not have $20,000 in their 401K. The person with the government pension of even $30,000 per year is in MUCH better shape.

If you are making $40,000 a year in the private sector, how can you contribute $17,500 to your 401K?

The outliers are the people in the private industry who are making $150K plus a year and max their 401K, Roth, and save in a taxable account. You can compare these people to the people who have $140,000 a year government pensions.

For the vast majority who don't know how to save or who make so little that it is incredibly hard to save a meaningful amount, the public sector pension wins hands down.

We have to compare apples to apples here.

 

[brewer12345]

Just to avoid some of the bickering and offer a glimmer of hope, Colorado now requires financial literacy as part of the curriculum starting at 3rd grade. My daughters' school adopted it last year (a year early) and my then-3rd grader had an amazing experience. They created a "mini society" that included a currency. The kids had to participate in a couple bartering sessions to understand why we use money. They had to earn money in various jobs, some of which you had to apply for (my daughter became the banker). They then had to come up with a product idea, do a market survey to understand demand, produce a finished product with a specified budget, figure out how to price it, buy storefront space (with price differentials based on location in the gym), and sell their product. My daughter learned a ton and it was a nice way to introduce the idea of entrepreneurship.

 

[Chuckanut]

The less educated have always led more challenging lives I'd imagine, and it's probably gotten more difficult as you suggest. Many would say more/better education is essential - but that's another thread.

Very True. Like my old Grand Pappy used to say when asked if he had bought a lottery ticket, "Government lotteries are a tax on people who didn't study their math."

Of course, I know many very smart people who buy lottery tickets, but at least they know they are paying a voluntary tax.

 

[Chuckanut]

What sets the posters (and lurkers) on this board apart from the rest of the population isn't so much their incredible mental prowess/financial acumen as their ability to see that they have a personal future out there that needs to be planned for. We have people on the board who can't bring themselves to invest in those incredibly risky things called equities, and we have people who have difficulty investing in anything less risky than microcaps, and most of us are somewhere in between. The similarity between these people isn't in their ability to read and react to the financial winds, but to see that they are going to need to provide for themselves when they can't (or decide not to) work any more. Saving 20% of your salary and stuffing it in a shoebox, while unsophisticated, is much better preparation for retirement than saving 5% of your salary, investing in a sophisticated portfolio of hedge funds, and running up credit card debts. The shoebox guy is probably lurking on this board, while the sophisticated guy is on the BMW board.

We come together on this forum to share ideas about where to live, how to live, how to live efficiently, how to support ourselves, how to enrich our lives in retirement. I don't think we do that because we're smarter on average than other groups, but because we're paying attention and trying to plan for that phase of our lives. We're all gratification postponers. Okay, maybe smarter-than-the-average-bear gratification postponers.

+1 Well said.

 

[Chuckanut]

Just to avoid some of the bickering and offer a glimmer of hope, Colorado now requires financial literacy as part of the curriculum starting at 3rd grade. My daughters' school adopted it last year (a year early) and my then-3rd grader had an amazing experience. They created a "mini society" that included a currency. The kids had to participate in a couple bartering sessions to understand why we use money.

This sounds like a good idea to me.

Those who want the schools to do more teaching of this-or-that, need to also tell us what should be dropped to make room for the new material.

In my experience, we had well intentioned people who wanted to add the following to the subjects taught in middle school: swimming, gun safety, animal protection, personal safety, and good manners. These are only the ones I can remember at the moment. Not one offered any suggestions as to what to drop to make room for these new curriculum. I can assure you that whatever is dropped also has a constituency who thinks it's to important to be dropped.

Anyway, back to the subject at hand. Even the most basic savings habits have got to be better than the financial planning done by 50% of the American public. Our non American friends might want to chime in here concerning how things are done in other countries. One of the biggest reasons for continuing SS, IMHO, is that without it we would have a huge increase in older welfare recipients.

 

[bradaz2488]

I wonder... If we could go back in time 30-40 years and talk to people getting ready to retire would they think financial investing & AA was complicated back then? Were they just blindly going into retirement because that is what you did at age 65 and you trusted that your savings, pension & SS would always be there and keep up with inflation. They did not have EXCEL spreadsheets or other tools (i.e. FIRECal) to help them run various best & worst case scenarios.

Now stepping on soapbox..These people were America's greatest generation having been brought up during the Great Depression and living thru WWII as young adults. I can not even imagine what that would have been like to live during those times. Every generation after that (including me) has been on a path of being spoiled and a sense of entitlement. Stepping off soapbox ...

I love my parents but I did not learn the value of the "dollar" and saving for the future from them. My Grandfather thought me the value of saving and building wealth over time. Making your money work for you. He was not a collage graduate or have a above average IQ. He just understood the value of hard work, discipline & saving. Ironically because he lived during the Great Depression & WWII he did not spend any extra money on travel or hobbies when he retired at 60 and died at 90. He was always scared that he could loose it all at anytime. I think this is very common for people who lived during those times..

I totally agree with the OP that it has gotten very complex to manage your finances to ensure you will have enough to retire. The technology & information age has really change things for the good & bad and it's hard to know if the information you get is real and who to trust. So many financial options & vehicles to choose from which is good, but it makes it more complicated. I'm willing to bet that people in the financial world had more integrity 30-40 years ago and were really looking after their clients best interest, so maybe this is why it was not complicated back then. Not so much now. Most people now are only looking after their best interest so you have to constantly verify, trust and then verify again. This takes a lot of time & energy.

Sorry for rambling... Bottom-line. I do not think you have to have a collage education or above average IQ to reach FIRE. Education on developing good work ethics & how money works need to happen early in life. Need to allow kids to fail in life. Teach them it is okay to fail and it is how your recover from failure is what really matters in the long run.....

 

[kyounge1956]

This sounds like a good idea to me.

Those who want the schools to do more teaching of this-or-that, need to also tell us what should be dropped to make room for the new material. (snip)

ISTM that financial literacy topics could (and should) be included in a standard math curriculum. For example, at some point the students are going to be taught about exponents. Why not do this in the form of, say, calculating future value instead of random problems asking what is this number raised to that power, without ever being shown how the ability to make such calculations will be useful to them in the future?

 

[tmm99]

ISTM that financial literacy topics could (and should) be included in a standard math curriculum. For example, at some point the students are going to be taught about exponents. Why not do this in the form of, say, calculating future value instead of random problems asking what is this number raised to that power, without ever being shown how the ability to make such calculations will be useful to them in the future?

+1

 

[gozer]

Fairer, certainly...perhaps even a little off in the other direction. I don't want to minimize the value of a defined benefit pension, which many public employees receive and I think most private sector workers don't. The fact that I have a pension is what makes it possible for me to retire at all, as I didn't start saving seriously for retirement until about five years before I pulled the plug. I doubt that many private sector workers would have been able to retire at 57 in spite of having procrastinated for so long.

It's just a sore point with me that so many people seem to think many if not most public employees receive outrageously high pension benefits, which just isn't the case. I think generally the pension is proportional to pay--high earners get big pensions, modest earners get small ones. I do agree (with the author of the article, and I think the majority here on ER) that "spiking" is an abuse that should be eliminated from pension systems.

I think we have arrived at a point in this back and forth that is closer to my personal beliefs. I would add that when somebody gets a wildly lucrative pension in the private sector, most people are less angered because it was a company spending its own profits as opposed to a government spending those same peoples tax dollars. Even though the lucrative private pension might contribute to higher prices for their goods or services, people are usually free to not use and not pay for those products. It is harder to legally withhold money from the government when you disagree with how the government is spending the money. I think this kind of thing along with the fact that private pensions are almost a historical footnote is why people have such a problem with public pensions.

Both kinds of pensions should have been based on reality and should have been more sustainable. We should never have had the "work 20 or 30 years and then retire on almost your full salary with almost free medical care" kind of pension. e.g. My mother in law paid $7 a month for coverage prior to medicare. That same policy for just my wife was almost $700 on the ehealthinsurance site 2 years ago when I looked. I don't think plans, that were this generous, were ever sustainable. Unless, of course, you believe this planet can support continual heavy population growth forever.

In the private sector, when we reached a point where the numbers failed to work and began to hamper domestic companies as they competed with foreign companies, private pensions began quickly changing and then dying/closing to keep up with the changing situation. Public pensions have also been effected by budget issues, but not as many or as much, yet. Now governments are having much greater trouble balancing budgets. It seems that public pensions are getting more attention then ever before. Since many private workers already had their pensions taken or reduced, there is not a lot of sympathy from this crowd. Too me it seems to be more of a "now it's your turn kind of mentality."

Full disclosure: both my wife and I have private pensions that are not that bad. They are a step or two below what auto-workers had years ago, but no longer provide any medical benefits in the future (PPACA killed that, or gave the company the excuse to kill it). Our pension plans have been closed to new employees for years. Like many plans they earn most of their benefit in the last few year before your full retirement age. (age credits, years of service credits, etc) My company just took steps to insure that the surge near the end isn't going to happen for any more people. Since I am leaving soon, it doesn't change anything for me.

 

[gozer]

I think part of it is that a few news stories about exceptional out-of-the-ordinary pensions create a mental "anchor point" and that creates the perception, ignoring the reality, that all public service pensions are lavish six-figure ones.
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+1, it's the same with welfare cheat stories or outlandish spending by famous people or investment bankers gone wild, etc. Outrageous is memorable. Normal and reasonable are not.