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Old 04-10-2019, 10:25 PM
 
25,586 posts, read 27,939,755 times
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Government pensions not bailed out by higher returns.

The short answer is too much was promised at the worst possible times when they knew a large wave of Baby Boomers was going to start collecting them.

In the 1980s and 1990s, double-digit stock and bond returns convinced governments they could afford widespread benefit increases.

Problem is, they couldn't afford those increases.

But the value of their holdings—their assets—began to fall in the aftermath of the dot-com bust in the 2000s, and the 2008 financial crisis followed soon after. State and local retirement systems lost 28% in 2008 and 2009, according to the Boston College data.

“The first thing you have to do is make up what you lost,” said Sandy Matheson, executive director of the Maine Public Employees Retirement System. “And it takes years. And then you have to make up what you didn’t earn on what you didn’t have. It’s a pretty steep climb.”


We're going to be in serious trouble if the stock market has a major bear market.

https://www.msn.com/en-us/money/mark...ons/ar-BBVN7Ia
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Old 04-11-2019, 01:48 AM
 
69,301 posts, read 69,893,196 times
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the problem is more people are living to older ages as well ... pensions count big time on mortality credits and those who die earlier pay for those who live ..... with the odds of one in a couple living to 90 at almost 50% if they are 65 that is a big drain ...

unlike you or i pension funds and annuity companies can make big dollars on even low returns because of mortality credits ...

if 30 of us buy a 30 year bond at 3% we get 3% ,,,, no biggie ...... if we had a deal that if one of us dies a year that money is put back in the pool , by the end of 30 years that last man standing gets a whopper of a return from that 3% bond .....

so pension's and annuities get very different results from the same investments we do by design ... but the longer people live the cumulative effect hurts more
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Old 04-11-2019, 02:17 AM
 
25,586 posts, read 27,939,755 times
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Quote:
Originally Posted by mathjak107 View Post
the problem is more people are living to older ages as well ... pensions count big time on mortality credits and those who die earlier pay for those who live ..... with the odds of one in a couple living to 90 at almost 50% if they are 65 that is a big drain ...

unlike you or i pension funds and annuity companies can make big dollars on even low returns because of mortality credits ...

if 30 of us buy a 30 year bond at 3% we get 3% ,,,, no biggie ...... if we had a deal that if one of us dies a year that money is put back in the pool , by the end of 30 years that last man standing gets a whopper of a return from that 3% bond .....

so pension's and annuities get very different results from the same investments we do by design ... but the longer people live the cumulative effect hurts more
Yes, the article mentioned life expectancy. However, life expectancy in the U.S. has stalled the past few years, so I would think that would have a slightly positive effect on pension finances. Of course, the people getting the pensions might not be the ones suffering from decreased life expectancy.
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Old 04-11-2019, 02:29 AM
 
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Originally Posted by mysticaltyger View Post
Yes, the article mentioned life expectancy. However, life expectancy in the U.S. has stalled the past few years, so I would think that would have a slightly positive effect on pension finances. Of course, the people getting the pensions might not be the ones suffering from decreased life expectancy.
life expectancy stalled as far as exceeding the top ages , but not the number of people living to older ages.

more people then ever are living to 90
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Old 04-11-2019, 05:55 AM
 
Location: Wooster, Ohio
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When I started under Ohio PERS in 1982, the formula was 2.1% per year, with a maximum of 90%. This was changed to 2.2% for the first 30 years, followed by 2.5% per year with a maximum of 100%. Both of these were based on the 3 highest salary years.

Now that the baby boomers are retiring, they are having to cut back on benefits. In addition, paid healthcare for spouses has been eliminated, and Ohio PERS continues to point out that they are not required to provided any healthcare coverage.

Those of us who were employed prior to April 1986, and did not change employers, did not pay into Medicare, and did not earn Medicare credits. I got a part-time job after retirement so that I could earn my remaining Medicare credits, just in case Ohio PERS ends its Medicare Part A payments to those grandfathered employees.

It took the Ohio legislature a long time to implement the changes recommended by Ohio PERS. They said they were studying the issue. I suspect they were delaying the changes in order to benefit themselves.
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Old 04-11-2019, 09:18 AM
 
306 posts, read 225,234 times
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Frontline did a pretty good story on this, focusing on Kentucky's system. While they attribute it to bad management mostly, I think it is compounded with sweet deals being given out, and slow process of bringing those promised pension amounts under control.

High replacement rate of income, including overtime in salary calculations, requiring little to no contribution from the employee in their pension. At least in NY a lot of these items have been reigned in, especially considering salaries have been shifted upward to be more in-line with private salaries at least for the mid to low level employees.

Life expectancy should have been planned for. I guess they could always eliminate health coverage as part of these packages in the hopes that the reduced care will translate to shorter lifespans.
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Old 04-11-2019, 09:18 AM
 
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Because government in general does not understand basic financial principles / concepts.
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Old 04-11-2019, 09:35 AM
 
306 posts, read 225,234 times
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Originally Posted by SWFL_Native View Post
Because government in general does not understand basic financial principles / concepts.
Probably more accurate to say that politics don't care unless it affects votes. And it takes a long time for it to get to the point where it hurts.
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Old 04-11-2019, 10:47 AM
 
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Originally Posted by Energystream View Post
Probably more accurate to say that politics don't care unless it affects votes. And it takes a long time for it to get to the point where it hurts.
No they clearly have no concept as this was passed in 2014 as part of the Highway bill. It relaxed the amount that corporations were required to contribute toward pension funding (sinking fund). This allowed corporations to overstate income while the IRS could impose incremental taxing on corporate income to pay for the roads.

https://taxfoundation.org/highway-bi...immick-primer/
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Old 04-11-2019, 08:12 PM
 
Location: Was Midvalley Oregon; Now Eastside Seattle area
3,674 posts, read 1,690,576 times
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Oregon has $22billion pension liability on a population of ~4.2 million. About 78% funded.
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