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Thanks for the link. Actually, Jefferson County has not yet gone belly-up. They are trying to decide what to do, and filing for bankruptcy is one of their options.
Thanks for the link. Actually, Jefferson County has not yet gone belly-up. They are trying to decide what to do, and filing for bankruptcy is one of their options.
LOL, thats funny because like some folks I equate bankruptcy with going belly up. I know what you are saying but to me if you can't pay your bills you are on your back. Local bankruptcies are inevitable in some states. However Pennsylvania has recently bailed Harrisburg out for now. Not sure every state would have. Ed Rendell realized that Harrisburg defaulting on bonds would be a disaster state wide. With Build America Bonds going by the wayside for now.
Not all states or locals are in the same situation and you can't paint a broad swath and say all will or do have problems. Each person should find out for themselves the ratings of their local and state government and how their bond sales are going.
LOL, thats funny because like some folks I equate bankruptcy with going belly up. I know what you are saying but to me if you can't pay your bills you are on your back. Local bankruptcies are inevitable in some states. However Pennsylvania has recently bailed Harrisburg out for now. Not sure every state would have. Ed Rendell realized that Harrisburg defaulting on bonds would be a disaster state wide. With Build America Bonds going by the wayside for now.
Not all states or locals are in the same situation and you can't paint a broad swath and say all will or do have problems. Each person should find out for themselves the ratings of their local and state government and how their bond sales are going.
It's not only bond sales one should watch. Local tax revenue figures are another. Are they steady, did they drop drastically, etc.
This is kind of a Bah! Humbug! thread to be seeing Christmas morning. But, so on target. We retired or soon to be retirees might want to weight what gets our attention more to the fiscal side of things for both State and Local governments, rather than the attributes of weather, culture and so forth. I know my thinking has evolved more toward weighting solid civic finances, then say weather for instance.
There are few, very few courageous politicians who make the tough decisions to either facedown public unions who demand outsized pensions, or shortened vesting periods. Instead, they just quietly underfund the pension fund contributions in their budgets, letting the next administration deal with it.
Bottom line is you can't get blood out of a stone. Robyn
I had read the first article the second was interesting including high pensions taxed at 90%. That is hilarious since most of that money in state pensions is employee contributions and ROI. So why should I be willing to pay in a pension fund with money I earned. Government needs to remember as they reform public pensions that you are requiring people to participate and if it is not to their advantage to do so why should they? In a sense the increasing discussion about pensions and SS is giving even more reason to privatize each and to have a defined contribution program. If that hurts low income workers those are the breaks of government not being willing/able to meet their commitments.
There are few, very few courageous politicians who make the tough decisions to either facedown public unions who demand outsized pensions, or shortened vesting periods. Instead, they just quietly underfund the pension fund contributions in their budgets, letting the next administration deal with it.
Readingt he article it seems nobody had any thing to say or do about that pension fund but the politiicans and they messed it all up. I wonder how many of them were against a PBG type thing for public pensions?
I have a freind who works for a city governement and many years ago the state had talked about some form of PBG program for local municipal pensions. They were told by their local politicians that it would cut into their pension payouts if the city was to have to pay into a PBG type program. Lots of talk of governement takeovers, governement interference, governement control, and cuts and cost to the employee. Governement should stay out of the local city pension. Their pension is also now in trouble of being cut because they are also running out of money. They can't take a voluntary decrease to save it. They can't do anything but live or die with no protections. Now he's telling me the local city is yapping up a storm about how governement needs to step in to save their pensions, governement needs to enact laws to potect their pensions and how governement should have created a PBG type authority. The shoes on the other foot.
I had read the first article the second was interesting including high pensions taxed at 90%. That is hilarious since most of that money in state pensions is employee contributions and ROI. So why should I be willing to pay in a pension fund with money I earned. Government needs to remember as they reform public pensions that you are requiring people to participate and if it is not to their advantage to do so why should they? In a sense the increasing discussion about pensions and SS is giving even more reason to privatize each and to have a defined contribution program. If that hurts low income workers those are the breaks of government not being willing/able to meet their commitments.
I didn't agree with all the comments in that commentary (some pensions being taxed at 90% being one of them - how does federal taxation at 90% help state/local governments that are going broke?).
I've never been a government employee - but my impression is no matter what the employees contribute - the benefits are too high for many people for a variety of reasons. Early retirement ages after relatively short periods of employment. COL provisions. Double-dipping. Jacking up incomes by various means (like overtime) right before retirement to increase pensions. Etc.
Also - with regard to a large majority of defined benefit plans (public and private) - the actuarial assumptions haven't caught up with current investment realities. Many plans are assuming 8-9% for the next 30 years - although it isn't likely that returns will be that high. If I did that in terms of managing our investments - we'd probably be broke long before we were dead.
There's one fellow whose name I forget who has a proposed a radical restructuring of allowed pension investments and future actuarial assumptions. Namely that investments should only be allowed in very safe long term bonds - and that assumed future returns should be based on the interest rates on those bonds. IOW - if the 30 year t bond is yielding 4.5% - that's your return assumption - 4.5%. And you match your current investments with your future liabilities using that 4.5% return. Of course - the best way to do that is with a zero coupon bond - like a STRIP. You buy a STRIP today - you know exactly what you'll have X years down the road (unless the US goes broke - an issue that's outside the scope of this discussion).
Anyway - I like what this guy has to say because that's the way I've invested (before and during retirement) and spent for years. And it's worked out ok. I actually didn't underperform equities in the 80's and 90's because interest rates went from very high to low (and STRIPS outperformed stocks). And I did ok after 2000 (when just about any fixed income investment - even CDs - outperformed domestic US equities).
For the most part - it is much easier for me to control what I spend than control what I earn outside a fixed income environment. And - the older I get - the less likely I am to trust guesses about future investment returns (no matter what they're based on). Robyn
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