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Old 01-11-2016, 06:45 AM
 
633 posts, read 465,915 times
Reputation: 1103

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Quote:
Originally Posted by AlaskaErik View Post
It's hard to argue with someone drinking all that Kool-Aid, but the fact of the matter is that only about three states are fully funded. And as budgets tighten, taxpayers will be upset that public sector employees are making more in retirement then they are making working. This isn't a Wall Street issue. Look at what happened in Detroit. That's what's going to be happening at the state level. And the family making $40,000 a year in the private sector isn't going to be too happy about paying higher taxes so the retired public sector family can keep getting their $120,000 a year retirement. I saw a study about California firefighters. It takes 24 currently working firefighters to pay the retirement income of one firefighter. That is not sustainable. It's going to collapse at some point in time in every state. Alaska went from defined benefit to defined contribution. There are still plenty of applicants for every job posted by the State of Alaska. Defined benefit plans are going to be extinct. It's just a matter of time and time is running out.

This is actually false. "fully funded" or a "healthy funded" ratio is any funding ratio at 80% or above. Anything over this level is just a bonus.


Quote:
The common industry standard for a “healthy” system is that it’s 80 percent funded when looking at obligations to retirees, although the number is the subject of debate.

http://www.governing.com/blogs/by-th...al-health.html


Why 80%? Because that's the point at which the state has the money to pay out 80% of the retirement benefits that it owes. There's no need to go above this point, since having 80, 90, or 100% of your workforce retire all at the same time and demand a payout is neither realistic nor feasible. Aiming higher than this can be a good thing, if you're looking ahead and preparing for serious downturns that may occur in the market (like in 2008) but again, not required by most rating agencies. One even has a healthy ratio pegged at 70%, though most stick to the 80% threshold.


How many are at this point?


Quote:
The median state pension last year had 70 percent of the assets needed to meet promised benefits, up from 69.2 percent in 2013, according to data compiled by Bloomberg.

State Pension Funding Levels in U.S. Improve for a Second Year - Bloomberg Business


Per Bloomberg, the MEDIAN (meaning half above, half are below, not skewed by outliers) state pension fund is at 70%. Those at 80% or higher are:


Texas
Wyoming
Utah
Florida
Iowa
Maine
Nebraska
Washington
New York
Idaho
Tennessee
Oregon
North Carolina
South Dakota
Wisconsin


Those at or above 70 but below 80 are


California
Montana
Nevada
Oklahoma
Arizona
Ohio
Minnesota
Arkansas
Missouri
Georgia

Last edited by Burger Fan; 01-11-2016 at 07:02 AM..
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Old 01-11-2016, 07:33 AM
 
29,910 posts, read 34,981,661 times
Reputation: 11812
Once again folks know the vulnerability of their own public pensions are not prone to the pronouncements and broad generalizations of others positive or negative. A number of states that have implemented reforms are now feeling the pinch in terms of hiring especially teacher and that in many cases is more of a public concern.
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Old 01-11-2016, 07:44 AM
 
29,910 posts, read 34,981,661 times
Reputation: 11812
Quote:
Originally Posted by Escort Rider View Post
The bolded is more than twice what a typical retirement is, even in California. Your exaggeration consists not in the figure itself, but in presenting it as if it were typical. And Detroit as an example? Another extreme case. Once you have a certain narrative in your own head, there are (unfortunately) a few outrageous examples out there which you can use to support the narrative.
He noted family and for a two benefit family with each have a 60K pension that would be accurate. As I have said before consider if you were married to yourself. Sometimes folks like to combine family income which can be a combination of many factors to portray a higher amount. Like a married couple each with their own SS benefit and being at or near the max waiting until age 70 and have a combined SS benefit either close or above 80K.
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Old 01-11-2016, 07:44 AM
 
8,018 posts, read 5,090,197 times
Reputation: 13722
Quote:
Originally Posted by Escort Rider View Post
The bolded is more than twice what a typical retirement is, even in California. Your exaggeration consists not in the figure itself, but in presenting it as if it were typical. And Detroit as an example? Another extreme case. Once you have a certain narrative in your own head, there are (unfortunately) a few outrageous examples out there which you can use to support the narrative.
Good point!

At the Federal level, the "new" retirement system ("FERS", started in 1983) is in most circumstances an annual pension of 1% of "average of high 3" salary-years, times the number of years of service. So an employee retiring after a 30-year career, earning $100K in his/her final years, would receive an annual pension of $30K. That's a nice cushion against the vagaries of life, but isn't exactly a lavish retirement. Contrast that with the earlier system, that paid ~2%/year times number of years of service.

Most federal retirees with whom I'm familiar started working before 1983, and I don't anticipate a substantial FERS retirement-wave until around 2020 or so. So current and near-future retirees are OK. But those who started in the mid-1980s would have been too early in their investment-career to have strongly benefited from the stock run-up of the 1980s and 1990s. Just as they reached peak earning years, in the 2000s, the stock market entered a protracted period of oscillation and (in the long run) stagnation. It is these impending retirees, which is to say the younger baby-boomers, who will feel the brunt of the penalty for being unsuccessful investors - even if they were consummate savers.
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Old 01-11-2016, 07:47 AM
 
29,910 posts, read 34,981,661 times
Reputation: 11812
Quote:
Originally Posted by freemkt View Post
It drives me nuts to see this incomprehensible coalition of public employee unions and poor people.

The unions say they're sticking up for and protecting poor people from budget cuts and I'm wondering HowTF does that work when every dollar in inflated public employee compensation (current and deferred) is a dollar unavailable to spend on the poor.
It is money to use for the recruitment of teachers to teach their often unruly children and to hire police and fireman to protect them from each other. Also those pension funds often purchase municipal bonds to help build their schools and fund recreation centers and roads etc etc etc. Oh yeah build public housing.
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Old 01-11-2016, 08:09 AM
 
Location: Living rent free in your head
31,252 posts, read 13,744,856 times
Reputation: 22330
Quote:
Originally Posted by AlaskaErik View Post
It's hard to argue with someone drinking all that Kool-Aid, but the fact of the matter is that only about three states are fully funded. And as budgets tighten, taxpayers will be upset that public sector employees are making more in retirement then they are making working. This isn't a Wall Street issue. Look at what happened in Detroit. That's what's going to be happening at the state level. And the family making $40,000 a year in the private sector isn't going to be too happy about paying higher taxes so the retired public sector family can keep getting their $120,000 a year retirement. I saw a study about California firefighters. It takes 24 currently working firefighters to pay the retirement income of one firefighter. That is not sustainable. It's going to collapse at some point in time in every state. Alaska went from defined benefit to defined contribution. There are still plenty of applicants for every job posted by the State of Alaska. Defined benefit plans are going to be extinct. It's just a matter of time and time is running out.
What is a "public sector family"???? Most public sector pensions are 1.5% or 2% at 60 or 65. The average California public sector retirement is 2014 was $2,784 a month, so I guess your 120k figure would be correct if there were four family members drawing public sector pensions, huh?
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Old 01-11-2016, 08:16 AM
 
29,910 posts, read 34,981,661 times
Reputation: 11812
Quote:
Originally Posted by 2sleepy View Post
What is a "public sector family"???? Most public sector pensions are 1.5% or 2% at 60 or 65. The average California public sector retirement is 2014 was $2,784 a month, so I guess your 120k figure would be correct if there were four family members drawing public sector pensions, huh?
Depends on the job they have. There are former California teachers in the forum with pensions in excess of 60k. If married to a similar the couple would reach that 120K level. Which may seem like a lot to some but not so much to others with similar backgrounds and profiles who benefited from their services. The problem is that many are willing to pay the benefits needed to recruit and retain top public service employees. Others could care less and the nanny state requires in many cases comparable pay and services for all regardless of the communities served interest level.
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Old 01-11-2016, 08:41 AM
 
14,092 posts, read 7,520,848 times
Reputation: 25781
Quote:
Originally Posted by ohio_peasant View Post
Good point!

At the Federal level, the "new" retirement system ("FERS", started in 1983) is in most circumstances an annual pension of 1% of "average of high 3" salary-years, times the number of years of service. So an employee retiring after a 30-year career, earning $100K in his/her final years, would receive an annual pension of $30K. That's a nice cushion against the vagaries of life, but isn't exactly a lavish retirement. Contrast that with the earlier system, that paid ~2%/year times number of years of service.

Most federal retirees with whom I'm familiar started working before 1983, and I don't anticipate a substantial FERS retirement-wave until around 2020 or so. So current and near-future retirees are OK. But those who started in the mid-1980s would have been too early in their investment-career to have strongly benefited from the stock run-up of the 1980s and 1990s. Just as they reached peak earning years, in the 2000s, the stock market entered a protracted period of oscillation and (in the long run) stagnation. It is these impending retirees, which is to say the younger baby-boomers, who will feel the brunt of the penalty for being unsuccessful investors - even if they were consummate savers.
This is exactly what I've been writing in this thread. If you're under the age of 55, you probably don't have much of a defined benefit pension. Increasingly, defined benefit pensions for public sector jobs are being replaced by employee tax-deferred savings plans with some kind of match so the town/city/state doesn't have the pension liability. In corporate America, there's pretty much no such thing as lifetime employment and pensions, even if they existed, aren't portable between employers. Other than a last few union jobs, pensions are gone forever.

It's bad for the late-boomers and very bad for the Gen-Xers. It's pretty easy to project out 30 years and see that the median retiree at age 75 is going to be very close to the poverty level. It's frightening to think of all the demands on social services for the elderly poor. There's going to be an enormous housing problem.
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Old 01-11-2016, 08:49 AM
 
Location: Living rent free in your head
31,252 posts, read 13,744,856 times
Reputation: 22330
Quote:
Originally Posted by TuborgP View Post
Depends on the job they have. There are former California teacher in the forum with pensions in excess of 60k. If married to a similar the couple would reach that 120K level. Which may seem like a lot to some but not so much to others with similar backgrounds and profiles who benefited from their services. The problem is that many are willing to pay the benefits needed to recruit and retain top public service employees. Others could care less and the nanny state requires in many cases comparable pay and services for all regardless of the communities served interest level.
If public agencies are going to cut benefits they will need to increase employee wages, in fact in many cases they need to increase wages even with the current benefit packages. The public agency my son works for can't attract new accountants because the pay is so low compared with the private sector so they are stuck with hiring college grads who stay for a year or two and bail for the private sector or when they can't fill spots at all they bring retirees back to work. That is not sustainable in the long term. (and this is in that nasty old nanny state California) With two promotions my son's pay is 5% more than it was in 2010.
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Old 01-11-2016, 08:55 AM
 
Location: Jamestown, NY
7,841 posts, read 7,360,476 times
Reputation: 13779
Quote:
Originally Posted by AlaskaErik View Post
It's hard to argue with someone drinking all that Kool-Aid, but the fact of the matter is that only about three states are fully funded. And as budgets tighten, taxpayers will be upset that public sector employees are making more in retirement then they are making working. This isn't a Wall Street issue. Look at what happened in Detroit. That's what's going to be happening at the state level. And the family making $40,000 a year in the private sector isn't going to be too happy about paying higher taxes so the retired public sector family can keep getting their $120,000 a year retirement. I saw a study about California firefighters. It takes 24 currently working firefighters to pay the retirement income of one firefighter. That is not sustainable. It's going to collapse at some point in time in every state. Alaska went from defined benefit to defined contribution. There are still plenty of applicants for every job posted by the State of Alaska. Defined benefit plans are going to be extinct. It's just a matter of time and time is running out.
You missed the point 2sleepy was making. Public employers use defined benefit pensions to keep highly trained professionals working for them very cheaply. We're not talking about prison guards or clerks but doctors, psychologists, computer programmers, engineers, accounts, actuaries, etc. Doing away with those defined benefit pensions will result in those kinds of high skill employees leaving the public sector for the private sector. However, governments still need those kinds of employees to carry on the functions of government ... so they're going to have to pay the going private sector rates while having absolutely no hold on those employees leaving in the middle of projects for greener pastures.

I worked in IT for state government and a public college. Many young programmers use public sector jobs as stepping stones to much better compensation in the private sector even with the availability of defined benefit pensions. I started working in public service about 30 years ago. If it had not been for the pension plan or if I had started in my twenties rather than my thirties, I would have never have stayed. I don't know a single IT professional who would have.
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