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CalPERS managed 6.2% over the 10 years through 2015, and 7.8% over the past 20 years. Vanguard's Wellington fund and Wellesley fund both have better returns. And of course none of these accounts give the return consistently from year to year. All had negative returns during 2008, for example.
Also, consider that an 8% SWR (safe withdrawal rate) requires a much larger return than 8% on the portfolio. The S&P 500 has averaged probably 9% over the past 50 years, and yet it can only support a SWR of about 4% for a 30-year retirement.
Pensions have the advantage of only needing to support the average life span, plus they always have new money coming in. These are advantages that individual accounts typically don't enjoy, so it is reasonable that pensions can support a higher withdrawal rate even without any special investment prowess (which they do not seem to posses).
A double Bada Bing! Having both a pension and owning both Wellington and Wellesley, I understand the strength and limitations of all three. I consider our pensions to be part of a balanced portfolio. I also appreciate the worth of investing in more than those two funds.
There is another thread about private sector pensions which is currently active. Here is how poster Caco54 described his private pension:
"I will be 62 in July and retired at the end of last year. Company gave me a year and a months pay as a severance package for my 34 years of work. My pension starts July 1 @ $4,100 per month with 50% survivor for my wife. Would have had another $1,000 per month but took that in a $210,000 lump sum that I rolled into my IRA along with my 401K. I have deferred income and 25% of my year end bonus for many years and that will come to me as $5,000 per month for the next 10 years. Will start SS at 70. For the two years with SS and deferred monies hitting me I will gift my 4 kids $10,000 each per year as a "special bonus". Tap into the IRA's ($1,900,000) as needed then when forced to at 70.5. No debt. Planned this when I was 30 and it all has come to pass. Picking up a few consulting gigs to keep me out of my wife's hair who says "she married me for life not lunch". Good education, good career and now I am learning to "blow the dust off my wallet" and starting to spend and gift it while I have my health and marbles,"
I wish all the posters who have written with such resentment about my "cushy" California teachers pension would read that quote. "Bonuses"? What the hell are those? Severance pay for retiring? What the hell is that?
Yes, of course: Most private sector workers these days do not get any pension at all, so the poster I quoted above is not typical in that sense. I quoted it because the bashers of public employees seem to lack all sense of perspective. Even the private sector workers who have no pensions still get (for the most part) free money in the form of the company match for their 401(k) plans.
Those of us who have no pension at all are paying for your cushy California teachers pension and Calif. is up to 34 million so there are lots and lots of teachers. Yes I have plenty of resentment.
There is another thread about private sector pensions which is currently active. Here is how poster Caco54 described his private pension:
"I will be 62 in July and retired at the end of last year. Company gave me a year and a months pay as a severance package for my 34 years of work. My pension starts July 1 @ $4,100 per month with 50% survivor for my wife. Would have had another $1,000 per month but took that in a $210,000 lump sum that I rolled into my IRA along with my 401K. I have deferred income and 25% of my year end bonus for many years and that will come to me as $5,000 per month for the next 10 years. Will start SS at 70. For the two years with SS and deferred monies hitting me I will gift my 4 kids $10,000 each per year as a "special bonus". Tap into the IRA's ($1,900,000) as needed then when forced to at 70.5. No debt. Planned this when I was 30 and it all has come to pass. Picking up a few consulting gigs to keep me out of my wife's hair who says "she married me for life not lunch". Good education, good career and now I am learning to "blow the dust off my wallet" and starting to spend and gift it while I have my health and marbles,"
I wish all the posters who have written with such resentment about my "cushy" California teachers pension would read that quote. "Bonuses"? What the hell are those? Severance pay for retiring? What the hell is that?
Yes, of course: Most private sector workers these days do not get any pension at all, so the poster I quoted above is not typical in that sense. I quoted it because the bashers of public employees seem to lack all sense of perspective. Even the private sector workers who have no pensions still get (for the most part) free money in the form of the company match for their 401(k) plans.
That poster also clarified that he was a F500 executive. Basically, a 1%-er.
The vast majority of private sector workers (greater than 80% and growing) will get zero company pension. Yes, many have a 401(k) where there was a match, but the average balance in those types of retirement accounts has a current value somewhere around 100,000. Enough to produce maybe $300 per month in current-dollar retirement income.
As time goes on, these private-sector people -- the majority of taxpayers and eventually the majority of retirees -- are going to look around and wonder why they are paying taxes for pensions that they do not share and that wildly exceed what they will ever receive.
Those of us who have no pension at all are paying for your cushy California teachers pension and Calif. is up to 34 million so there are lots and lots of teachers. Yes I have plenty of resentment.
First, my California teachers' pension is not "cushy", not even close. Second, it was funded by the 8% taken out of my salary plus a matching 8% contributed by the employer (the school district). So it is basically pre-funded, which means that the taxpayers are basically off the hook. That should be good news for you - you are not paying for my pension since it is already paid for. I doubt that you will be able to process that information, as you seem to be so into your resentment that you will be unable to give it up regardless of how ill-informed it is.
Note what I am saying and what I am not saying: I am not claiming that all public pensions are in such good shape. There are other states and other localities where the taxpayers are in fact, to a greater or lesser degree, on the hook.
I'm not an expert at all, and I do not want to start an argument, but with the figures you have given, it appears with you having given 8% of your salary along with a matching 8% by your government employer donated, you & your government employer have put approximately just 6 years of your retirement pension of $56,000 per year into the fund.
So anything you receive after receiving approximately 6 years of your $56,000 yearly pension has not been pre-donated by you nor your employer.
I realize I could be wrong. (you've said your final salary was around $70,000 and that you receive a $56,000 per year pension for life) Also I've been generous with how much you & employer have put into the fund because you were not making $70,000 for much of your 34 year career)
Last edited by matisse12; 06-01-2016 at 03:49 PM..
First, my California teachers' pension is not "cushy", not even close. Second, it was funded by the 8% taken out of my salary plus a matching 8% contributed by the employer (the school district). So it is basically pre-funded, which means that the taxpayers are basically off the hook. That should be good news for you - you are not paying for my pension since it is already paid for.
Without making any judgement with respect to any individual's benefits...
Assuming the math pencils out and this pension account is self-funding, this is vastly better than an individual can hope to accomplish on their own. If I use 16% withholding over 30 years, assume the long-run average return from stocks, and then use a SWR that's appropriate for a 40-year retirement (a bit over 3%), I get an income replacement rate of about 40%. So it's about half of what a pension account is giving. In the real world most people will not be 100% in stocks during all their working years, so the outcome will likely be even a bit worse than this.
Why not create pension accounts that individuals can choose to participate in? It may not pay out quite as much as a mandatory plan, since participants are self selecting and people with health problems will probably pass. But it seems it should still be better than the go-it-alone approach, and better than any annuity that's available.
Those of us who have no pension at all are paying for your cushy California teachers pension and Calif. is up to 34 million so there are lots and lots of teachers. Yes I have plenty of resentment.
Doesn't everyone during their lifetime have the option to work for the government, whether it be federal, state or local? And you chose not to?
In my experience, most people who work in government are paid less than their counterparts in the private sector, in exchange for enhanced retirement (and in many cases health) benefits. It's a trade-off. Sure, there are people who abuse the system, again the same as the private sector. And with the reforms happening recently, many benefits are being reduced with contributions required by the employee.
I can't say I've seen any teachers with million dollar homes and new Mercedes...
Starting back in the mid 80s for over 20 years I made decent money (not extravagant) and saved up a nice nest egg with 401ks and IRAs. The last 8 years I've made less working for the government and will have a decent pension in a couple of years to supplement my savings. I'm not saving much at this point...
Last edited by Vic Romano; 06-01-2016 at 04:23 PM..
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