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Even a retiree with a defined benefit pension is dependent on the fulfillment of the promise to pay by someone, somewhere.
Not true for state and federal employees. States have tried to reduce pensions for retired state employees, but have not been successful. If states were unable to pay, unfortunately they would just raise taxes. I'm a huge advocate of pension reform for state and federal employees (new and existing).
the whole idea is the past does not have to repeat . we learned from these calculators and numbers crunching that every single failure in the past has had the exact same common denominator .
that is the real return over the first 15 years fell below 2% and 4% inflation adjusted failed every time .
so that is really the take away from all the data . if 5 years in you are below a 2% real return a red flag should go up . certainly by 10 years in pay cuts should start .
While the odds are low, it can happen. For example, we had a 1000 year flood (.1 chance of occuring in any given year) in our area a couple of years ago. Based on historical data, the odds were extremely low. Unfortunately the people who didn't have flood insurance were in deep trouble; many of these people lost everything. Even though the odds are very low, that's not a chance I'm willing to take when our livelihood is at stake in our later years. Odds mean nothing when IT happens to you.
soaring inflation and a crumbling dollar can wipe out your cd's purchasing power if it goes hyper or drive your annuity company out of business and states can lack the funds to pay any claims . , so as long as we want to draw up visions nothing will stand up under the right conditions .
nothing is ever 100% including gov't pensions because gov'ts can be destroyed
Not true for state and federal employees. States have tried to reduce pensions for retired state employees, but have not been successful.
Given how badly underfunded some state pension programs are, I wouldn't count on that continuing to be the case in the future (at least for employees who have not yet retired). There are limits to how high a state can raise taxes before the tax bite starts undermining the state economy and thus reducing the tax base.
Not true for state and federal employees. States have tried to reduce pensions for retired state employees, but have not been successful. If states were unable to pay, unfortunately they would just raise taxes. I'm a huge advocate of pension reform for state and federal employees (new and existing).
i believe detroit cut pensions so wrong again there if they did
the whole idea is the past does not have to repeat . we learned from these calculators and numbers crunching that every single failure in the past has had the exact same common denominator .
that is the real return over the first 15 years fell below 2% and 4% inflation adjusted failed every time .
so that is really the take away from all the data . if 5 years in you are below a 2% real return a red flag should go up . certainly by 10 years in pay cuts should start .
I'm not opposed to taking some risk with your retirement portfolio (it's likely necessary), but it's important to realize there IS risk. Just because Monte Carlo simulations indicate there is little chance of running out of money, doesn't mean it couldn't happen, similar to the people who thought a 1,000 year flood would never happen because the odds were extremely low. In fact, we will have some equity risk in our retirement portfolio, but the income needed for basic living expenses will not be subject to market risk. When I construct portfolios for us and others, I try to think about things that could possibly derail projections. Annuities (diversified across companies) make a lot of sense, for those with no pensions, to cover basic living expenses during retirement.
whoever said anything is 100% ? certainly no one here . no one can predict the future . we can only plan as best as we can . if someone is a nervous nelly type and fears every thing in the financial world then they should stay away from cash instruments too . in fact my money market went belly up .
we got locked out for quite a while and not only did it lose money but no funds could go out .
so everything has risk . they can always use a bullet proof portfolio with gold , long term treasuries , t-bills and stock index's and even that has risks of down years.
i think the permanent portfolio had very few losing years since the 1970's and no loss exceeded the 4% range .
Last edited by mathjak107; 07-09-2018 at 03:27 PM..
It appears they did make cuts, but thus far, this is a very isolated case. I'm a huge advocate of moving to defined contribution plans for federal and state employees. My understanding is that federal employees have a hybrid plan.
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