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It may be better, but how much does the private sector worker put into the pension plan. I have a public education pension, but I put 11% of my income each month before taxes into the fund for 33 yerars. It wasn't free. it was actually quite a drain on my monthly income, since after taxes that number was closer to 15%.
I've covered this already. I pay over 15% into mine. But that pales in comparison to what the employer typically pays. The employer is kicking in at least as much as you are putting in, often more. In my employer's case, they're putting in more than 5X what I'm putting in (no exaggeration). People talk as if they're paying for 100% of the cost of their pensions all by themselves, but that is far from the truth.
Oh, and your portion of the pension contribution is pre-tax, same as a 401k contribution would be. (At least that's the way mine is and I assume they're all the same).
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Originally Posted by slyfox2
If the private sector worker put that much money into a fund, and their employer helped a little bit too, then their funds at retirement would be much better.
Sure, saving 11% over a 30 year career, plus getting a 3% match from your employer (typical) wisely invested in a mix of stocks and bonds, gets you with a nice account balance in that time frame. Does it get you the equivalent of a government pension? In most cases, no. Not even close.
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Originally Posted by slyfox2
Most people think that teacher pensions are Free. They are not.
I'm not sure most people think that, but clearly some do--and that is annoying.
However, I also find it equally annoying that public sector workers seem to think it's a big deal that they have to pay into their pensions and take the employer's contribution for granted--despite the fact that the employer typically contributes more than the employees do (or at least an actuary would say they should if they want to keep the pension fund solvent). In the vast majority of cases, the pension is almost always a better deal over a 30 year career than Social Security & a 3% 401k match.
If folks with 401K's wanted to pool their accumulations and create a shared payout and take their chances on how long they would live to draw and do so knowing there would be nothing to pass on to their heirs they would if they lived long enough be ahead of or equal with public pensions. It is a shared risk/reward pool with advantages and disadvantes. Like converting your 401K to an annuity that ended when you died. You are giving up individual control risk/reward for a group benefit that may or may not be better in the long run.
My pension payout includes the contributions and ROI of the many who died and got very little.
A valid point. But most people these days are living to collect their pensions. In an increasing number of cases, they collect the pension for longer than they worked for their employer, which is one reason why costs have gone up.
But for a teacher required to place 11% of their pay into the pension accumulating an additional significant sum in additional retirement accounts would be difficult. Not impossible but difficult. It would clearly impact other investments.
I make less than most teachers where I live and I do it. Plus I save more than that in the voluntary deferred comp plan. People are just bad at saving, no matter how much they make.
Very wrong my friend very wrong. Much of our pensions are the result of ROI from employer/employee contributions over the years. State and local governments do not save and invest a portion of tax payer dollars each year. Were it not for pensions that investment would not be occuring and it is NOT the property of tax payers but the trust fund that invested the money.
Do some research on the investment habits of various public pensions and compare that to the typical 401K portfolio. Are they investing the same amount of money in investments that serve the public good? If not what would be the impact on the public good without those investments?
Because pension funds need to meet current and short term future payout their investment portfolio's resemble someone closer to age 55 than 25. Would you recommend 50% equities at age 25 for a retirement account? My guess is that the typical 25 year old teacher is contributing more to their retirement account than the typical 25 year old. That is all money going into the economy and if ended for 401K's might end up being immediately consumed and not invested.
Wouldn't that be less dollars chasing and bidding up your 401K and bond funds? Do you really want 25-30 year old public employees making their own market contribution decisions as an investor? Aren't pension funds a major source of the current market run up? Aren't they helping drive the balanced funds we both love? Don't make the assumption that if public employees went from a defined benefit/mandatory contribution to a volunteer 403B plan that the same dollar amounts would be flowing into equity markets.
Can you say market crash?
Sure, there is ROI, but most pension funds haven't met their projected ROI over the last 10-15 years, a big reason for the spike in costs and this has stressed out everyone, the employers, the workers, and the taxpayers.
The rest of your post seems completely off topic. Ultimately the taxpayers pay for the pensions. If the investments in the pension funds didn't require any further contributions from anyone, then that wouldn't be true. But since they do, then ultimately taxpayers are paying for them.
The private sector has been whining all along that people do not deserve benefits - health insurance, matching on 401Ks, pension benefits - and even Social Security and Medicare for that matter - for decades.
I don't think they've argued that. They just don't like paying for them. But that's kind of like some folks on this board complaining about how they have to pay into their pension as if they're martyrs for doing so. They ignore the fact their employers are paying the same or even more (or at least should be, actuarily speaking). Everyone acts as if their costs are the only ones that matter and they ignore the cost burden that other people have to pay as if it doesn't exist. I find this annoying. Yes, I get it. Employers do that. But so do employees.
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Originally Posted by mlb
I am a firm believer that the only reason my government pension stays intact - is because the legislators who rule on it are benefactors of it as well. If it goes down - so do they. Funny how that works.
No disagreements from me on that one.
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Originally Posted by mlb
Higher pay and benefits - including but not limited to the minimum wage - raises all of us to livelihoods we can actually afford. And in many instances - it's shown NOT to affect the bottomline of those private sector companies. Look at the wage disparity between CEOs and the average worker. It's clear there's an imbalance.
While the private sector was axing pensions - pension envy was boiling..... setting up the divide.
The private sector needs to understand that people will not work for nothing.
This is a whole other argument beyond the scope of this thread. Bottom line is if your line of work is low paying, it means you have too many people with that skill set. The private sector is more than willing to pay up for in demand skill sets. Now, I get it....getting people with obsolete skills trained for new jobs is a real problem and it becomes a shell game because everyone wants to shift the cost to someone else (employees don't want to pay so much to retrain for a job they may not get, employers and the government say it's expensive, etc....it is a real conundrum with no easy answer). But the core problem, as has been discussed in many threads, is we have too many people who don't have the skill sets to do well in today's work force. If you disagree, that's fine, but I think we should keep to the topice.
My wife teaches at a private school. She has been there for 30 years. When she retires next year her pension will be $800 a month. This is about 30% of her last salary amount. Is this common? Typical?
If you are getting a pension, how much is it in comparison to your previous earnings?
I have a federal pension. It was computed at about 66% of the average of last three years of salary and a formula based on 32 years of employment.
More importantly, the net pension amount was the same as the net pay of my final check during employment give or take $50. Of course, that doesn't include thousands I was paying into fed/state taxes, contributions to pension plan, medicaire, 401K plan.
A valid point. But most people these days are living to collect their pensions. In an increasing number of cases, they collect the pension for longer than they worked for their employer, which is one reason why costs have gone up.
Pension eligibility is often age and or years worked driven. With the minimum age often being 55 or 59 and for full benefits 30 or 35 years of service. Hard to get full benefits at 55 or 59 and live 30-35 years after that. The actuarial tables have folks dying and leaving a sum behind to be pooled and used for those who do live as long as you suggest. The reality is that pensions have a ROI flaw that is the biggest challenge to future stability. The other problem is often who pays the salary and who pays the pension contribution based on that salary. In many cases it is local government setting the salary and the state having to pay the pension contribution. That leaves areas of the state that don't pay as high in salaries having to help pay the excess pension contribution from one local to another.
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