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The problem though is trying to predict future tax laws. For example, what if they decide to make an ultra progressive tax system to try and fund multiple government programs? Let's just assume for a minute that they ramp up the rate to a high of 70%, based on $150k per year for single folks and $250K for joint returns. Let's also assume they change the tax laws as they apply to social security, making 80% of it taxable.
If you have social security and a defined benefit pension, and made a good income when working, isn't it possible that you'll end up getting killed financially if you were a good and aggressive saver during your work life? Factor in some of the state funding issues, and the possibilities of state tax on retirement fund withdrawls over and above the federal tax...
Yes $%^%$$ Yes and you know how we both feel on this one! The $#$#@^&&& want our money and I voted for some of them!
The problem though is trying to predict future tax laws. For example, what if they decide to make an ultra progressive tax system to try and fund multiple government programs? Let's just assume for a minute that they ramp up the rate to a high of 70%, based on $150k per year for single folks and $250K for joint returns. Let's also assume they change the tax laws as they apply to social security, making 80% of it taxable.
If you have social security and a defined benefit pension, and made a good income when working, isn't it possible that you'll end up getting killed financially if you were a good and aggressive saver during your work life? Factor in some of the state funding issues, and the possibilities of state tax on retirement fund withdrawls over and above the federal tax...
Yes and you know how we both feel at this stage of the game.
I recently got a letter regarding my pension fund and that they are not in good shape. They are required to provide iinfo on what one would get if the fund goes belly up. From the PBGC I would get sixteen cents on the dollar of what I get now. That would not even cover 1/2 my mortgage, never mind any other expenses at all. I would be absolutely SOL.
They are probably not in the bad shape you think they are. Especially if it is a state pension. You need to understand a few years back congress passed what amounted to truth in something or another filing. It is called a unfunded liability because it has not yet been funded by either the employer or most importantly return on investment. Most state pension funds have decades worth of payments in reserves. That's why I posted the link about the FDIC wanting the multiple trillions of reserves to find their way to failing banks (what a joke). There is a problem if over the next 20 years the funds don't return anything on investment. Now think about it. Today is the 10 year anniversary of the Dot Com bust and the lost decade in investment (so to speak). Yesterday was the year anniversary of the real estate bubble bottom. That was all in the last ten years. Add to that the S and L crisis and in the last 20 or more years you have had three major tankings and pension funds still have healthy reserves. You are worried why? The California pension fund along with most states are based on an average return of 7-8% over a 20 year period and they have always done that including the last 20. Oh yeah you do have to worry if states go to defined benefit plans. Then they don't have to worry about striving for 7-8% returns and can use pressure to getting the fund managers to buy state and local muni bonds to finance their road and development projects on the cheap and you suffer with a 2-3% return and payout based on. Wouldn't California love to have some of the 200 plus billion in their pension fund used to buy state and local bonds right now. Beware of who you allow to scare you!
HHS/OIG-Audit--"Audit of the State of California's Pension Fund, (A-09-92-00116)" (http://oig.hhs.gov/oas/reports/region9/99200116.htm - broken link)
EXECUTIVE SUMMARY:
This final audit report points out that California used pension fund reserves to reduce California's budget deficit. In doing so the State passed legislation that effectively excluded the Federal Government (includes participating programs of all Federal agencies) from receiving its fair share of about $816 million in pension fund reserves which was allocated to State agencies for operating expenditures. Since the Federal Government participated in the contributions to the pension plan, then Federal programs should receive their fair share of the cost reductions resulting from the use of reverted pension funds. The Office of Inspector General estimates that the Federal Government's share is about $111 million and recommends financial adjustments to Federal programs for this amount.
See what they did in 1994!
Pension fund - Wikipedia, the free encyclopedia
Pension funds are important shareholders of listed and private companies. They are especially important to the stock market where large institutional investors like the Ontario Teachers' Pension Plan dominate. The largest 300 pension funds collectively hold about $6 trillion in assets.[1] In January 2008, The Economist reported that Morgan Stanley estimates that pension funds worldwide hold over US$20 trillion in assets, the largest for any category of investor ahead of mutual funds, insurance companies, currency reserves, sovereign wealth funds, hedge funds, or private equity.[2]
Pension funds may need to make adjustments and probably will to minimize needed returns. The situation is not dire and draconian methods including dropping them are not needed and shortsighted. The following is a good read and seeing what NJ and Christie which has one of the worse case scenario's is discussing helpful. Pension Pulse: Public Pension Funds Doubling Up to Catch Up?
The proposals would require workers and retirees at all levels of government and local school districts to contribute to their own health care costs, ban part-time workers at the state and local levels from participating in the underfunded state pension system, cap sick leave payouts for all public employees and constitutionally require the state to fully fund its pension obligations each year.
This is one of the worse case states and a fiscal conservative new governor and this is as game changing as it gets?
Who has the money? Who is solvent?
I guess I wouldn't have done a career in the military or been a Police Officer. I don't think anyone would do either without a guarantee if they are killed or disabled
I'm in that group. I served in the Army for 23 yrs, but would have left the service after 3 yrs and never looked back. No pension? Then I'd keep working until my dying day. I'm in good physical condition and could do it. I'd also save every penny and not spend money unless absolutely necessary. I'd drive my car past 200,000 miles instead of buying a new one every 5-10 yrs, I'd likely never donate to charity, and wouldn't spend so much on entertainment.
Interesting day on CNBC that I saw. Focus on State financial problems with a lot of ranting about Pensions,eucation spending, police fire services should be cut to help give tax breaks to citizens etc etc with a book author stirring the pot. Some of it as we know from previous discussion in here were not true. States can't file bankruptcy. Later in the day they had the California state treasurer on who shot down some of what was being said. So after a day of ranting about the need for states to cut on CNBC on NBC Nightly News they talk about the horrors of state budget cuts on education. No wonder honest people don't want to become elected officials.
Interesting day on CNBC that I saw. Focus on State financial problems with a lot of ranting about Pensions,eucation spending, police fire services should be cut to help give tax breaks to citizens etc etc with a book author stirring the pot. Some of it as we know from previous discussion in here were not true. States can't file bankruptcy. Later in the day they had the California state treasurer on who shot down some of what was being said. So after a day of ranting about the need for states to cut on CNBC on NBC Nightly News they talk about the horrors of state budget cuts on education. No wonder honest people don't want to become elected officials.
Picking your way through all of the issues is pretty interesting, to say the least. Looking at how the pension discussions are now going at the state level, I'd suspect that what we are now seeing will eventually turn into a two tier pension process. I believe that pensions for current state/education/public employees will be signficantly modified, especially for those folks at least 10 years from retirement.
But like you state, the information is so distorted it is difficult to get a good analytical discussion going about the reality of pension funding on state budgets.
The truly sad situation in America today is that many people are given the boot some time after they are fifty years of age. I worked for a fortune 500 company and had no intention of retiring. The company had different ideas and told those of us over 55 that we should accept the retirement package or chance losing our jobs with nothing. Seven years afterwards this company has cancelled our healthcare and are now trying to shut down our pensions. The protection afforded by the age discrimination laws is nothing less than a travesty. How many people are forced to retire or retire by choice only to have the promises of healthcare and pensions stripped away from them? We are left with the hope that we can savage something from our pensions through the PGBC. Isn't it grand how our government protects big business and throws the workers in the fire?
If when I retied I had any idea what would happen to pensions and healthcare in America I would have moved to Canada, Britain, France, or Mexico. In those countries I at least would be free of worry about my healthcare.
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