Retirement is threatened to CSRS

[nnuut]

Boy you had to dig deep to find that honest mistake made by me.

This isn't the first time this change to our retirement systems has been studied::worried:

United States
General Accounting Office
‘Wdtington, D.C. 20548
General Government Division
B-276730
April 25, 1997
The Honorable John L. Mica
Chairman, Subcommittee on Civil Service
Committee on Government Reform and Oversight
House of Representatives
Subject: Federal Retirement: Comnarison of High-3. 4. and 5 Salarv Factors
De. ar Mr. Chairman:
This letter responds to your February 20, 1997, request for information on the
effects of changing the high-3 salary factor in the formulas that are currently
used to compute Civil Service Retirement System (CSRS) and Federal
Employees Retirement System (FERS) pension benefits. Congressional
consideration of modifications to high 3 has led to the impression that
employees would need to work a number of years longer in order to earn
annuities under high 4 or high 5 that would be comparable to their high-3
annuities. Our objective was to determine how much longer retiring employees
would need to work to earn basic annuities under a high 4 or a high 5 that​

would be comparable to the annuities they would have received. (Much more with charts)
http://archive.gao.gov/paprpdf1/158737.pdf

 

[nnuut]

More:


[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Number: [/FONT][/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]95-103 [/FONT][/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Date: [/FONT][/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]July 6, 1995[/FONT][/FONT]
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman] [/FONT]
[/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]SUBJECT: The Congressional Budget: Potential Benefit Program Changes[/FONT][/FONT]
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman] [/FONT][/FONT]
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]On June 29, 1995, the Senate and the House of Representatives passed the Congressional budget for fiscal year 1996 (House Concurrent Resolution 67). The budget resolution represents Congress's plan to balance the Federal budget by 2002. The resolution suggests certain changes in the Civil Service Retirement System (CSRS), the Federal Employees Retirement System (FERS), and the Federal Employees Health Benefits Program (FEHBP). [/FONT]
[FONT=Times New Roman,Times New Roman]No changes in CSRS, FERS, or the FEHBP have been enacted. The budget resolution does not include any changes in law and therefore does not have to be signed by the President. It sets guidelines for further Congressional action, with spending limits and assumptions as to how spending can be reduced. Before any of the changes listed can take effect, the statutes governing these programs would have to be amended by Congress in separate legislation. It is likely that no specific legislation to make these changes will be approved before September. [/FONT]
[FONT=Times New Roman,Times New Roman]The Conference Report for the budget resolution contains information that generally reflects House-Senate agreement in principle as to how Government savings can be achieved. The Conference Report and the resolution itself do not contain details of proposed changes, other than those given below. The next step in the process is for the Congressional committees responsible for these areas of the law to consider the proposals in detail. We will inform you of any significant developments. [/FONT]

[/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Average Salary [/FONT][/FONT]​

[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]N [/FONT][/FONT][FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]The average salary used in the computation of CSRS and FERS annuities would be changed from a high-3 to a high-5 year basis. [/FONT]
[FONT=Times New Roman,Times New Roman]N We understand that the intention is to phase in this change with a high-4 for retirements in calendar year 1997, moving to a high-5 the following year. [/FONT]

[/FONT]-2

N ​

Neither the budget resolution nor the Conference Report mentions grandfathering under a high-3 or an exemption for any special group.

[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Contributions [/FONT][/FONT]
N
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Employees' retirement deductions would go up by 1/4% in 1996 and an additional 1/4% in 1998, for a total increase of 1/2%. [/FONT][/FONT]
N
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]The Conference Report specifically states the savings represented by the increase in employee deductions may be substituted for with "some other changes in federal employee policies that would be sufficient to achieve these savings." [/FONT][/FONT]
N
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]CSRS agency contributions would be increased by 1% beginning in 1996. [/FONT][/FONT]
N
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]FERS agency contributions would be decreased by the amount of any employee deduction increase. [/FONT][/FONT]
N
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Neither the resolution nor the Conference Report is specific as to whether the changes would occur on a fiscal year or calendar basis. [/FONT][/FONT]
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Members and Congressional Employees [/FONT][/FONT]
N
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]The annuity computation formula for Members of Congress and Congressional employees would be changed under CSRS and FERS to be the same as for employees generally. [/FONT][/FONT]
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]Commission to Study Retirement Systems [/FONT][/FONT]
N
[FONT=Times New Roman,Times New Roman][FONT=Times New Roman,Times New Roman]The budget resolution calls for a high-level commission to be formed to study the problems associated with the Federal civilian and military retirement systems and to make recommendations that will ensure the long-term solvency of Federal retirement funds. [/FONT][/FONT]​

http://www.opm.gov/retire/pubs/bals/1995/95-103.pdf​

 

[Boghie]

Folks, We Is Broke...

Folks,

There will be changes to the pension portions of our retirement packages. Just watch what is happening in the States and cities. Our politicians overpromised, we (imperial we) voted for them, and now the future (right now) will deal with it. That generation of voters and taxpayers are the GenXers. They ain't all civic minded and stuff - more individualistic, much more Machiavellian. Don't count on that group (right now in their 'peak' earning years) to save the day. They are historically pragmatic and cheap and rather functionally brutal (think Patton, Rommel, Grant, Washington rather than FDR, Churchill, Hitler, Stalin, Lincoln, Franklin).

Regardless, if these flaks try to apply the new adjustments to CSRS folks than my GenX claws come out. The CSRS plan did not allow you to invest in your own 401(k) [TSP] to the extent of us FERS bubbas. I am concerned that they will be forced to do so because the Chinese and oldsters will stop funding the debt - and we know the GenXers aren't buying Treasuries...

Anyway, the pension portion of FERS retirement is not a huge percentage of one's retirement plan if one invested in his/her TSP account properly. For me, the pension portion will be about 1/5th of my total gross income (much less if the quoted benefit is not inflation adjusted). When I started investing in TSP I did not even know there was a pension. For me, the difference would be minimal (2% - 3%). Don't like to lose it, but wasn't counting on it anyway.

Finally, why should the government pay 100% of the salary of an employee that is working 100% of the time for another employer (a union)? That is a benefit that will, and should, be blown out early in the fiscal cutbacks to come.

A $1.87 Trillion annual deficit (or the hoped for $500 Billion annual as far as the eye can see) is not sustainable. The private sector will force change or will go Gault. Best to adjust now...

 

[alevin]

Boghie, I do expect the FERS "pension" leg of the 3-legged stool to get revised downward. Despite the fact I've been putting 5-10% into TSP the past 19 years (and not in G either), the retirement calculator still tells me that (unrevised), the pension leg would constitute about 1/3 of my retirement income, withSS another 1/3, and TSP another 1/3 approx. So, assuming 2/3 downsizing on previously anticipated income, I'll be trying to live on 1/3 of FERS retirement strategy-and will be subsisting on rice and beans, unless I do exceedingly well with TSP the next 12-15. And I've begun to think of myself as a "tweener"-transition era between boomers and GenX because I got started so late on stable employment with benefits (early 30s). Culturally a boomer, fiscally a GenXer.

 

[Boghie]

Alvin the Tweener'

Alvin,

I don't know what your salary is, but the difference between a three year average and a five year average isn't that huge - definitely not a 2/3rds reduction of your pension plan. Here is an example:

3 year average: (45,000 + 47,000 + 49,000) / 3 = 47,000 multiplier
5 year average: (41,000 + 43,000 + 45,000 + 47,000 + 49,000) / 5 = 45,000 muliplier

Thus, a difference of 4.3% in the average salary multiplier.

Given your 1/3rd formula that means a total difference of 1.5%.

And, if one invests 15% (10% + 5% match) in TSP with an average growth of 8% for 30 years (TSP is just a 401(k) or IRA) than you will be getting $25,000/year after tax and inflation adjusted using $49,000 as todays salary twenty years into TSP funding with fifteen years left. My guess is that TSP will be 2/3rds of your total retirement with SS and the pension filling the other 1/3. Also, expect reduced Social Security. Both the Social Security and the Pension are formulated by the whims of Senator Kennedy and Senator Inohe, Congresswoman Pelosi and Congressman Pence. Uuuggggghhhhh.

So, my guess is that you aren't looking too bad since you are on this site and are investing C/S/I.

 

[alevin]

Boghie, some would say I've done very well careerwise. I don't feel that way about my investing at all the past 15 years when I look at my TSP balance and crunch growth projections (despite continued contributions of course). SS is going to take a dive, pension will likely also. They just can't afford it all, not come 2019 (my earliest retirement date with 30 years in).

TSP will likely equal 2/3 (or more) vs. 1/3 (or less) for the other 2 legs combined.

My TSP contrib rate at the moment is 5% with match, using the other 5% to make essential cap ex on house-like new roof and whatnot this year, that second 5% paid off my house the last several years, done now.

Contributions will go back to 10% +match next year, but doubt I can achieve 10% growth annually between now and retirement, which is what it would take to get me semicomfortable not relying on the other 2 wobbly legs of FERS stool. that's assuming .gov doesn't default and lay us all off in the meantime. I'm not an optimist on the situation. I'm getting pretty good at understanding what's going on after the past 2 years of megalearning curve, but time is short to put into practice.

 

[Birchtree]

I just wish they would offer a defined contribution plan in place of the annuity - and have the offer a voluntary one. That way they don't go bankrupt. It would work the same way as TSP only Uncle puts in all the money on a regular basis and the program is made mobile.

 

[Boghie]

Runnin' with the Birch's

Alevin,

Sounds like you are doing purty good on the conservative side of investing for retirement. Not having a house payment will be absolutely huge. Just math out what it takes now to have your house payment available during retirement. Huge.

I think any cut in pension will be in the <5% range if NNuut's nightmare comes true. That sucks, but it is not catastrophic. Social Security will probably be cut or taxed - maybe another 5%.

I don't see you as an Alpo connoisseur during retirement.

On the other hand, I think we all got to start digging some roots with that Birch tree over there. We need to get back into the game so that we can attain market level growth. For example, why am I 'happy' with 15% when the market gained 39% from the bottom. The three shocks of October, November, and March made me gun shy. My lack of faith was demonstrated again on July 10th - the result is that I missed 40% of last week's growth. So, it is time to go 'all in' and adjust only on a crash. Back to normal - and you ain't going to get 5% in G/F, not to mention 10%.

My biggest concern is that whatever growth we might see over the next four years may take place in the next 4 weeks to 4 months. Higher taxes, more regulation, major tarrifs, etc. are not likely to create a market boom. I expect a flatline Carter Malaise Economy rather than a Reagan Boom.

 

[alevin]

My boss wants me to go for that next promotion before I get too dusty sitting in one place too long. would require moving and taking on substantial new mortgage to buy equivalent home in other community. Ugh. Oh yes, and the new mortgage payments would mean no increased cashflow going into TSP/Roth next year. Hmm. She doesn't understand why I'm not jumping at the idea-yet. :suspicious:

Meantime, I told Birch the other day if I'd been more focused on watching weekly candlestick patterns, I'd have gone at least partway in early last week for a short ride. That pattern requires a confirmation white candle week before I bail in now. The other weekly EMA/SMA/ADX patterns I'm watching are close but not there quite there yet either. If we're in a renewed bull market (hard to believe but coolhands charts are persuasive regardless of the real economy), there'll be time to enter in 2-3 stages over the next two-three weeks.

Anybody got a "cannonball dive" pic they want to share? Show-Me? Nnutt? surely one of you have one for the pool next to the Tiki Bar? :nuts:

 

[Birchtree]

We all must remember that the money in the annuity and social security is not ours - those programs are only obligations and can be altered by the payee do to various circumstances. Money that is in a defined contribution plan belongs to the holder no matter what happens and you get to choose your beneficiary.

 

[nnuut]

My boss wants me to go for that next promotion before I get too dusty sitting in one place too long. would require moving and taking on substantial new mortgage to buy equivalent home in other community. Ugh. Oh yes, and the new mortgage payments would mean no increased cashflow going into TSP/Roth next year. Hmm. She doesn't understand why I'm not jumping at the idea-yet. :suspicious:

Meantime, I told Birch the other day if I'd been more focused on watching weekly candlestick patterns, I'd have gone at least partway in early last week for a short ride. That pattern requires a confirmation white candle week before I bail in now. The other weekly EMA/SMA/ADX patterns I'm watching are close but not there quite there yet either. If we're in a renewed bull market (hard to believe but coolhands charts are persuasive regardless of the real economy), there'll be time to enter in 2-3 stages over the next two-three weeks.

Anybody got a "cannonball dive" pic they want to share? Show-Me? Nnutt? surely one of you have one for the pool next to the Tiki Bar? :nuts:

View attachment 6579
THAT WAS A GOOD ONE!!!:laugh: