The Great Pension Deficit

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My Mother was a Teamster! And a Cheese packer to boot! We always looked for the Union Label at our house.
 
Bullitt,

I respectfully disagree. Public pensions are reeling from an assortment of problems. Underfunded obligations, poor investment choices and/or returns, fraud, and unrealistic retirement promises made to local and state government workers all play a part. To assign all of the currrent public pension problems to risky investment strategies or underfunding doesn't tell the entire story.

Public employee unions have played a role in this mess. Recognizing that is not union bashing - that's calling a spade a spade. The next time you see a political ad by a teachers union, or the police union, or their "endorsement" of a particular candidate, ask yourself whether their endorsement is really best for the community they serve, or is it a self-serving endorsement meant to collect on the other end when contract negotiations come around. No politician wants to be the one who gets the thumbs down from the teachers or police or firefighters union...

Public pension fund fraud also plays a role, though how big or small a role is debatable. "Pay to play" as they say...

To say that "OT payed to a policeman has absolutely nothing to do with a pension shortfall" is nonsense. 'Spiking' and the increased pension payouts it produces means money has to come from somewhere to pay for that increased pension payout.

The politicians that agree to ever increasingly generous contracts share some of the blame as well, but the unions need to recognize when enough is enough...

There's plenty of blame to go around, and more than one reason why things are the way they are...
 
What's done is done. If you got your wish and unions were banished from the face of this earth tomorrow, there would still be pension shortfalls. Don't forget, management agreed to every one of those 'destructive union proposals.'
 
Bullitt,

The very scary thing is that the voters will not fund the pensions. Government pensions have been demagogued for quite some time – with some validity. The taxpayer did not directly agree to the benefits accrued. The politicians who promised deferred benefits in place of current pay are long gone. Those that temporarily deferred contributions are history. Similarly, employees underfunded their own accounts as a benefit. And, a pension is not an open process.

I am very happy that much of my retirement is in a 401(k) that I manage.

Anyone want to be dependent on the GenXer generation.
 
Let's face it... pensions are usually Ponzi schemes. They promise upfront what they have not secured, hoping that future revenue will always be there to cover IOU's.

Any large pool of money will be spent by those who make the rules, and the pensioner is left holding the bag, i.e. Social Security (just another pension Ponzi scheme).

Maybe pensions schemes should be identified as what they are, and made illegal. Retirement accounts would then be the sole responsibility of the individual.
 
Bullitt said:
What's done is done. If you got your wish and unions were banished from the face of this earth tomorrow, there would still be pension shortfalls. Don't forget, management agreed to every one of those 'destructive union proposals.'
Click to expand...

Never wished for all unions to be banished, I just want them to be responsible partners with government and the taxpayers when they do exist...The clout of some of these unions and the political power they wield is unnerving...
 
Boghie said:
Anyone want to be dependent on the GenXer generation.
Click to expand...
No. I don't.

-------

The pension model proved to be a failure or Ponzi after repeated excesses toppled it's asset base. 401K or Pension plan, take your choice, but it's all about the Stock Market. It is the only thing that matters anymore. Right now the crooks are preparing their escape pods for arrival of the end game. Meanwhile, the Wall Street Oligarchs will continue to find ways to stick it to anyone who doesn't spend a lifetime inside the industry. We've seen this with the failed Modern Portfolio Theory, buy and hold low cost index funds and most recently with the failure of Lifecycle plans to preserve wealth.

The greed, gluttony and sins will be paid for by many generations to come. As a cause and effect of the great discoveries of modern medicine, people are living longer but the age of retirement is the same as it's been since social security laws were enacted. Something has got to give, and I don't see any option other than raising the retirement age as people live longer.

As a friend of mine once put it nicely, "The problem is that everyone wants to eat like a bird and ____ like an elephant."
 
Pensions are dangerous structures...

The employee is separated from his/her investments. The assets are not mobile. The employer hires the fund advisor and contributes in a hidden manor. And, who wants to trust a politician - in government pensions - to keep the promises made by other politicians thirty years ago.

And, most folks nowadays do not have pensions. And, do not understand the mechanics of pensions. And, cannot remember promising the benefits thirty years ago that are affecting them now.

Finally, unfunded pensions look grasping to GenXers.

They will be 'adjusted' to reality.

They are right now.
 
Bullitt said:
No. I don't.

-------

The pension model proved to be a failure or Ponzi after repeated excesses toppled it's asset base. 401K or Pension plan, take your choice, but it's all about the Stock Market. It is the only thing that matters anymore. Right now the crooks are preparing their escape pods for arrival of the end game. Meanwhile, the Wall Street Oligarchs will continue to find ways to stick it to anyone who doesn't spend a lifetime inside the industry. We've seen this with the failed Modern Portfolio Theory, buy and hold low cost index funds and most recently with the failure of Lifecycle plans to preserve wealth.

The greed, gluttony and sins will be paid for by many generations to come. As a cause and effect of the great discoveries of modern medicine, people are living longer but the age of retirement is the same as it's been since social security laws were enacted. Something has got to give, and I don't see any option other than raising the retirement age as people live longer.

As a friend of mine once put it nicely, "The problem is that everyone wants to eat like a bird and ____ like an elephant."
Click to expand...

Modern Portfolio Theory assumes a longer timeframe than a couple of years. It didn't hold for 2008 through early 2009. Everyone is calling the last decade the lost decade. True if you made absolutely no allocation changes. Otherwise, not so true. It took a massive market collapse to negate a decade of growth. Anyway, buy and holders - like BirchTree - are only down about 25% from the market high; not including the positive affects of his DCA. He did not lose a decade of investment returns. A 25% loss is within acceptable limits for equities investing. He (and we) will be hurt far more by the grasping hand of the taxman than the market manipulations by GS.

Yes, the folks depending on Social Security have to expect a higher 'retirement' age. The politicians put the assets in a 'lock box' that invested in only one financial vehicle (our 'G Fund', by law). That is as dumb as it gets! Waiting for a politician to execute a decades old promise by prior politicians is not a good and safe thing.

I just hope they don't try to increase the age at which I can start pulling assets out of my retirement TSP account. I don't think they will because those assets are untaxed till I pull them out. The only negative thing a politician can do to me is to increase tax rates near retirement. That is why I have a Roth IRA:p
 
Pensions are a contractual benefit until the pensioner meets death - then that obligation terminates. You can accept a lower payout that will continue for a spouse until death. These benefits are and can be subject to change. When you have the choice of a 401K or a defined contribution plan the money in the account is already yours and there is always a beneficiary so the funds can be passed on until exhausted. The pension agency no longer has any obligations for your retirement. The days of the defined benefit programs are numbered - they are just to expensive and risky for the agency. The defined contribution retirement plan does require the employee to take responsibility for the future gains - and they better get educated about the markets. This all makes a bull like myself see dollar signs.
 
James48843 said:
Ahh HAA!

So you ADMIT that Al Gore won. :D
Click to expand...

Eh???

The only President to attempt to allow personal ownership of at least a portion of ones Social Security assets was 'W'. President Clinton did nothing other than jigger the Social Security pension benefit by taxing some of it. Was that a positive?

A 'lock box' is not an account controlled by a politician or an actuary. Anyone want either Senator Frankin or Senator DeMint running your retirement asset account? How about Representative Boehner or Representative Pelosi? Anyone want President Bush, Obama, Clinton, or even Gore and McCain? Yuk. Double Yuk. What a crappy choice we had in Nov08.

I want investment allocation options and I want control of it.

I don't want a mythical promise of an 8% gain. I don't want any politician to control my asset allocation (all in the G Fund - even at 30 years old, yuk!!!) and promising me he/she will stand by me twenty years from now.
 
What is the difference between what's happened in Greece (country is finished) and what is happening in California? Just keep borrowing from future generations so baby boomers, who allegedly walked uphill both to and from school in the snow, can fart around on their iPhone in their retirement home on the water. Hey, it's entitled to them right?

What ever happened to a rainy day fund? Spend when times are good, ask for money when times are bad.

Taxpayers would be on the hook for increasing their contribution to the state employees' pension fund by $600 million a year — at a time when the state budget is $19 billion in the red — under a recommendation approved Tuesday by a committee of the California Public Employees' Retirement System.
Click to expand...
http://www.latimes.com/business/la-fi-calpers-20100519,0,3667497.story

Hey don't worry. It never rains in Southern California.

 
I have to say my state has been talking about developing a rainy day fund for years, but it just gets shot down every time it comes up for a vote.

People want their $50-100 tax rebate too much. (balanced budget-any tax collection in excess of biennial budget gets rebated-every year-on top of the refund due at time tax return filed). We're going to be hurting bad here state budget wise about this time next year due to lack of rainy day prep.
 
Pensions have been a joke for a while now, at least in the Private sector. That's why so many people have IRAs and 401K's, and ride the market trying to make money.

It's just punching the States now. To make money, they put the money in investments - many of which just took a major bath or have drowned.
 
Unfortunately a pension similar to an annuity is not your money - it's only an obligation extended from the employer and is subject to change. A defined contribution plan is your money from the start but requires a certain degree of investment acumen. My wife's plan was just devalued $49K since April - but she has over 26,000 shares of an index fund that will gain in value - in the meantime she buys more shares at lower pricing. What's not to like.
 
Birchtree said:
Unfortunately a pension similar to an annuity is not your money - it's only an obligation extended from the employer and is subject to change. A defined contribution plan is your money from the start but requires a certain degree of investment acumen. My wife's plan was just devalued $49K since April - but she has over 26,000 shares of an index fund that will gain in value - in the meantime she buys more shares at lower pricing. What's not to like.
Click to expand...

Birch,

Whats 'not to like' would be another 10 or 15 years of banging around - or slow market drop.

Then it would be cash holdings that 'make' money. Deflation is 'whats not to like'. I can't say we aren't heading there...
 
The mythical 8% gain.
And, the I forgot to fund it.
And, why can't I retire at 52.

Me thinks Prichard is rich compared to Illinois and Kalefornea:p

I am absolutely ecstatic that the major portion of my retirement is in a defined contribution plan (TSP).
I don't want politicians cutting my income in my dotage to cover some union wage.
Back in the bygone era - oh, how the times were a'rolin'...
Not so much now. Kinda overpromised...
 
What happens to a Ponzi scheme when it is popped?
Let us put it this way - it does not gracefully wind down.

Now, if we take a gander down the road of recent history we remember that:
  • Mark-To-Market rules came into effect in 2007
  • and, Bernanke was raising interest rates in 2006/7
Did the housing bubble pop gracefully?

What happens when unfunded pension liabilities see the light of day and the dumb money starts moving?

This could make the .Com and Housing Crashes seem like walks on a summer day.
 
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