is your pension healthy?

[97guns]

this is an accepted proposal to a large metro police/fire pension plan from keeping it from going bankrupt. all government pensions are in big trouble, i would post the link but not sure if acceptable




Normal retirement age would be boosted from age 55 to 58;

The “benefit multiplier” used to determine retirement benefits would be reduced;

Cost of Living Increases (COLAs) would be permanently eliminated;

Those with DROP (Deferred Retirement Option Plan) accounts will have their interest rates cut from six percent to whatever U.S. Government Treasuries are earning — around three percent currently;

Those retiring will have their DROP accounts turned into lifetime annuities, while others with DROP accounts won’t be able to access them until they retire; and

Current employees will have their present contributions to the plan increased from 8.5 percent to 13.5 percent.

[~bs]

nope. 60% funded.

My state already took action to improve the finances of the pension, although it's not expected to go to 100% funding until 20-30 years from now.

-It increased contribution and reduced payout rates for new employees
-increased "normal" retirement age from 55 (with 30 years service) to 62
-Increased its own contribution to the pension (in previous years, it was underpaying)
-COLA reduced dramatically for new employees
-Enacted a law preventing it from "skimming" the pension. Basically in the past, all the way until the mid 2000s, if the pension return was above a certain percentage, lawmakers skimmed the excess, which amounted to hundreds of millions of dollars. The loss on this skimming probably is in the billions if you consider the fact that it was being skimmed back in the 70s. That's a lot of lost investment money.

[corn18]

Yikes! Quite frightening. My pension is a military pension, so funded by the Federal Gov't printing press. I hope the veteran love holds for the next 40 years and they keep it as is.

[AJ444]

My brother is one of the ones impacted in OP's post. I told him when he started to save outside of the plan because nothing is guaranteed and his pension was underfunded. He didn't listen and is looking at other options now.

My father in law is in construction and his pension was reduced by 50% and he is almost ready to retire. Fortunately he is in a good financial position but it will definitely reduce quality of life in retirement.

My dad is living fat off a CSRS gov pension.

My wife is under a FERS gov pension and there are talks of changing the rules.

I have a small defined benefit pension from the first company I worked for, it should buy me a ham sandwich a month when I retire. It is decently funded but wouldn't have much impact for me if it went under.

My current company has a defined contribution pension, a rare bird now days, it is essentially like having more of a 401k match but my company has an outside investor manage the money. The only risk there is the outside management company investing in something stupid.

[~bs]

Bad decision making & organizational structure of pensions by companies/govt administering is a huge reason why not to rely on the pension for income in retirement. If youre at retirement age and get the pension in full, that's great, but not something you should rely on along the way.

[97guns]

Bad decision making & organizational structure of pensions by companies/govt administering is a huge reason why not to rely on the pension for income in retirement. If youre at retirement age and get the pension in full, that's great, but not something you should rely on along the way.

Not only bad decisions and poor management, I've read articles about pension funds getting skimmed also

[~bs]

Not only bad decisions and poor management, I've read articles about pension funds getting skimmed also

yeah, like my state pension fund. In good years, they used to skim the "excess" returns. They'd steal like 50 mil or 100 mil, then apply the funds to one of their pet projects or towards "balancing" the budget. Not only did they limit the max investment gain of the fund, lowering the overall return over the lifetime of the fund, they're effectively taking from the principal of the fund, and not allowing that money to compound over the long term. To me, I can't see how that would even be legal in the first place. The only exception should have been if the pension fund was 100% funded at the time, which it never was.

Since pension fund is taxpayer funded, essentially they're borrowing money from future taxpayers to spend for the "benefit" of current taxpayers. Eventually, the bill will come due with interest, but they didn't care because chances are, they'll no longer be in office by the time the pension reaches crisis status, and the future taxpayers are forced to pay more and more money to attempt to meet the obligation. Basically kicking the can down the road, similarly to racking up the credit card until it's maxed out, then having to struggle to make the payments + interest.

[bigdaddybus]

My spouse and I work for a nearly 100 yr old mutual company with 75K employees. The pension is 100% funded and held by an employee association vs being heald by the company. The pension after 30 yrs of employment is approx 48% of your final salary with no cola adjustment in retirement.

Its a nice benifit along with a small company 401K match (for employees that contribute to the 401K) they provide. Another nice perk is that the mutual funds our 401K offers have extremely low or no overhead fees.

So along with additional savings, the pension, 401K, and social security make for a comfortable retirement with multiple income streams.

Well at least that is the plan!

[Drake3287]

My public safety retirement is with CALPers which luckily is the largest in the country although I realize no pension plan is totally safe. Although I'm now retired, CALPers enacted new lower benefits for newly hired employees several year's ago and at the same time upped the retirement age to 57 along with a lower yearly percentage accrual rate.

Unfortunately this will only cost the state more money in the long run. With Cops & Firefighters working until age 57, the rate of disability retirements will sky rocket, it's bad enough now with 50 to 55 year olds.

As for my retirement, I think I'm old enough to weather the current pension storm but for younger members still working, thing's will be different down the road in 20 or 30 years.

[tripods68]

There was a Pension Reform that Governor Davis signed that took affect in January 2013 to help ease the burden on Employer and higher contribution cost to employees along with modified formula changes. This action is to help maintain a healthy pension system for State of California, CalPERS & CalSTRS. Currently funded at close to 70% and 64% respectively. They would like that number to be at 80% funded to be considered healthy pension system. The new President Trump already put in place to loosen all banks regulations and lending once again (ole days) that would propel the market to keep going up and up. Most likely with the Pension reform, combined with higher market return in the next few years (assuming it continue to go up minus market dip), most public pension could reasonably funded at 80% level. But who knows.

[kork13]

The military is currently in the process of rolling out changes to its retirement system. I can't say right now that it's definitely a bad deal, but at the least, they implemented this plan to save money because personnel costs are rising too fast for the military budget to support. So I can't imagine it being an awesome deal....

My understanding of the change is that we basically go from 50% of base pay at 20yrs plus 2.5%/yr beyond 20, to 40% at 20yrs plus 2%/yr extra in addition to getting a 5% TSP match & a mid-career bonus (with strings attached, namely an extended contract).

This new plan will only be forced on new people starting in 2018, but anyone with less than 12 yrs in before 1 Jan 2018 has the ability to opt in to the new plan. There are some benefits, mostly that people who leave the military before retirement won't walk away with nothing... But I'm skeptical.

Long story short: even the golden goose of the federal employee pension is starting to get cooked.

[~bs]

^

They've already been changing the federal retirement over the past few decades. They're just nerfing it more and more, and trying to push the employees to save for themselves via 401k or TSP in the fed government case.