Return to the Household Finances Forum | Post a Follow-Up

 o
does this cause anyone else to stop and think?

Posted by gibby3000 (My Page) on
Sat, Sep 29, 07 at 12:21

Some things I've read here and some people I know have caused me to ponder this situation. Private industry is having to reconsider generous pension benefits for an aging workforce in order to remain competitive. People might have to work longer to save enough for retirement - might not be able to retire in their 50's. On the other hand I know a few people who have worked for the government who have retired comfortably at age 55 with what seem to be generous defined benefit pensions - at least that's what they tell me. I also noticed some postings here along those lines. Of course the government does not have to be competitive since taxes can be raised on a "captive audience" to generate more revenue if needed.

What do you think?


Follow-Up Postings:

 o
RE: does this cause anyone else to stop and think?

I think the generous government benefits aren't as good as they used to be. I know people who work for state and federal governments. The ones who got in earlier got better deals.


 o
RE: does this cause anyone else to stop and think?

Ditto what Adellabedella said.

Here the local civil service contracts have really eroded the benefits as well as the pension system for newer hires. The deals for those hired before 1980 were amazing by comparison. Nothing close if you came on in the last 20 years.

Those 60 to 80 and up percent pensions mentioned here and elsewhere are for folks hired way back I'm sure. Even the Ferderal system has changed. Most people in the current system (hired since mid 80's or so) will have to work 60 years to draw a 60 per cent Federal pension. Good luck doing that!


 o
RE: does this cause anyone else to stop and think?

In addition, government jobs typically paid less than what the private sector paid for "equivalent" work; the nicer pension plan was supposed to help make up for that. I'm hard-pressed to say which I'd prefer more: a bigger salary or a bigger pension.


 o
RE: does this cause anyone else to stop and think?

Okay - well I guess that is encouraging to know - that everyone is now dealing with the growing number of aging workers in a similar way. I had a fleeting thought that I'd be working forever to cover the taxes on my retirement investment income to fund pension plans for others who retired at age 55.....


 o
RE: does this cause anyone else to stop and think?

Actually, a fair number of people who retire at 50 or 55 often end up continuing to work, either for health benefits or because they have found something they like doing, but can finally afford to do it at a lower pay scale.

My DH found, for instance, that it would not really pay him to keep working after 55, unless he was willing to stay another full 10 yrs. The fractional increases on years worked in between age 55 and age 65, weren't worth very much to make up for the stress he deals with. Since he's already had a stroke at age 50, I'm not particularly eager for him to keep working a moment longer than he needs to.

I'm not sure why you think your taxes are paying for government workers to retire early. There are many types of governmental workers - city, county and state as well as federal. Most of them are funded locally by the agencies themselves. If you don't live or work in that area, or use their services, you aren't paying any part of their pensions.


 o
RE: does this cause anyone else to stop and think?

I have several friends that work in Law Enforcement and Fire Rescue and I would say their retirement benefits exceed anything you will find in the corporate world today. I have one friend that retired from the FD 2 years ago at 47 and he is now living off of $90k a year and walked away with $400k in drop money. Another buddy who is 3 years from retirement says his buyout offer, they get one every year, broke $1million this year. He is 41. I could go on and on.

Amazingly, the retirement system for LE and FR in Florida also is way more then someone would get from the US Military for similar amounts of service.


 o
RE: does this cause anyone else to stop and think?

Also, in some government-pensioned jobs, the individual has a flexible schedule and can easily work a second part-time job. However, working for 'the gubmint' can be a stifling, crazy-making experience, regardless of which government entity it is. (Why do we think they offer such generous pensions?)


 o
RE: does this cause anyone else to stop and think?

That's very funny and true. Working in a big government bureaucracy is truly "crazy-making".

I work in the public schools, and I often think the administrative and decision making process as comparable to a Monty Python skit!
(note: although funny, it should also strike you as depressing as well!)

By the way, teacher benefits seem to be pretty bottom of the barrel. The pension system isn't terribly impressive. Work 30 years and get 50% of your salary... I believe that's the deal.

For me, I am trying to design my life so that I will have a very simple and inexpensive set of responsibilities in old age so that I will be more likely to afford retirement. Very small house, well insulated, safe area, no debt, no boat!.

More to say, but it's probably more appropriate for another thread.


 o
RE: does this cause anyone else to stop and think?

Safety workers (defined as police and fire) have always gotten generous pensions traditionally. They get 3% at age 50 from CalPERS, as opposed to 2% at age 55 as many PERS employees (including transit, school, and health workers). PERS is the State of California's Public Employees Retirement System, BTW; should have explained the acronym first.

I don't begrudge them that. Their chances of injury or disability are quite a bit higher than for your average desk worker.


 o
RE: does this cause anyone else to stop and think?

I did not know that there were any private industry employers left that still offered pensions. Even if there were, I would think that by the time I "retire" (ha ha, like that is ever gonna happen), these companies will have done away with pensions, so that they can remain competative with foreign companies.

I think that anyone relying on a private company to provide a pension to fund their retirement is likely to find that they won't end up with what they are expecting.


 o
RE: does this cause anyone else to stop and think?

A pension that would cover 50% of my salary seems pretty decent to me. Especially if health insurance continues....that is the big wildcard.

Realize that once you retire all that money you were plowing into retirement savings stops....so you don't need 100% of your previous income to have the same spending money. Many often suggest planning to have 80% of your pre-retirement income to fund the same level of living.

This means you put together a 50% pension, social security plus all you put away in an IRA, Roth or 401k....you should be quite well set.

As to the original posters question....most governments are moving to defined contribution plans same as business. The older generations got excellent pensions and the younger will fund their 401's or starve.


 o
RE: does this cause anyone else to stop and think?

Behaviorkelton, 50% of your salary after 30 years is pretty good for civil service these days. If you were a federal employee it would be 30% after 30 years.

And rather than free insurance, federal employees earn the benefit of continuing to buy health insurance at the employee rates.



 o
RE: does this cause anyone else to stop and think?

The politicians', though, is a whole different story.

Our provincial folks just voted themselves between 25 - 30% increase in current income.

And ... 25 cents addition to the minimum wage rate for the average Joe/Jill - to somewhere around $8.00/hour.

Plus - the politicians have a sweet pension, as well.

Around here, anyway.

Question: By what logic does a guy/gal spend millions to run for office (or even the nomination to run) ...

... for a job that pays $100,000 - 200,000. per year?

With no assurance that one may win the election?

And with poor job security ...

... one must go through the whole rigamarole again in about 4 years or so.

Am I missing something, here??

ole joyful


 o
RE: does this cause anyone else to stop and think?

Good point Ole Joyful... of course, there must be something else "in it" for the politician to endure such an expensive risk. (and I hate to think of what that might be)

About the 50% for public school folks.. it's more like 45%, but I guess it's not bad if what you say is true.

So, for someone in his 40's (me), is S.Security going to be there? I'm sort of planning on it *not* being there. (In other words, I am planning on being poor... just not destitute!).


 o
RE: does this cause anyone else to stop and think?

I have to question the premise of the OP:
Private industry is having to reconsider generous pension benefits for an aging workforce in order to remain competitive

CEOs at S&P 500 companies retire with an average of $10.1 million in their supplemental executive retirement plans, according to the Corporate Library. In contrast, only 36% of American households headed by someone over 65 even had a retirement account in 2004.

So the idea that companies need to eliminate pensions for the lowly worker in order to be competitive is (imo) simply justification for greed on the part of upper managers.

Here is a link that might be useful: Is a CEO Worth 364 Times the Average Joe?


 o
RE: does this cause anyone else to stop and think?

Private industry that does not have a unionized workforce reconsidered pension benefits some time ago. I've been at my current employer for nearly 10 years and we get no pension. I worked for a total of 3 different companies in the 7 years before that - no pension either. From 1978-1993 I worked for a bank and I will get a pension from there.

Hubbie's employers haven't offered pensions either.

We know how to save...and save we do. If the lack of pensions result in people not being able to retire in their 50's - oh well, too bad. No sympathy from us. If, however, the pension folks had saved some of their earnings, maybe early retirement could happen. No matter how you slice it, the key to wealth is to live under your means.


 o
RE: does this cause anyone else to stop and think?

Will Social Security be there for those of us under 50? Yes, unless we let the politicians destroy it in the name of fixing it.

The reality is that Social Security has some long term funding concerns as it is currently structured, but it is hardly insolvent. In the simplest way to understand this, simply eliminating the FICA phase out (tax all income instead of only the first $95k) would make SS solvent for the next 75 years. Reducing benefits about a quarter would do the same....and while such a move would generate howls from retirees it's a long way from the "no SS" scenarios spun by the politicians with ulterior motives.

What is going bankrupt is the US general fund. As SS surpluses dry up the incredibly massive deficit that the government is running will be even more noticeable. Add in the repayments to the SS trust fund that were borrowed and I think that general program cuts will be very much needed. The good news is that most of those payments will be made with seriously reduced value dollars....a function of having borrowed so much.


 o
RE: does this cause anyone else to stop and think?

I've worked for city, state, & federal govt as well as private industry.

My City job had a day to day contract at the pleasure of the City Manager, health benefits, but no retirement and average salary for the area but was high profile

State job was low salaried, but with health benefits and 11% retirement contribution. No pension

Federal job paid better than the previous two, had health benefits, and retirement was 5%, but with more vacation days than the previous two. 1% salary per year service to fund.

Private industry- Much higher salary than any of the previous 3, health benefits, no pension, but options. Financially this was the best of the bunch, but it came with the expectation that family was of a lesser priority than being available for unpaid overtime.


 o
RE: does this cause anyone else to stop and think?

I have been working for the federal govt. for the past 10 years in a law-enforcement venue. I am 36 and can (and will) retire when I'm 50. At that time, I will receive 36% of my base pay for 26 years of work, which isn't a huge percentage, but is more than other federal NON-law enforcement workers. I do contribute heavily to my 401K, as does my husband, whose workplace does not offer a pension.


 o
RE: does this cause anyone else to stop and think?

Yes, drcindy, the multiplier for years of service is higher for most federal law enforcement and military. It is the regular ol federal civil servants that have 1% as a miltiplier. They do also get a match though (to 5%) on the optional retirement savings TSP (Thrift Savings Plan). Good deal.


 o
RE: does this cause anyone else to stop and think?

"I did not know that there were any private industry employers left that still offered pensions."

Yep, they are still out there. But, they are terminating fast. That's my job - terminating pension plans. LOL! Not really, but it seems I do a lot of that lately. I just checked the online data base for the US and 275 companies terminated their plans in 2006. It's been the trend for many years now to switch to a 401(k) plan. :(

The tiny little company I work for has 31 corporate pension clients. So, there are many, many plans still around, just not as many as their used to be.


 o
RE: does this cause anyone else to stop and think?

"I did not know that there were any private industry employers left that still offered pensions."

Indeed there are. DH is retiring early next year with a full pension. (And a 401K) Of course, it's a union job - makes a big difference.


 o
RE: does this cause anyone else to stop and think?

behaviorkelton, if you are in a gov. pension plan with your public school district you come under the Windfall Tax Act. Can't remember the year, but you won't be seeing much, if any, Social Security. Even if you have enough paid in credits from other jobs. Might want to check that out.

Gloria


 o
RE: does this cause anyone else to stop and think?

Quiltglo, what you are referring to is the Windfall Elimination Provision (WEP) that reduces - but does not eliminate - Social Security benefits for those people who have public pensions for service not covered by Social Security. Social Security uses a three-tiered benefit formula which is designed to replace a higher-percentage of income for lower-wage employees. It replaces 90% of the first X amount of dollars, then 32% of the next band of income, and then finally 15% of the last band. WEP reduces that first tier from 90% down to 40% on a declining scale for public service employees who have less than 30 years of Social Security covered service. It can result in a reduction of a few hundred dollars in the monthly benefit. But again, it does not eliminate the benefit. Now the Public Pension Offset (PPO) can eliminate completely a spousal Social Security benefit (i.e., the benefit one would get based on their spouses work history, not their own), but that is a completely different issue.


 o
Re: does this cause anyone else to stop and think?

For those of you wondering about the federal retirement program, it can be divided by those who began working prior to 1984 and those who started in 1984 or later. The earlier system, CSRS, is a defined benefit program that pays an annuity (not a pension) based on a retiring employee's age and years of service. Employees contribute 7% of their gross salary to CSRS. For example, an employee would first become eligible for an unreduced annuity at age 55 with at least 30 years of service. That person would receive an annuity based on 56.25% of his highest three years average salary. He would accrue an additional 2% for every additional year worked beyond 30, up to a maximum annuity of 80% for 41 years and 11 months of service. CSRS employees are not covered by Social Security, but can contribute to the government's version of a 401(k)which is called the Thrift Savings Plan (TSP). CSRS employees do not receive any matching contributions to the TSP.

In 1984, the government's retirement plan, now called FERS, was changed to cover new employees by Social Security and to reduce the defined benefit portion of the annuity. The retirement age was also to be raised on an increasing scale from 55 to 57 based on an employee's year of birth. FERS employees still contribute 7% of salary, but 6.8% goes to Social Security and only .20 goes to the FERS annuity. A FERS employee who works 30 years would only receive 30% of their "high-3" as opposed to 56.25%. They also only receive 1% for every additional year, instead of the 2% that CSRS employees receive. However, they do receive Social Security (and should they retire before age 62, they would receive a supplement that would equate to their Social Security benefit until they are eligible for Social Security). Additionally, they receive an employer match on their TSP contributions that maxes out at 5% if the employee contributes 5%.

Finally, whereas CSRS employees get a full cost of living increase based on the CPI each January as soon as they retire, FERS employees do not receive any COLA increases until they turn 62, and even then they receive a "diet cola" of the CPI minus 1%.

Now, there are some variances to what I've written above, but that covers the basics. I hope that you've found this description to be informative.


 o
RE: does this cause anyone else to stop and think?

I just went to a FERS retirement planning seminar. I figure my 30 year annuity, after taxes, will pay for my contributions to health care, extremely basic life insurance and maybe some beer. After that its your 401K which and and HAS lost money, not grown as much for me as maybe a mutual money acct because unfortunately I did not reallocate for years and years. That bit about the stock market always being good long term? Didn't work for me.


 o
RE: does this cause anyone else to stop and think?

"That bit about the stock market always being good long term? Didn't work for me."

Mary, I don't know how you could possibly have lost money in the TSP. Here is the historical annual return of the 3 stock funds over the last 10 years (1997 - 2006):

S Fund (Wishire 4500): 9.56%
C Fund (S&P 500): 8.37%
I Fund (EAFE): 7.53%

Even the bond fund (F Fund) returned 6.25%.

And this is over and above the virtual 100% return you get because the government matches your contributions dollar for dollar on the first 5% of your salary that you contribute each pay period.

And I can't believe that you are complaining about your FERS annuity that will pay you roughly 30% of your salary each year, over and above your 401(k) withdrawals and Social Security. Most people only have a 401(k) to retire on in addition to Social Security. Very few private firms still provide a pension - and virtually none index it to inflation each year.


 o
RE: does this cause anyone else to stop and think?

I realize, bethesdamadaman, that SS isn't totally eliminated, but it might as well be. I know of no one who gets more than a pittance even through they worked summer jobs and had to pay into the system for years and years. I just want behaviorkelton to have the heads up and not plan on SS as any part of his retirement if he truly needs those funds. DH has numerous people come in the door who were planning on SS and are amazed to find out that is just isn't going to happen.

Gloria


 o Post a Follow-Up

Please Note: Only registered members are able to post messages to this forum.

    If you are a member, please log in.

    If you aren't yet a member, join now!


Return to the Household Finances Forum

Information about Posting

  • You must be logged in to post a message. Once you are logged in, a posting window will appear at the bottom of the messages. If you are not a member, please register for an account.
  • Posting is a two-step process. Once you have composed your message, you will be taken to the preview page. You will then have a chance to review your post, make changes and upload photos.
  • After posting your message, you may need to refresh the forum page in order to see it.
  • Before posting copyrighted material, please read about Copyright and Fair Use.
  • We have a strict no-advertising policy!
  • If you would like to practice posting or uploading photos, please visit our Test forum.
  • If you need assistance, please Contact Us and we will be happy to help.


Learn more about in-text links on this page here