CoasterBuzz Podcast #211 posted

RideMan said:
...wretched pyramid scheme...

Winner! :)

Only if it is still around past 2037. Otherwise, I'm a *loser*. :(

--Dave Althoff, Jr.

The irony was not lost, in the days of my government work, that I paid into a pension system and not SS. The other nice thing is that when I left it, I got all of that cash. The bad thing is that I squandered it all on hookers and blow.

Not really, but I couldn't tell you where it went.

Well, you probably could, but regardless, that information is privileged...and we are not. :)

--Dave Althoff, Jr.

I hope you paid for a Fastpass with the hookers. ;)

LostKause said:
already making more than plenty to begin with.

Who gets to decide what is enough, what is plenty, and what is more than plenty? I'm sure that, for billions upon billions upon billions of people, what our below-the-poverty-line workers make is more than plenty, even considering the much higher cost of living.

Jeff said:
The bad thing is that I squandered it all on hookers and blow.

Not really, but I couldn't tell you where it went.

I missed that lecture with my agent at Fidelity - he made me or rather he enticed me to roll it over into IRA's. Based on the market performance I'd rather have had the Hookers and Blow.

There is no such thing as "plenty." I'll give room for "adequate," but not plenty. It seems like there's always something. We've found our little family can easily get by with a pretty huge cushion of cash left over each month, but we can always find something that money is or should be spoken for with. It can be saved for retirement or college, house renovations, a future vacation... there's always something. Mo money, mo problems. :)

If I made $200k per year, for ten straight years, I think I'd be at the point where I felt like I had "plenty," mostly because I could pay off my house. I feel very strongly now that if you can get down to only your real estate taxes and utilities, you've truly reached a place of financial freedom.

I'm not there yet but I echo your thoughts Jeff. Every time I get a raise I think, "ok...some breathing room" and inevitably something comes up. I cashed out some vacation to take my Vegas trip coming up. And, wouldn't you know it, the car needs four new tires.

Still going to do the vacation with a credit card...but that two steps forward and one and a half back steps back stuff just gets irritating. Then I remember how fortunate I am in the big picture and I just can't get upset about anything.

Social secuity won't be really solvent for as long as politicians say. At this point, they are close to the edge on one side or the other of paying out more in benefits than they collect in taxes each year. But in a couple of years, the program will be in the red on a permanent basis as the boomers retire in mass. Claims of solvency reaching out 20 years or more are based on the supposed "trust fund" that exists of excess contributions over the years. But we didn't invest the SS surplus in gold or Microsoft stock which would could sell to help pay benefits. We spent the money and wrote ourselves IOUs which can only become money to pay SS benefits through higher taxes or more debt which will lead to more taxes.

My wife and I have 2 kids with our oldest being a freshman in high school. We have been saving for them for college. If at the end of each year, we determined our college expense surplus for the year (everything we have saved) and spent it on a vacation with an IUO put in the funds place, would our college fund be solvent when my kids get to college?

At the time social security was put into place, the average person didn't live long enough to collect it. That is not true anymore.

To me, social security should be phased out and replaced with a system that is welfare for old people. If you are under 45 and putting anything other than $0 in for your expected SS benefits, you are crazy. People should understand that they need to provide for their own retirements. The notion of spending everything you earn now (and sometimes more than that) is suicidal. Part of what you earn now needs to be saved for when you can no longer work. Taxes we pay now into SS go to pay benefits to current retirees. As an aside, all government pensions should be frozen immediately and should be replaced with 401(k) plans. If you save enough to retire when you are 55, good for you. But pension plans funded with taxpayer money that pay able bodied 55 year olds to do nothing are unsustainable and stupid. Look at the unfunded pension liabilities of state pension plans. But heaven forbid that reality even be brought up lest one be shot.

But as messed up and politically charged as social security is (just try to mention social security benefit cuts to a senior citizen and you better duck because there is a cane coming at your head ...and quickly), medicare is the bigger problem. You can run actuarial numbers with social security and come up with a combination of benefit reductions/phase outs and tax increases which can make the system work (whether you can get a political solution is another story). But with ever increasing medical costs and new medicines and procedures coming out daily, there is no simple solution for medicare much less an easy one politically.

GoBucks89 said:
As an aside, all government pensions should be frozen immediately and should be replaced with 401(k) plans. If you save enough to retire when you are 55, good for you. But pension plans funded with taxpayer money that pay able bodied 55 year olds to do nothing are unsustainable and stupid.

You do realize that those pension plans are funded out of the employee's salaries, right? True, their salaries are paid with tax dollars, but it's really no different than you or I putting money into an employer provided fund. I agree that the double dipping and early retirement issues should be looked at, but there's no need to throw out the whole system just for that.

Secondly, why move them to a 401k? So they can be SOL like everyone else the past few years who believed investing in the Wall Street ponzi scheme would actually help them afford retirement? I've only been investing in my employer sponsored plan for 3 years (thankfully at the lowest allowable rate) but at this point, I've lost so much in the market that I would be better off stashing half of it under a mattress and taking the other half to a casino and betting on black. Guaranteed pensions are totally the way to go, and sadly have just been another casualty in the war to cut costs for the sake of the next quarterly report.

Uh, you guys do realize that most civilian federal government employees hired since the mid 80's have been paying into SS and have a 401 type plan.

Feds hired before then are on CSRS, in which employees had 7% taken from their check and put into a defined benefit (pension) plan. CSRS pre-dates Social Security, possibly the reason they never contributed to or collected from it.

Employees hired since then are on FERS, pay into SS, have a smaller portion taken out for a much smaller defined benefit plan, and have standard employer matching for a 401 plan.

http://www.govexec.com/dailyfed/0306/033106rp.htm

CP Chris said:
You do realize that those pension plans are funded out of the employee's salaries, right? True, their salaries are paid with tax dollars, but it's really no different than you or I putting money into an employer provided fund. I agree that the double dipping and early retirement issues should be looked at, but there's no need to throw out the whole system just for that.

State employees pay a PORTION of their pension costs. The rest are paid for by the state (and thus tax dollars) and growth in the assets in pension funds. But much of the future pension liabilities are unfunded at this point meaning that even with projected growth in the assets in the state pension funds, there will not be sufficient assets to pay promised benefits. Current estimates put the total unfunded pension costs at somewhere between $500 billion and $2.8 trillion dollars (differences resulting from the investment returns you assume for pension fund assets).

http://www.statebudgetsolutions.org/about_us/newsroom/state-unfunded-pension-liabilities-exceed-1-trillion

To cover those unfunded liabilities, states will either need to cut services to state residents in other areas, raise taxes or a combination of the two.

Secondly, why move them to a 401k? So they can be SOL like everyone else the past few years who believed investing in the Wall Street ponzi scheme would actually help them afford retirement? I've only been investing in my employer sponsored plan for 3 years (thankfully at the lowest allowable rate) but at this point, I've lost so much in the market that I would be better off stashing half of it under a mattress and taking the other half to a casino and betting on black. Guaranteed pensions are totally the way to go, and sadly have just been another casualty in the war to cut costs for the sake of the next quarterly report.

I understand your frustration with 401(k)s and the stock market. But at this point, they are the best investment vehicle that we have for retirement savings. And if you want to save through other means, go for it. And if you are able to save enough to retire in 10-15 years, good for you. Enjoy it. If you aren't, you will need to scale back your retirement plants/work longer.

The stock market that you despise is a large component of what states invest their pension fund monies in seeking to grow them to pay benefits. And interestingly enough, although most Americans with 401(k)s or who are retired without a pension have seen their retirement funds/incomes reduced dramatically in the past 2-3 years, folks with state pensions have seen zero change in their expected pension benefits (unless they agreed to reduce them in contract negotiations) though the state's ability to pay those benefits has taken a big hit.

Guaranteed pensions are the way to go from the government employee's perspective. Question is whether they are the way to go from the state/taxpayer perspective. To me, its not. There was a reason that private, non-union employers went away from pension plans years ago. And there is a reason private companies with non-government pensions are struggling with pension costs. With increased life expectancies and, if you are also paying post-retirement healthcare costs, the skyrocketing costs of healthcare, pension plans are unsustainable.

Baffles me as to why middle class people would want to work longer and harder for their own retirement, paying increased taxes and getting reduced services along the way, so that able bodied government employees can retire on pensions/full healthcare when they are 55. Makes no sense. Though as noted in another thread, sense and politics are not friends at the moment or even talking to each other at this point.

And Bob, I do understand the federal employee situation. We are talking state employees not federal. In a former life I worked for the federal government for a couple of years. Judge I clerked for had a pension but no one on his staff did.

GoBucks89 said:
I understand your frustration with 401(k)s and the stock market. But at this point, they are the best investment vehicle that we have for retirement savings.

I think that's part of my problem/concern. That the best system we have is only perhaps a little more predictable/reliable than taking your money down to the casino seems asinine to me. There needs to be a more sensible way.

In part, that's what SS is/was supposed to be for, although as you pointed out that system is in trouble right now, in large part due to politicians taking from the pot whenever they please. I haven't read up too much on what it would take to refine it, but making the pool untouchable by anyone but beneficiaries and removing the tax cap (I think it's around $106,000 right now) would certainly help.

I don't think comparing it to a casino is fair. The markets go up and down, yes, but looking at the long-term, it only goes up. It's the timing for any individual that "needs" the money to be liquid at a specific time.

Well, at least at a casino you know what your odds are. :)