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November 08, 2008 – Comments (8)

I wrote a post that I couldn't publish the other day and it isn't on this computer so I still can't publish it.  It was on pensions. 

The way I look at pensions is that you need to look at fixed dollars and if you consider the average person is living 20 years into retirement, well, if you were paying 10% and the employer was paying 10% for 40 years then the pension plan can only afford 40% of your wage, yet they try to pay out 70% of wages.  The numbers are so insane...

The way to fix pensions is to make an adjustment to 1% of wages per year for say the first 30 years and to reduce overall incentive to retire early make it 1.5% for each year over age 60.  Now pensions would be affordable and pension funds would not take the kinds of risks they have taken.

Look at this pension, it is currently only funded at 73% and who knows what the return expecations is for the plan.   It is about time tax payers say enough to unaffordable pensions plans they are expected to pay for.

8 Comments – Post Your Own

#1) On November 08, 2008 at 11:23 PM, Option1307 (29.91) wrote:

I believe you did post this the other day, just fyi...I haven't checked to find it, but this post seems strikingly similar. Good luck on that plane...

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#2) On November 09, 2008 at 9:48 AM, garyc27 (< 20) wrote:

If these types of pensions continue, the taxpayers will be working to support the pensions of government workers. 

Ideally, these pension plans should be frozen, cash balance accounts should be established, and the workers should have the opportunity to invest that cash in equities, bonds, of other financial instruments.

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#3) On November 10, 2008 at 12:00 PM, ByrneShill (74.82) wrote:

Pensions will be things of the past pretty soon, except for government workers. Most companies with defined-benefit pensions have pensions plans with more obligations than what the company itself is worth. In a lot of cases it makes financial sense to bankrupt the company just to get rid of the pension obligations.

 As for our beloved governments, well, our federal pensions is so generous it's worth more than the salary in some cases. Our municipal pensions too. At least our provincial (at least here in QC) are not out of whack. But prepare yourself to pay much higher fed/prov/muni taxes to cover for these pensions. I don't think most governments have the backbone to face unions on this subject.

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#4) On November 10, 2008 at 1:57 PM, jcrash (99.65) wrote:

I work at a higher educational institution.  My hours are below average for the industry I am in.  My pay is also below average.  My stress is also below average.

 At retirement, I'll get 2% of my final pay per year of service.  For me, that will mean about 60% of my final salary at age 62 or 63.  However, I can never hit it rich with stock options or company stock matching that goes up dramatically.  I won't get to "travel on the company", or go to company christmas parties.  Many of my coworkers are people I have very little in common with - as they are not the types you would find at my former employers.

Guess what, I think it is a good deal - and I'd encourage you to find a job such as mine.  It isn't as fast paced as the corporate world, and I will never be rich, but I don't have to worry about my job every time there is a new "re-engineering", "re-structuring", "downsizing", "rightsizing", "redeployment", or "refocus" like I did at my previous jobs.  I didn't get a raise this year due to state budgets, and I can already tell I won't be getting one this next year.  Some tradeoffs are worth it.

 

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#5) On November 11, 2008 at 11:41 AM, frankaj9 (72.65) wrote:

   I agree.   Any company offering a pension as part of their benefits package, should look at all the possibilities a person can participate in: like Social Security, IRAs, 401Ks, and shouldn't try to pay out 70%.  By the time a person retires, if they need  100% of their paycheck, then they've managed their lives BADLY.  Credit card debt should be minimal, their homes should be paid off.  their children grown and out on their own ...

   That payout level puts a burden on USA companies that foreign companies don't have to match. 

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#6) On November 11, 2008 at 12:41 PM, MaskedMan2007 (99.25) wrote:

Totally agree with this post. Young workers will pay for the retirement of the older one. Makes no sense to me.

And then, if pension funds make a clean up and make the appropriate ajustment, those young workers will not get as much as they paid from the pension fund.

Here in Quebec City, the police is on strike, the new mayor want to make a cut in their pension fund and their sick leave. The idea is that the governments will have more and more difficulties to affort these kind of conditions.

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#7) On November 11, 2008 at 4:02 PM, MadRussianHobbit (91.78) wrote:

The days of the defined benefit pension plan are numbered.  More and more companies (and even governments) are switching over to defined contribution.

When I started working for a local government here in Florida, I had the choice between the defined benefit plan and a defined contribution plan.  I choose the defined contribution for two reasons.  First, I don't have to stay 30 years to fully vest.  And second, I am not dependent on the policies of the Florida Retirement System to keep my pension safe.  (Of course, I AM dependent upon my own policies...)

(Heck, I've never stayed at a job for 30 years, and I don't plan on staying at this one for another 23 years.  I'd end up remarkably bored.  At some point, the job is no longer challenging, so I'd want to leave.)

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#8) On November 11, 2008 at 7:31 PM, dwot (97.29) wrote:

I am now working at a job that gives me pension.  When I worked on call they gave a reduced pension, reduced in two ways, first was for number of days worked, fair enough, you work less days you should get less, the second was outrageous, they counted weekends for people with contracts, so 30 or 31 days to a month and you could work every working day of the month and the best you could get is 21 to 23/out of the number of days in the month, essentially a double penalty for casual workers, 71% rate of accumulation for equal days worked.  I found it disgusting that they dump further on the workers that are already having the roughest time.  So, under employment put you at 60% working and then what you actually accumulate on pension was at 42%.  And they further hit casual worker because your pay didn't go up the pay scale as other teachers.  Would take 55 years to get to the top of the pay scale with the way they treat on call workers, so that is actually a 3rd large hit for on call workers.

And people ask me why I went up north... 

Which reminds me, I am just about able to pull my money out of that plan which I think I will do before the benefits are cut.

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