This is life in the privatized pension lane

 It’s just about picking the right stocks. Right?

What does distributing risk look like? What do the fees actually cost over the 60 years between 25 and 85? Oh and then there’s the health savings account for you medical costs. Everyone will have to save for the average cost of medical care including end of life. Right? And there won’t be any downturns in investments ever again. Right?

Now let’s see how many dollars will it take 20 or 50 years from now? So I’ll need to save how much out of my checks? I don’t make that much yet. Shouldn’t my school district or university or the state have to pay this? Who benefits from my work, after all?

04MONEY-02-master768

Matthew Lesser, a Connecticut state representative, sponsored a bill that would require more disclosures on conflicts of interest by those who sell 403(b)-type retirement plans.

Credit Christopher Capozziello for The New York Times

Support the Minnesota TRA 2017 Pension Adjustment Plan. Protect your public employee pension. It’s part of your compensation for years of service to Minnesota’s children and families.

Investing in Your Retirement Income

How is investing in your retirement income like keeping yourself in food? Well, how do you keep yourself in food now?

Feed-Me #3: I eat at my parents’ until they invite (force) me out to work and live on my own. Okay. Partying, social media, Starbucks platinum level may have to back off in place of serious work, rent and utilities, and eating out—but giving up international cuisine is asking too much. After all, you only live once, right? And this is how it will go until I drop or marry into money, the latter of which is not likely to happen when I pass the retirement age of 70+. By then inflation is likely to have out-paced wages by 100%. Hello, cat food.

I had no pension plan, except Social Security, and years of small government conservative shrank that and Medicare to something less than the poverty level and free clinic visits. No one explained to me that not everyone wins the lottery or winds up in the top 2% of wealth.

Feed-Me #2: I make a plan before moving out to own a house by 35, so save for a down payment while working hard and long—a day job plus a part time. I buy smart and healthy at the co-op and learn the best buys in wine and craft beers. I take a cooking class or two and master some pretty good dishes that impress my friends and partner. Our children don’t appreciate the food, but demand much in clothes, sports activities and tech-toys. Our kids go off to very good schools, which we hope will earn them high paying jobs.

By the time we settle in to paying off the house and college loans, we realize that there has never been a time to contribute the advised 20% of income to an IRA. We will be working past retirement age if we can, but those last 5 years of life, which cost half or more of our total life medical costs may have to be covered by the kids. I may be watching a modest life drain away into a long, sad decline. It all balances out.

Feed-Me #1: I live at home, paying costs to my parents until I have a steady career job. I plan on buying a home as soon as I can arrange it. I live as cheaply as I can manage, valuing people over things, parks over concert halls, Mr. Coffee over Starbucks. I use public transportation, which alone saves enough for a down payment on a house in about five or six years. I buy smart and healthy at the Cub. I have learned what foods have real value and are affordable. As soon as I can, I get a garden plot to supplement the expensive stuff I can grow. Once I get a house, I plant an apple tree in the yard and a big garden in the back. These investments, along with running and biking, help keep me fit as well, and will reduce my medical costs even into very old age. Live starts early and ends late after all.

I was fortunate enough to have a public pension plan which with Social Security took about 15% of my salary, and that was matched by my employer. I have paid off my house, and the kids’ public college loans are handled. Since I also saved in 430(b) and 457 plans almost from day one, I will have enough income for the next 20-25 years to equal about 80% of my final working salary. That means travel, visiting the kids, and even reinvesting against expensive final years.

Just as I planted seeds in my garden, I planted financial seeds in my retirement plans, and because I started early and waited, as I did with the apple tree, I can actually wind up with more than I absolutely need. Just as I understand the growing season, I see the value of treating life as a whole process. I could have just lived on the harvest collected by others; then I would have been feeding the others as well, and that would be expensive and would have no end. I could have joined the harvesting, cutting the wheat I could later eat, and that would have reduced the cost, but because of waiting until late in the process, it would have offered too little a return, and even that return could be threatened by a bad crop. Worse, next season, when I wasn’t working, I would earn no return at all.

Even starting early, planning and exercising some prudence, while it could earn proportional wealth compared to those early years, — even that case offers no guarantee. Climate change, mining operations, social disorder, any number of things can spoil the crops or even poison the land. Social Security and Medicare can still be gutted, pension plans can be subverted, or the world economy can collapse.

There are no guarantees; there are risks. The trick is to minimize the risks, and that is best done by pooling our efforts. Going it on your own, no matter how good you are, leaves you the most vulnerable. There is safety in numbers. It doesn’t matter how confident you are in your abilities, the thing that will get you is beyond your control or anyone else’s. Life is a challenge; rise to it; don’t try to play it. Your public employee pension plan is your best hedge against tragedy. It’s your right. Support it.

Congress could soon allow the benefits of current retirees to be cut.

By Michael A. Fletcher, Washington Post, 3 December 2014
Congress could soon allow the benefits of current retirees to be cut as part of an agreement to address the fiscal distress confronting some of the nation’s 1,400 multi-employer pension plans.
Several unions and pension advocates opposing the move, which would be unprecedented, say that permitting financially strapped plans to cut retiree benefits would violate the central promise of traditional pensions: that they would provide a defined benefit for life.
“This proposal would devastate retirees and their surviving spouses,” said Karen Friedman, executive vice president of the Pension Rights Center, a nonprofit group. “The proposal would also torpedo basic protections of the federal private pension law . . . that states that once benefits are earned, they can’t be cut back.”
Several of the nation’s large multi-employer pension plans are on a course that would leave them insolvent within a decade. If that occurred, the federal insurance fund that protects the retirement benefits of more than 10 million Americans in multi-employer plans could collapse.
In a proposal made more than a year ago, a coalition of plan trustees and unions said the only way to salvage the most distressed pension plans without a government bailout is to allow them to cut retirement benefits before they run out of money. The reductions would be voted on by the trustees of individual plans, as well as retirees, under proposals being negotiated by lawmakers. Advocates point out that the plan laid out by the coalition would leave pensioners in distressed plans with more than what they would receive from government pension insurance if their plans failed.
“The plans that are headed for insolvency would have benefit cuts under existing law,” said Randy G. DeFrehn, executive director of the National Coordinating Committee on Multiemployer Plans. “At least this proposal would preserve benefits above existing law.”
In recent weeks, negotiations over the proposal have heated up on Capitol Hill. Still, some key elements are unresolved, including a way to satisfy objections from United Parcel Service, which withdrew from one of the most distressed plans in 2007 but would be on the hook to make up for any pension cuts affecting its retirees.
If those details can be ironed out, congressional aides said an agreement is possible before the current session of Congress ends this month.
“Members are still discussing the details about a possible legislative solution to the multiemployer pension crisis and remain hopeful Congress will act before the end of the year,” said a bipartisan statement for the House Committee on Education and the Workforce. “Any decisions regarding how a possible solution might move through the legislative process will be made by leadership at the appropriate time.”
Multi-employer plans are formed by businesses and unions that join forces to provide pension coverage for working-class Americans, from truck drivers to grocery store clerks and construction workers.
Their finances have suffered over the past decade in large part because of stock market plunges and a decline in employment and union membership, leaving the plans with a growing proportion of retirees to current workers.
Employees covered by the plan are part of a diminishing share of private-sector workers who are still covered by pensions that pay them a fixed percentage of their pay for the rest of their lives. The idea of allowing cuts to benefits now being paid to retirees is supported by some unions, even as it is adamantly opposed by others.
“This is nothing less than a declaration of war by Congress on American retirees,” said R. Thomas Buffenbarger, international president of the International Association of Machinists and Aerospace Workers. “Allowing cuts to existing retirees’ pensions is simply the wrong way to address the problems of a few troubled pension plans. . . . The long-standing promise of a secure pension system must not be overturned by unaccountable lawmakers in a lame-duck session of Congress.”
Since 1974, the federal law governing the nation’s private-sector pensions has prohibited cuts to the benefits of workers who have already retired — a precedent that is now endangered.
Opponents have accused Congress of negotiating the deal “behind closed doors.” Also, while the general proposal has been aired in legislative hearings, they say the specific legislation now being hammered out has not.
“Retirees, most of whom are living on modest incomes, have few alternatives and no ability to plan for or absorb cuts in their benefits,” said Joyce Rogers, senior vice president of government affairs for AARP, the lobbying group for older Americans. “Before demanding reductions in the pension income of current retirees, Congress should first require the key stakeholders to take every possible action permitted under current law to restore their plans to solvency.”