Why can't teachers/cops live with 401(k)'s instead of pensions?

[Jim in CT]

Originally Posted by Chesapeake Bill

Jim,

It surely isn't a path to wealth. I did not mean to insult. Merely to point out that the deals these workers get are long term contractual agreements. I will not defend those who made them because, like you, I think they were shortsighted acts to merely gain votes. I do, however, feel we need to honor those agreements and find a go-forward approach. If that means negotiating a 401K buy-out then I am all for it. My name should give some indication that I line in the People's Republic of Maryland where we are beset with high taxes as well. My tax bill is slightly worse than your stated amount. Like you, I don't want to see it go up any more than it has to.

Bill

"It surely isn't a path to wealth"

Yes, it surely is...at least here in CT it is...

My 2 best friends are a married couple who are public teachers in CT. They are each 41 years old, they have each been working for 17 years with masters degrees. Their combined income is about $160,000, and of course on top of that, they get insane healthcare and retirement benefits. You'd have to make a lot more that $160,000 in the private sector to equal their purchasing power, because of their benefits. In most towns in CT, public teachers can earn more than $85,000, and again, with ridiculous benefits. Also, here in CT, teachers don't participate in Social Security, which is a huge benefit. I wish I could have my social security taxes given back to me, because as it is, I pay into social security, and I don't expect to get much back (I'm 41 years old). That alone is a huge, huge benefit.

My only first cousin is a police officer. He started at age 21 in the city of New Haven, worked for 23 years, retired with a full pension ($paying $62,000 a year, for the rest of his life) at AGE 44. Then, he took a job as a detective in another town. So between his paycheck and his pension, he makes about $130,000.

In my opinion, those 2 situations represent wealthy folks. In my opinion, both of those scenarios are indescribably crazy, totally irrational, completely fiscally irresponsible, and not sustainable.

I'm not saying I want to pull the rug out from underneath those who are too close to retirement to make changes. But we need to cut back on benefits for those workers who are young enouogh to absorb the change. Again, everyone in the private sector went through the same exact switch 20 years ago, and we all managed to survive somehow.

As for the contracts...you will see some governmengts (towns or states) file bankruptcy in the next couple of years, which gives them legal recourse to re-negotiate the contracts.

[fishpoopoo]

Defined benefit plans (where the risk of payment is borne by the employer) are things of the past.

With exploding plan costs (thank you Alan Greenspan and Ben Bernanke) and sharply lower investment returns (thank you Alan Greenspan and Ben Bernanke), more employers, be it private sector or public sector, are providing defined contribution pensions (where the risk is borne by the beneficiary).

State and municipal governments are feeling pain, with tax revenues down. States are feeling the squeeze because income taxes are down (pervasive unemployment). Municipalities are in pain because assessed home values, and therefore property taxes are down (housing bubble popping, foreclosures, pervasive unemployment).

Revenues are down, and at the same time the cost to pay into pensions and post-retirement healthcare plans is spiking. Unfortunately, since the states can't print money to pay their bills like the U.S. gov't can, states have to cut expenses.

You will likely see, especially this year, an acceleration in state and local layoffs and even benefit curtailments.

Unfortunately, that's just how the math is working out.

[Jim in CT]

Originally Posted by fishpoopoo

Revenues are down, and at the same time the cost to pay into pensions and post-retirement healthcare plans is spiking. Unfortunately, since the states can't print money to pay their bills like the U.S. gov't can, states have to cut expenses.

You will likely see, especially this year, an acceleration in state and local layoffs and even benefit curtailments.

Unfortunately, that's just how the math is working out.

"states have to cut expenses"

Here in CT, there have been no signicant cuts (maybe this year). I don't know that state spending has ever decreased from year to year. Our elected officials have decided to "fix" the problem by raising taxes, because God forbid someone have the guts to stand up to the unions and be honest. I wonder if our politicians are literally unaware that there are 2 ways to addess this problem, one being that you cut spending. The other, raising taxes, that they're well aware of...

[JohnnyD]

Originally Posted by Jim in CT

Also, here in CT, teachers don't participate in Social Security, which is a huge benefit. I wish I could have my social security taxes given back to me, because as it is, I pay into social security, and I don't expect to get much back (I'm 41 years old). That alone is a huge, huge benefit.

...

As for the contracts...you will see some governmengts (towns or states) file bankruptcy in the next couple of years, which gives them legal recourse to re-negotiate the contracts.

With regards to SS tax, the teachers in my area pay into a separate fund with a rate that (if I remember correctly, probably am not though) equals the SS tax rate.

Concerning the town contracts, it is only a matter of time before towns realize firing everyone and subcontracting all of it to private entities is the best course of action.
Maywood, California Fires All Town Employees, Outsources Everything: An Act Of 'Municipal Genius'?

Mansfield for example has two full time public works employees that spend half their day watching soap operas and playing cards. I know because a kid I graduated with landed one of the jobs making good money, earning towards his pension, good beni's... great for him, terrible for the rest of us. It is absolutely insane.

[Jim in CT]

Originally Posted by JohnnyD

With regards to SS tax, the teachers in my area pay into a separate fund with a rate that (if I remember correctly, probably am not though) equals the SS tax rate.

Concerning the town contracts, it is only a matter of time before towns realize firing everyone and subcontracting all of it to private entities is the best course of action.
Maywood, California Fires All Town Employees, Outsources Everything: An Act Of 'Municipal Genius'?

Mansfield for example has two full time public works employees that spend half their day watching soap operas and playing cards. I know because a kid I graduated with landed one of the jobs making good money, earning towards his pension, good beni's... great for him, terrible for the rest of us. It is absolutely insane.

"With regards to SS tax, the teachers in my area pay into a separate fund with a rate that (if I remember correctly, probably am not though) equals the SS tax rate."

Do you know what kind of return they get on those contributions? I read that baby-boomers will ee about a 1.9% average annual return on what they paid into social security, which is a lousy rate of return. My generation will pay more and receive less, so there's no way I'll break even. That teacher fund you referred to probbaly returns teachers 35% a year, guaranteed.

[Fly Rod]

We all had the opprotunity to work for the town, city state or federal, instead we chose the private sector. I was offered a job on three occasions and refused, would have started with four weeks paid vacation and credited with four years towards retirement but, I chose the private sector, had worked out great for me.

Jim
I do not know what your property is assessed for but, I'm assessed for 450,000 and pay about 4,200 in property taxes. If your property is assessed around the same maybe you should think about moving to Cape Ann, great fishing, nice beaches and only 2.5 hours to ski country.

[Jim in CT]

Originally Posted by Fly Rod

We all had the opprotunity to work for the town, city state or federal, instead we chose the private sector. I was offered a job on three occasions and refused, would have started with four weeks paid vacation and credited with four years towards retirement but, I chose the private sector, had worked out great for me.

Jim
I do not know what your property is assessed for but, I'm assessed for 450,000 and pay about 4,200 in property taxes. If your property is assessed around the same maybe you should think about moving to Cape Ann, great fishing, nice beaches and only 2.5 hours to ski country.

FlyRod, you're right, I chose not to work in the public sector. However, I don't think that means that public employees can enslave me for eternity to fund their unreasonable demands. The bottom line is, in my opinion, what public employees are receiving is way out of whack what what we should be expected to pay for. I don't want my teachers eating cat food. But I don't want to have to get a 2nd job so that they can keep insane, antiquated benefits.

My house is assessed at $450,000 as well, and my propetry taxes are just about double yours, and mine will go WAY up this year. Plus, towns in CT charge an annual "car tax" for the privilidge of owning a car. We have a 2004 Honda Accord and a 2009 Sienna minivan, and for that, I have to pay the town about $1,000 a year. CT has been very creative in finding ways to stick their fingers in our pockets, very few states have this car tax. Plus our sales tax is 6%, income tax is 5.5%.

Everyone I love lives in central CT, so I'm stuck for now. If I could convince my parents, brothers, and 5 best friends to move to New Hampshire, we'd be g-o-n-e.

[JohnnyD]

Originally Posted by Jim in CT

Do you know what kind of return they get on those contributions? I read that baby-boomers will ee about a 1.9% average annual return on what they paid into social security, which is a lousy rate of return. My generation will pay more and receive less, so there's no way I'll break even. That teacher fund you referred to probbaly returns teachers 35% a year, guaranteed.

I'll have to check. They screwed up my payment one year and paid me as an employee as opposed to a contractor so I have something like $50 sitting in the account. I'll see if I can dig up the info.

[fishpoopoo]

Originally Posted by Jim in CT

Do you know what kind of return they get on those contributions? I read that baby-boomers will ee about a 1.9% average annual return on what they paid into social security, which is a lousy rate of return. .

That's in nominal terms.

If you consider real inflation ... you're getting a negative return.

[179]

Originally Posted by Jim in CT

"It surely isn't a path to wealth"

Yes, it surely is...at least here in CT it is...

My 2 best friends are a married couple who are public teachers in CT. They are each 41 years old, they have each been working for 17 years with masters degrees. Their combined income is about $160,000, and of course on top of that, they get insane healthcare and retirement benefits. You'd have to make a lot more that $160,000 in the private sector to equal their purchasing power, because of their benefits. In most towns in CT, public teachers can earn more than $85,000, and again, with ridiculous benefits. Also, here in CT, teachers don't participate in Social Security, which is a huge benefit. I wish I could have my social security taxes given back to me, because as it is, I pay into social security, and I don't expect to get much back (I'm 41 years old). That alone is a huge, huge benefit.

My only first cousin is a police officer. He started at age 21 in the city of New Haven, worked for 23 years, retired with a full pension ($paying $62,000 a year, for the rest of his life) at AGE 44. Then, he took a job as a detective in another town. So between his paycheck and his pension, he makes about $130,000.

In my opinion, those 2 situations represent wealthy folks. In my opinion, both of those scenarios are indescribably crazy, totally irrational, completely fiscally irresponsible, and not sustainable.

I'm not saying I want to pull the rug out from underneath those who are too close to retirement to make changes. But we need to cut back on benefits for those workers who are young enouogh to absorb the change. Again, everyone in the private sector went through the same exact switch 20 years ago, and we all managed to survive somehow.

As for the contracts...you will see some governmengts (towns or states) file bankruptcy in the next couple of years, which gives them legal recourse to re-negotiate the contracts.

Bingo we have somebody who actually gets it. I will tell you I am a local government worker here in NC and our benefit package and pention package are nothing like what is the norm up in RI/CT. The unions through corruption have managed bury the average taxpayer with these gold platter pension plans.

[fishpoopoo]

Interesting that folks mention pensions.

While this thread has been addressing mostly state and local situations, a lot of people also benefit from double dipping the federal pension plan.

Put in your 20 with the fed.gov, get pension, then work in a lucrative related (e.g., IT or defense contractor for the fed.gov) private sector job.