Bill Gates Says State Pensions Draining Education Money

[matt0611]

How about Bill Gates give more of his money to fund education in America rather than sending it 3rd world countries where they continue their cycles of coups, genocide, and famine.

Don't bother. Our public school systems are a black hole for money.

Keep it Bill, invest in some businesses.

 

[ShawnD1]

We should put suicide booths on every street corner. When your pension runs out and you already sold your house and your kids cannot take care of you, there is still that final solution.

It beats the alternative. My grandmother died alone in a hospital roughly 16 hours away from her nearest family members. I think id rather die next to the bus stop by my home.

 

[IronWing]

You're supposed to get money that you put in, not 10x more than you put in.

No. You are supposed to get the pension as specified in your employment contract when you agreed to do the work. Reducing pension benefits after the fact when the work has been completed is theft.

 

[sactoking]

And how in the hell is that different from a loan? Like a bond, isn't that "owed"?

A bond carries investment risk. At any time, the bond issuer can default and any bond holders can lose their investment.

These pension plans are a contractual liability for services rendered, they're employment compensation. There's typically no expectation of investment risk in an employment scenario; people tend to expect to get paid for work performed, and when they don't they sue the shit out of the employer.

Looks like that to a lot of us, although we'd call it 'excessive compensation'.

Really? I lose over 25% of my paycheck to funding the pension plan. Given the amount contributed and the timeframes involved (30+ years) it's not excessive at all.

If I started work at age 35 making $50,000 (baseline), got 2% annual raises, contributed 25% to the pension, and the pension returned 5% by the time I retired at 65 the pension plan would have been funded $1,098,379 by me, which would fund 75% of my highest income for more than 30 years in retirement, by which time I'm 95 (and likely dead). Pensions are not excessive compensation.

These employees want SOMEONE'S else's money.

No they don't, they want their money back! Pensions were funded by employee withholdings.

 

[ShawnD1]

If I started work at age 35 making $50,000 (baseline), got 2% annual raises, contributed 25% to the pension, and the pension returned 5% by the time I retired at 65 the pension plan would have been funded $1,098,379 by me, which would fund 75% of my highest income for more than 30 years in retirement, by which time I'm 95 (and likely dead). Pensions are not excessive compensation.

Don't bullshit us. You're telling us you pay $12,500 per year into your pension?

Once we account for the roughly 3% yearly inflation, what is your 1.098mil worth in today's dollars?
1,098,379 = X * (1.03)^30
1,098,379 / 2.427 = X
Pension = $452,566 in today's money

You said your yearly raise is 2% (I assume that's inflation adjusted since not-adjusted would mean you get a pay cut every year)
50000 * (1.02)^30 = $90,568 in today's money is your highest wage

Divide one into the other
452566 / (90568 *0.75) = 6.66 years pension at 75% your highest income


Uh oh. Better start saving and don't plan on retiring. Then again it has always been like that. I don't quit my job then expect to float on my savings for 5 years before getting another job. That's just infeasible. Why would you expect to float on your savings for 15-20 years when your quit your job at 65?

 

[wuliheron]

We should put suicide booths on every street corner. When your pension runs out and you already sold your house and your kids cannot take care of you, there is still that final solution.

We do that already. We have more gun dealers then gas stations in the US! For a couple of hundred years it was popular in China to kill yourself by eating a pound of salt (it was cheap), but we're much more humane today and make cheap guns available. If you live in a big city where guns are harder to buy the nearest tall building will suffice.

 

[JACKHAMMER]

Don't bullshit us. You're telling us you pay $12,500 per year into your pension?

Once we account for the roughly 3% yearly inflation, what is your 1.098mil worth in today's dollars?
1,098,379 = X * (1.03)^30
1,098,379 / 2.427 = X
Pension = $452,566 in today's money

You said your yearly raise is 2% (I assume that's inflation adjusted since not-adjusted would mean you get a pay cut every year)
50000 * (1.02)^30 = $90,568 in today's money is your highest wage

Divide one into the other
452566 / (90568 *0.75) = 6.66 years pension at 75% your highest income


Uh oh. Better start saving and don't plan on retiring. Then again it has always been like that. I don't quit my job then expect to float on my savings for 5 years before getting another job. That's just infeasible. Why would you expect to float on your savings for 15-20 years when your quit your job at 65?

Your math is wrong. When do retire tomorrow in today's money? I double checked the guy's post you responded to, the pension money would run out at little over 27 years. He is right. Use a spreadsheet.

 

[ShawnD1]

Your math is wrong. When do retire tomorrow in today's money? I double checked the guy's post you responded to, the pension money would run out at little over 27 years. He is right. Use a spreadsheet.

/facepalm

Do you remember what guys said 30 years ago when the yearly wage was maybe $15,000?
"Dude, in 30 years your pension will be worth like $300,000!!!" (20x their yearly income)

Then 2011 comes around and it turns out that's not exactly a lot of money. You can't even buy a house for that much (in my city).
Right now you guys are saying the exact same thing. omg my pension will be worth a million dolllars!!!!!! (20x your yearly income). Then 2040 comes around and holy shit 1 million dollars is not a lot of money. You can't even buy a house for that much (in 2040).

Just watch. It happens every single time. People assume inflation is 0 and that the 5% yearly return on their pension is enormous. Then they later find out inflation was 3% so their pension was just barely hanging in there at its current value. Lots of people retire then suddenly figure out they can't retire because their entire life saving plan was based on 0% inflation.

 

[sactoking]

Don't bullshit us. You're telling us you pay $12,500 per year into your pension?

Yup, and the contribution is going up even more this year in July.

You said your yearly raise is 2% (I assume that's inflation adjusted since not-adjusted would mean you get a pay cut every year)

In years where a pay raise is granted it's about 2% IA, 4% gross. However, not only will there be 3 years with no pay raise but there's also furloughs and pay cuts to account for, so yes, public employees are currently getting a pay cut every year.

50000 * (1.02)^30 = $90,568 in today's money is your highest wage

Divide one into the other
452566 / (90568 *0.75) = 6.66 years pension at 75% your highest income

Not even close. All numbers are IA (except benefit, which was level). Adjusting benefit for COLA and the pension is funded for 21 years. Given retirement at 65, that would run out at 86, by which time I'll statistically be dead. Using the law of large numbers the state would easily be able to fund pensions for people who live beyond their funding date through the contributions of those who die early.

Uh oh. Better start saving and don't plan on retiring. Then again it has always been like that. I don't quit my job then expect to float on my savings for 5 years before getting another job. That's just infeasible. Why would you expect to float on your savings for 15-20 years when your quit your job at 65?

Yup, that's why I need to contribute to my deferred comp plan in addition to the money taken for the pension.

 

[TheDoc9]

/facepalm

Do you remember what guys said 30 years ago when the yearly wage was maybe $15,000?
"Dude, in 30 years your pension will be worth like $300,000!!!" (20x their yearly income)

Then 2011 comes around and it turns out that's not exactly a lot of money. You can't even buy a house for that much (in my city).
Right now you guys are saying the exact same thing. omg my pension will be worth a million dolllars!!!!!! (20x your yearly income). Then 2040 comes around and holy shit 1 million dollars is not a lot of money. You can't even buy a house for that much (in 2040).

Just watch. It happens every single time. People assume inflation is 0 and that the 5% yearly return on their pension is enormous. Then they later find out inflation was 3% so their pension was just barely hanging in there at its current value. Lots of people retire then suddenly figure out they can't retire because their entire life saving plan was based on 0% inflation.

I agree with this, the best thing to do would be to buy a house during your working years.

In any case, what was promised for pensions when you were hired should stick. Public sector employees have a vast benefit in this area as well as medical. For future employees the numbers should be rained in at least a little, but it's indicative of a massively flawed system anyway.

For example: if the public sector benefits ever matched the private sectors, then the benefits would continue to fall over the years due to globalization - which Bill happily advocates - and inflation.

Instead of setting up the largest tax shelter for every billionaire in the world, perhaps Bill should re-invest in the people and country that allowed him to achieve this.

 

[Darwin333]

How about Bill Gates give more of his money to fund education in America rather than sending it 3rd world countries where they continue their cycles of coups, genocide, and famine.

How about you go make a few billion dollars and you can do whatever the hell you want with your own money?

 

[BansheeX]

people should be responsible and save and invest, but thats too much to ask.

You've given the government the power to price fix interest rates via the federal reserve, thereby control the rate at which people save. You've also given the government the power to steal the value of your saved dollars by issuing new money since the money isn't backed by a material good like gold. Too late now, foo.

 

[Svnla]

/facepalm

:thumbsdown:

 

[JACKHAMMER]

/facepalm

Do you remember what guys said 30 years ago when the yearly wage was maybe $15,000?
"Dude, in 30 years your pension will be worth like $300,000!!!" (20x their yearly income)

Then 2011 comes around and it turns out that's not exactly a lot of money. You can't even buy a house for that much (in my city).
Right now you guys are saying the exact same thing. omg my pension will be worth a million dolllars!!!!!! (20x your yearly income). Then 2040 comes around and holy shit 1 million dollars is not a lot of money. You can't even buy a house for that much (in 2040).

Just watch. It happens every single time. People assume inflation is 0 and that the 5% yearly return on their pension is enormous. Then they later find out inflation was 3% so their pension was just barely hanging in there at its current value. Lots of people retire then suddenly figure out they can't retire because their entire life saving plan was based on 0% inflation.

Perhaps I am not understanding what your saying, but I don't follow.

It doesn't matter that inflation is greater than zero. What matters is the contribution, the return, and and the final salary/benefit. People with pensions don't just magically get more money because inflation was 10 %, their spending power is just less. The seven year figure you came up with is just ludicrous. Using you reasoning, one would never be able to save enough in a 401K to retire because of inflation. I retire in the future, I don't retire today.

 

[Mr. Pedantic]

It doesn't matter that inflation is greater than zero. What matters is the contribution, the return, and and the final salary/benefit. People with pensions don't just magically get more money because inflation was 10 %, their spending power is just less. The seven year figure you came up with is just ludicrous. Using you reasoning, one would never be able to save enough in a 401K to retire because of inflation. I retire in the future, I don't retire today.

As long as the inflation rate is lower than the average interest rate of the investment (geometric mean? Or arithmetic mean? ) then your investment's net value will increase. For example if inflation is a constant 3% and your savings rate is a constant 4% over the course of 20 years, you will still get a net increase in value of ~21%. It doesn't mean that you will never be able to retire, it just means that you will need more money to retire than your parents or grandparents did.

 

[ShawnD1]

Perhaps I am not understanding what your saying, but I don't follow.

It doesn't matter that inflation is greater than zero. What matters is the contribution, the return, and and the final salary/benefit. People with pensions don't just magically get more money because inflation was 10 %, their spending power is just less. The seven year figure you came up with is just ludicrous. Using you reasoning, one would never be able to save enough in a 401K to retire because of inflation. I retire in the future, I don't retire today.

It's simple to understand what's up. Your money drops in value as time goes on. It drops a lot. The only accurate way to measure what your money is worth is by comparing is as a multiple of your salary. In that above example I said salary for someone 30 years ago might be $15,000 and they think $300,000 retirement fund (20x their income) is huge, but in reality it's actually not a lot of money when they decide to use it. The projected value was 20x your salary 30 years ago, but it's now only maybe 6x a normal yearly salary due to inflation. If you live paycheck to paycheck right now, not including pension, then you'll blow through that $300,000 pension in just 6 years! Maybe 10 if you're good with budgets and try to stay reasonable.

Look at your current salary, look at the expected value of your pension after 30 years. What multiple is one of the other? If you say 20x, then I'm sorry but you can't reasonably retire at 65 unless you plan on dying before 75. You'll need more like 30x your salary, 40x, maybe more. Depends how long you plan to live. Remember that the cost of everything is constantly going up at about 3% every year. Right now $1,000,000 retirement fund sounds like a lot of money, but when 2040 comes and you try retiring, you'll find out really fast that it's not a lot of money because the base salary for the job you have right now will be maybe $200,000 in 2040. So your retirement fund is worth 1mil, but people are earning 0.2 mil per year, so your pension is only worth 5 years worth of income? yeah. You'll run out of money in a very short period of time.

There's a reason half the people in my office are "retired" but still working. That pension sounded huge when they were young, but as they get older they start to realize their pension is only a few years of their current income. There are some tax shelters to make it so you don't pay as much income tax on it when withdrawn in a certain way, but that doesn't change the fact that it's still only a few years worth of income.

If you're making $50,000 right now and you want to retire right now at 65 and you expect to live to 80, you'll need a pension that is about 15x your current income, give or take. Does that sound about right? $50,000 x 15 = $750,000 in today's money if you want to retire right now.

If that's how much you need right now, how much will it take 30 years from now? 5 mil? Do you expect to have a 5 million dollar pension? It's either that or you don't retire until 75, or if you retire at 65 but plan to die younger than that.

 

[mcmilljb]

I agree with this, the best thing to do would be to buy a house during your working years.

In any case, what was promised for pensions when you were hired should stick. Public sector employees have a vast benefit in this area as well as medical. For future employees the numbers should be rained in at least a little, but it's indicative of a massively flawed system anyway.

For example: if the public sector benefits ever matched the private sectors, then the benefits would continue to fall over the years due to globalization - which Bill happily advocates - and inflation.

Instead of setting up the largest tax shelter for every billionaire in the world, perhaps Bill should re-invest in the people and country that allowed him to achieve this.

The problem I have with public pensions is that they create loop holes for people with influence and power. They typically peg your pension pay out at some multiple of your 4 highest consecutive quarters. Typically that would your last year for a long time employee, however also we have to look at the multiple to get the full picture. And this is where the loop holes come in. The multiple is typically determined by years of service, and people really know how to abuse this. They will serve as an elected official to get time added to their years of service. Most elected officials don't make much, however some are only part-time so they work some where else. So what you do is build up your service credits to build up your multiplier, and then you take a high paying full-time for one year to lock in your 4 highest consecutive quarters. Typically they get the position because they know the people in charge since they worked with them. After that, you leave to do whatever you want, and you get your state pension. Some people in California did this in a dirtier way, they just overpaid themselves as elected city officials.