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tony

Public Pension Funds Could Run Dry In Downturn

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I am starting to worry about the next downturn when it comes and it will come. Some of you younger folks have seen nothing but good times in the last ten years. Things can change. Be prepared.

 

Many pension funds for public workers already owe far more in retirement benefits than they have in the bank, and the problem will only grow worse if the economy slows down, according to a report released last week.

The study from The Pew Charitable Trusts found that the New Jersey and Kentucky public pension funds are in such perilous shape that they risk running dry.

https://www.cbsnews.com/news/study-some-public-pensions-funds-could-run-dry-in-downturn/

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This is one reason why I'm finally paying attention to retirement and trying to build up my 403b and 457.   This article  shows Hawaii at #5  of states with "worst shortfalls".   Between poor funding of the public schools and the worst teacher pay (adjusted for COL) in the nation, being a teacher in Hawaii has definite drawbacks. 

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NJ teacher here.  Anyone have information on what happens when a pension system fails?  Or information on States or organizations that found creative ways to fix pension systems?  Would employees get back their contributions back?  It almost seems as though our pension is certain to fail.  

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Luckily, Virginia has a strong retirement system at the moment  ( I think).However back during the last major downturn, the system developed a tiered  benefit system. I was in tier one based on my years of service so nothing changed for me. Others however with less years of service or newcomers ended up in tier two which was adjusted and not as beneficial as tier one. They also had to pay more into the system. I believe it was 6%  of their income.

Seems like teachers today have it tougher than ever in all aspects of their employment. 

So worse case scenario in my opinion is you might see your benefits reduced and payments into it go up by participants. I seriously doubt your pension plan would completely fail.  If the situation was that bad I am sure money would be found to prop it up. Problem with New Jersey is your taxes are already very high . Ultimately it could fall on taxpayers or major reduction of other services.

I feel teachers are getting the raw deal in so many ways. Lets  hope reducing their pensions is not yet another blow against the profession. Here in Virginia there has been talk for years that teachers shouldn't have benefits other workers no longer have. Luckily we now have a balanced General Assembly. For years it was heavily Republican.

I still say save all you can just in case something catastrophic does happen. Also make sure you have some risk protection in your savings like bonds and cash. Don't like predicting what lies ahead but this expansion has been going on for a long time and eventually things might turn. I realize some of you have never experienced employment while in a major downturn as of yet. Its no fun.

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Here in California, they increased both the teachers' contributions and the districts'. The district will be increased to an unsustainable 19% by 2020 (from 8.5% just a few years ago)!!! This will bust district budgets IMO. Teachers contribution went from 8.0% to about 11%. 

I have gone to my union meeting with just retirees in Los Angeles, and there is a lot of heads in the sand with statements such as "they will never take away our pensions" our pension benefit is protected by the constitution! What! I don't think this will happen in my lifetime but future teachers may not have a pension. 

The problem with pensions is with counties and cities with public protection employees, police and fire. OMG! Those pensions in some cities here in California have gone through the roof. Some police and fire are getting full benefits after a few years in the system. It was never like that with my pension plan. For me, after 24 years I only get 49% of my final compensation as a teacher. It is nowhere near 100%, a teacher has to work nearly 40 years to get 100%. 

 

 

 

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4 minutes ago, sschullo said:

 

The problem with pensions is with counties and cities with public protection employees, police and fire. OMG! Those pensions in some cities here in California have gone through the roof. Some police and fire are getting full benefits after a few years in the system. It was never like that with my pension plan. For me, after 24 years I only get 49% of my final compensation as a teacher. It is nowhere near 100%, a teacher has to work nearly 40 years to get 100%. 

Its true. But I never hear anyone threatening the police or fireman with their pensions or even state workers for that matter. Its always teacher pension I hear are on the chopping block.  

 

 

 

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It concerns me that our union is not talking about this.  Teachers sometimes wonder aloud if there will still be a pension when they retire but no one I talk to is talking about how funding is at 31%!

Tony, I’m more pessimistic about our pensions future.  It hasn’t been funded the way it should be for close to twenty years. We’ve had incremental increases to our contributions over the past 5 years and a percentage of proceeds from lottery sales have gone towards funding as well.  We’re still way short, according to this study, dead last

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Jebjebitz

 

I totally understand what you are saying.For your sake and others I hope it works out for you.

Start writing your governor and representatives now and express your concern.  The union should be looking into this. Share these articles with your Union rep. Make sure you elect the right people in your next elections. In the meantime keeping saving!!   As a side note, being Italian I have always loved New Jersey, the boardwalks and the eateries and delis. I don't envy the taxes you guys pay up there however. Keep us up to date on your efforts and findings  As Kennedy once said "The time to patch the roof is when its sunny" Yup start addressing this issue NOW!!

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6 hours ago, jebjebitz said:

It concerns me that our union is not talking about this.

First and foremost, I'd want my union fighting for fair compensation, reasonable hours, and safe working conditions. When I hear about the local union it is never because they're working to address those issues in a substantive way.

It is about making it difficult for teachers to be fired (at a time when I hear they're having a hard time finding teachers to hire). It is about curriculum. It is about class sizes in art class. It is about standardized testing.

It isn't to say people don't have legitimate concerns or that none of these issues have value, but I'd prefer to put out the fire before we renovate the guest bathroom. So I'm not at all surprised that your union isn't talking about this.

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SURPRISE! The traditional teacher pension plan is already gone in many states. In most cases these teachers are offered what's called a hybrid plan which combines elements of a traditional pension and a 403(b)-style account. Generally, they shift more of the investment risk to the workers.  That makes it even more important for teachers to understand the underlying investments in their plans.

Ed, in our state you can't even count on the union to do even the basic things you mention. The union state and local is pretty worthless here as are the local reps. They walk around collecting dues and then you never see them again. All you get from them is a monthly NEA magazine. I never joined and frankly I think teachers could do better without this huge organization. Just look what the NEA has done for teachers in the 403b arena.

I don't see things getting better for teachers.Ultimately with the huge turnover now occurring most kids today won't even remember who their teachers were once they grow up.

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24 minutes ago, tony said:

I never joined and frankly I think teachers could do better without this huge organization.

That’s fair enough, my wife made the same choice.

I believe unions (and labor laws) are critical for the health of the economy because it is critical that the interests of workers be balanced with the interests of those who run/own the employer.

I believe it is impossible to achieve that balance when an organized employer can negotiate with each employee individually and the employee can either accept the terms or accept (increased) poverty.

So for me it is beyond shameful if people working for or running the union are discrediting and abandoning its true purpose. That is something I won’t easily forgive.

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