Dow 30,000

[SEIOWA CLONE]

Slander and insult is the last refuge of a crumbling position.



The risk profile with a DC plan is basically linear... you ride the market.

The risk profile with a DB plan is nonlinear. Under most normal circumstances, you are fine, but if there is an extreme market upset (see 2008 or 1929), then you bet plenty of public and private pensions are not going to be worth all that much.

And yep, my thoughts are influenced by my family's experience with Enron.

I remember you saying your fund can opt to slash benefits in extreme circumstances, which to me makes your fund sound more like a DC fund anyways, even if outwardly structured and managed like a DB plan until something would go wrong.

And that is probably my ultimate thoughts towards this -- not that they are so different, but that they have become more and more similar over the past few decades and, no matter how clever you try to be, they are both constrained by returns. Somebody else even brought up some DB plans are starting to offer benefits or lump sum payments to survivors and heirs...

...just like a DC plan. The lines between them are blurring.

Given those issues, I do not think we are too far apart really.



I would be pleasantly surprised if we receive anything from it (31 me/29 spouse).

There is a huge difference between public and private funds. You are correct businesses like Enron and others screwed over the workers on their retirement. But that is a totally different than a public workers retirement like the Post office or IPERS.
Maybe less reward, but also a hell of a lot less risk. Like I said before, I don't know any person drawing IPERS retirement or the couple from the post office complaining about leaving money on the table. Many at 62 are making more drawing IPERS and SS than when they were working.

 

[Sigmapolis]

There is a huge difference between public and private funds. You are correct businesses like Enron and others screwed over the workers on their retirement. But that is a totally different than a public workers retirement like the Post office or IPERS.
Maybe less reward, but also a hell of a lot less risk. Like I said before, I don't know any person drawing IPERS retirement or the couple from the post office complaining about leaving money on the table. Many at 62 are making more drawing IPERS and SS than when they were working.

As I have said, IPERS is in relatively good shape as far as state pensions go, but that is not saying much. Most of them are not looking too pretty right now...

https://www.pewtrusts.org/en/resear...fs/2018/04/the-state-pension-funding-gap-2016

You keep defending IPERS and the like as if nothing could ever go wrong with them. That might be true for you close to or already into retirement, but it is a similar situation to Social Security on the whole. Somebody is taking a haircut on those benefits. You might say the taxpayer will, but given the state of our fiscal situation overall between local, state, and the federal levels of government, I think it is going to be far more on pensioners than you would like it.

 

[SEIOWA CLONE]

As I have said, IPERS is in relatively good shape as far as state pensions go, but that is not saying much. Most of them are not looking too pretty right now...

https://www.pewtrusts.org/en/resear...fs/2018/04/the-state-pension-funding-gap-2016

You keep defending IPERS and the like as if nothing could ever go wrong with them. That might be true for you close to or already into retirement, but it is a similar situation to Social Security on the whole. Somebody is taking a haircut.

I could care less what is happening in other states, just the plan that I am enrolled in. You keep defending the stock market like it has never crashed. Your idea that if people just stay in the market they will recoup all their losses is true. But we both know people panic, and many will jump out after a crash trying to save what they have left. Is that wise, no, but its human nature.
SS will be fine, hell they were saying we would never get it 30 years ago. Does the system need tweaked, sure it does, take the cap off and it would be fine. Your employers part stays the same, you continue to pay on every dollar you earn, would go a long way to fixing SS.

 

[Rabbuk]

I could care less what is happening in other states, just the plan that I am enrolled in. You keep defending the stock market like it has never crashed. Your idea that if people just stay in the market they will recoup all their losses is true. But we both know people panic, and many will jump out after a crash trying to save what they have left. Is that wise, no, but its human nature.
SS will be fine, hell they were saying we would never get it 30 years ago. Does the system need tweaked, sure it does, take the cap off and it would be fine. Your employers part stays the same, you continue to pay on every dollar you earn, would go a long way to fixing SS.

If the stock market truly crashes your retirement won't really matter.

 

[Sigmapolis]

If the stock market truly crashes your retirement won't really matter.

Indeed -- that's the point he seems to miss.

If the stock market ever crashed bad enough to wipe out DC plan holders to the degree he wants to imagine, then state pension funds would be absolutely toast.

IPERS included.

At least with the 401(k) you can sit on it and wait for it to come back. With IPERS, you might be looking at an Enron situation and/or you're at the mercy of venal politicians.

 

[SEIOWA CLONE]

Indeed -- that's the point he seems to miss.

If the stock market ever crashed bad enough to wipe out DC plan holders to the degree he wants to imagine, then state pension funds would be absolutely toast.

IPERS included.

At least with the 401(k) you can sit on it and wait for it to come back. With IPERS, you might be looking at an Enron situation and/or you're at the mercy of venal politicians.

With IPERS it would fall back on the tax payer of Iowa, that is in no way close to an Enron situation.
Why would the IPERS investments be any worse off than your 401K? If we have a drop like in 2008, no one in IPERS saw a loss in the checks that they were drawing, not one.
Point being public service retirement plans are totally different than a private business retirement plan like Enron or the teamsters unions.

You seem to keep missing that basic fact.

 

[AuH2O]

With IPERS it would fall back on the tax payer of Iowa, that is in no way close to an Enron situation.
Why would the IPERS investments be any worse off than your 401K? If we have a drop like in 2008, no one in IPERS saw a loss in the checks that they were drawing, not one.
Point being public service retirement plans are totally different than a private business retirement plan like Enron or the teamsters unions.

You seem to keep missing that basic fact.

The point is IPERS is still dependent on contributions and investment of those contributions. Which means if there was a historic crash that wipes out 401Ks, the state may not have the money to fully pay their benefits. There is precedent that if a state or city government can't provide necessary services they can cut payouts to pensions regardless of the contract. A state isn't going to raise taxes to cover pensions in an environment where wealth has been wiped out. There are protections, but it isn't without exception. The chance is tiny, but the point is if the type of unprecedented crash were to happen that wipes out 401Ks we are all up a **** creek. It would probably take a combination of a massive crash, very slow recovery with an Ag economy crisis for IPERS to have major problems.

 

[NodawayRiverClone]

The post I was replying to said that you have to save more with an individual account vs. a defined benefits plan to get the same level of "security". That simply isn't true, because in a defined benefits plan your returns will be lower and you've paid for that security in a lesser account value/payout.

You also touch on a good point that it's a years of service/contribution formula, that I would guess further erodes the value of the defined benefits plan. I didn't have time to dig into it and didn't want to speculate originally, but I would guess the ROI on money contributed by the worker and state is less still than the 8.5% gain on the IPERs portfolio once fees and expenses are removed. I think the SS is a 1-2% ROI, which is awful.

As far as the forced savings, that's great, but it will probably be negated by fees and the lesser returns vs. individual accounts to the point where's there's an infinite number of scenarios that we can discuss with the net result is that saving money is smart.

The point several of us were making is that while these plans are fine and they have a place; the comments that they are superior to individual plans fails to look at the pros and cons to each type of retirement plan. That has fallen on deaf ears.

I can't disagree with the idea that an individual investor can reach retirement with a retirement benefit that is greater than that which results from the same amounts placed in a defined benefit plan. I do disagree with the proposition that individual investors will necessarily have that better retirement simply because the same money went into individual investment accounts. If they select a well balanced portfolio and adjust investments as they age, they can do it. Many people do not want to be bothered with it.

DB plans have some advantages and, if available, can serve people's retirement planning well. For instance, the returns posted by IPERS are after expenses. They are not less as you have speculated. DB plan investment expenses area a (tiny) fraction of what most mutual fund managers will take. But, again, the return that db's seek is based on the risk the db plan must take to pay projected benefits from the benefit formula and to pay down any unfunded liability. There are db plans that have "managed" themselves into tremendous unfunded liability amounts (Illinois, Kentucky). I'd likely agree, those may be candidates to change to individual investment accounts or some hybrid plan.

So, not saying db plans are superior, but saying a well manged db plan is an excellent part of one's retirement and is competitive with individual accounts. The trend of IRAs/401Ks completely replacing db plans is not a good one for folks retirement futures.

 

[ArgentCy]

I could care less what is happening in other states, just the plan that I am enrolled in. You keep defending the stock market like it has never crashed. Your idea that if people just stay in the market they will recoup all their losses is true. But we both know people panic, and many will jump out after a crash trying to save what they have left. Is that wise, no, but its human nature.
SS will be fine, hell they were saying we would never get it 30 years ago. Does the system need tweaked, sure it does, take the cap off and it would be fine. Your employers part stays the same, you continue to pay on every dollar you earn, would go a long way to fixing SS.

What do you think IPERS invests in? Magic fairy dust that is only available to public funds?

 

[ArgentCy]

With IPERS it would fall back on the tax payer of Iowa, that is in no way close to an Enron situation.
Why would the IPERS investments be any worse off than your 401K? If we have a drop like in 2008, no one in IPERS saw a loss in the checks that they were drawing, not one.
Point being public service retirement plans are totally different than a private business retirement plan like Enron or the teamsters unions.

You seem to keep missing that basic fact.

You are in for a bad reality check. IPERS will be around for quite some time but they are not immune from the laws of mathematics.

 

[LarryISU]

Half way there! Dow hit 28,500 today. That took 5 months.

 

[MartyFine]

Given this nation's current debts and deficits we're turning this into a nationalized pyramid scheme...

 

[VeloClone]

Given this nation's current debts and deficits we're turning this into a nationalized pyramid scheme...

You are absolutely right. There is no excuse for the wealthiest nation in the world to have such a crushing debt. And neither party seems to want to do anything about it.

 

[CascadeClone]

IIRC the market typically takes a dump during pre-election time, and then comes back afterward, regardless of winner. So expect 2020 to be not so good, and 2021 to be much better??

 

[UNI1ISU2]

Just hit 29,000

 

[Doc]

Greed index through the ******* roof.

 

[DeereClone]

Investment Accounts were up 26% in 2019...not sustainable but that is fun to see. 95% mutual funds/index funds, 5% random stock picks.

 

[Halincandenza]

The Dow can suck my ****.

 

[DurangoCy]

Investment Accounts were up 26% in 2019...not sustainable but that is fun to see. 95% mutual funds/index funds, 5% random stock picks.

I'm just thankful that I'm not forced into a pension right now, because all of those 2019 gains wouldn't do me any good.

 

[DeereClone]

The Dow can suck my ****.

Just curious what this even means? You aren't happy with 25% returns or you are mad you are missing out on 25% returns or what?