Retirement Targets

[SEIOWA CLONE]

What irritates me is that they take the funds, pay you an average payment of interest and keep the principle upon your death. I’m not a fan of annuities and IPERS is an annuity.

Yes, they give you a fixed amount, and everyone has no choice in the matter that we all pay into the system. But you can leave money to your spouse or children, so benefits do not stop on the persons death.

Looks like after less than 4 years your wife will be over the threshold of what she herself has paid into the system, any payouts after that, come from the employer and the system itself. IPERS works a lot like SS in that manner, the key is living long enough to get everything back and then so, over what you paid into the system.

 

[SEIOWA CLONE]

Many people want this guaranteed annuity. The IPERS kick is that the employer pays in 1.5x what you pay in. So you have 15% (actually a little over) going in. Take that 50k average salary. If my wife was to get a 4% match (common from my days of non self employed) and put her 6% in that’s 10%. Over 32 years to her minimum retirement it would be 672k. Say her top 5 years average 67k, to get a 60% of her salary she would need 6% to never touch the principle. If you work any time over that IPERS bumps the percentage 1% each year. The individual account bumps 8%. So any time over age 55-56 and it really gets worse.


It’s forced savings where many don’t. You can opt out of IPERS before you ever start but you lose the employer part. A lot of people are awful with money management and they want someone to baby them and that is what IPERS does. (But with a huge personal cost). You also get to retire at 55-56 whereas most can’t until 59.

Currently the only people allowed to "opt out" of the system are elected officials, everyone else is not given a choice, you do have to have 7 years into the system to qualify for a pension.

 

[Jayshellberg]

IPERS is a defined benefit plan where as 401k and 403b plans are defined contribution plans. Social security is also essentially a defined benefit plan. Both types of plans have their advantages and disadvantages, and if your employer offers both, you are very fortunate.

With a defined benefit plan, you know what your monthly benefits will be as it’s calculated on a pre-defined formula, generally salary and years of service. Defined contributions plans can yield better results, but the risk is shifted from the employer to the employee. In other words, if the employee refuses to participate, save enough, or makes bad investment decisions, it’s on them, not the employer. Therefore, defined benefit plans essentially help employees save them from themselves.

 

[KnappShack]

IPERS is a defined benefit plan where as 401k and 403b plans are defined contribution plans. Social security is also essentially a defined benefit plan. Both types of plans have their advantages and disadvantages, and if your employer offers both, you are very fortunate.

With a defined benefit plan, you know what your monthly benefits will be as it’s calculated on a pre-defined formula, generally salary and years of service. Defined contributions plans can yield better results, but the risk is shifted from the employer to the employee. In other words, if the employee refuses to participate, save enough, or makes bad investment decisions, it’s on them, not the employer. Therefore, defined benefit plans essentially help employees save them from themselves.

Sounds un-American

 

[BCClone]

Currently the only people allowed to "opt out" of the system are elected officials, everyone else is not given a choice, you do have to have 7 years into the system to qualify for a pension.

I read the fine print at the bottom of the statements, the stuff that gets buried. If you say, no, I want no part of that before you ever receive a paycheck, you can opt out. If you ever get a paycheck that involves an IPERS contribution, you are hooked forever.

 

[BCClone]

Yes, they give you a fixed amount, and everyone has no choice in the matter that we all pay into the system. But you can leave money to your spouse or children, so benefits do not stop on the persons death.

Looks like after less than 4 years your wife will be over the threshold of what she herself has paid into the system, any payouts after that, come from the employer and the system itself. IPERS works a lot like SS in that manner, the key is living long enough to get everything back and then so, over what you paid into the system.

If you feel that a good deal is what getting back only what you pay in, I'm not sure what to say. Will you borrow me 250k and in 35 years I will give you 57.5k back for 4 years?

A quick computation of 7500 yearly contributions means in 32 years at 8% return she should have 1,060,000 dollars in a pile. If she has a 67K average of top 5 years, she will get 40,200 each year. A 4% withdrawal of her pile would be 42,400. That doesn't seem like a good deal.

 

[SEIOWA CLONE]

IPERS is a defined benefit plan where as 401k and 403b plans are defined contribution plans. Social security is also essentially a defined benefit plan. Both types of plans have their advantages and disadvantages, and if your employer offers both, you are very fortunate.

With a defined benefit plan, you know what your monthly benefits will be as it’s calculated on a pre-defined formula, generally salary and years of service. Defined contributions plans can yield better results, but the risk is shifted from the employer to the employee. In other words, if the employee refuses to participate, save enough, or makes bad investment decisions, it’s on them, not the employer. Therefore, defined benefit plans essentially help employees save them from themselves.

Businesses realized that pension or defined benefits plans were costing them more in the long run, than a 401K or 403b plan and starting to move away from them in the 1980's and 90's. Less costs on the books for the business. They sold these programs as its best for the worker, and you controlled your money.

As you pointed out, most workers are not financially responsible to learn about the best ways to invest their nest egg, and that is the reason many Americans approaching retirement age have little to nothing in their retirement account.

Its must be horrible for the long time John Deere or Firestone workers receiving a lifetime pension, instead of the ability to do it themselves. If pensions were horrible for retirees, then businesses would still be offering them, while most got out of them decades ago, and the reason states keep talking about moving fixed retirements over to a 401K type of system. They know it will save the company or the state money in the long run. Again screwing over the American working man.

 

[SEIOWA CLONE]

If you feel that a good deal is what getting back only what you pay in, I'm not sure what to say. Will you borrow me 250k and in 35 years I will give you 57.5k back for 4 years?

A quick computation of 7500 yearly contributions means in 32 years at 8% return she should have 1,060,000 dollars in a pile. If she has a 67K average of top 5 years, she will get 40,200 each year. A 4% withdrawal of her pile would be 42,400. That doesn't seem like a good deal.

No one is getting an 8% return over a 35 year time period, those are fantasy numbers and we both know it, you are also not figuring in crashes in the market like 2008, where many retirement accounts lost half their wealth or more. You are just looking at an average return of 8% from the market.

You seem to think you can do better than most investing in the market, have at it, and good luck, but study show the vast majority of Americans are not willing to take that chance.

Your idea of me giving you 250K and then after 35 years you start to pay it back is also silly, your wife did not put in 250K in the first year, and only contributed that much 35 years. Two totally different things.

 

[clonechemist]

If you feel that a good deal is what getting back only what you pay in, I'm not sure what to say. Will you borrow me 250k and in 35 years I will give you 57.5k back for 4 years?

A quick computation of 7500 yearly contributions means in 32 years at 8% return she should have 1,060,000 dollars in a pile. If she has a 67K average of top 5 years, she will get 40,200 each year. A 4% withdrawal of her pile would be 42,400. That doesn't seem like a good deal.

You’re also not considering here that many state employees get promotions over their career. Say someone works for 30 years, but the last 10 years are in a higher salary position. Their benefit will be based on their higher salary even thought the majority of contributions (20 years worth) were based on a lower salary.

Also, I hope your partner lives a lot longer than 4 years in retirement. Keep in mind that the ‘4% rule’ for retirement still indicates that your ‘pile’ of capital is likely to get significantly drawn down over 30 years. It’s not like that pile is going to last forever in most scenarios.

 

[Jayshellberg]

I am not pro-defined benefit or pro-defined contribution plans. I was one of the fortunate ones who had both. My defined benefit plan or annuity replaced about 32 percent of my pre-retirement salary. Having that guarantee monthly payment that I cannot outlive is very comfortable. Regarding my defined contribution plan or 401K, I contributed the maximum and received a company match. This resulted in me accumulating a balance that replaced approximately 47 percent of my pre-retirement income.

My advice to those who have a defined benefit plan is not to completely rely on the plan to replace your salary. You need to contribute to your employers 401k or 403b as well. If your employer does not offer such a plan, than contribute a combined $13,000 a year for you and yourself into an IRA, preferably a Roth.

I know that sounds like a lot, but trust me, you will never look back and say “I wish I hadn’t saved so much.” I just viewed my monthly savings like a mortgage payment. That is, it’s not optional. Pay yourself first, and you will learn to live on what’s leftover.

 

[BCClone]

No one is getting an 8% return over a 35 year time period, those are fantasy numbers and we both know it, you are also not figuring in crashes in the market like 2008, where many retirement accounts lost half their wealth or more. You are just looking at an average return of 8% from the market.

You seem to think you can do better than most investing in the market, have at it, and good luck, but study show the vast majority of Americans are not willing to take that chance.

Your idea of me giving you 250K and then after 35 years you start to pay it back is also silly, your wife did not put in 250K in the first year, and only contributed that much 35 years. Two totally different things.

I guess I know a lot of no ones.

Average S&P return over the last 30 years is just shy of 10%.

 

[SEIOWA CLONE]

I read the fine print at the bottom of the statements, the stuff that gets buried. If you say, no, I want no part of that before you ever receive a paycheck, you can opt out. If you ever get a paycheck that involves an IPERS contribution, you are hooked forever.

Go to page 11 of the IPERS booklet, public school employees and teachers are not allowed to opt out of the system, only those at community colleges.

https://ipers.org/sites/default/files/publication_2021-03/Welcome%20Regular%208-27-19_0.pdf

​

 

[BCClone]

You’re also not considering here that many state employees get promotions over their career. Say someone works for 30 years, but the last 10 years are in a higher salary position. Their benefit will be based on their higher salary even thought the majority of contributions (20 years worth) were based on a lower salary.

Also, I hope your partner lives a lot longer than 4 years in retirement. Keep in mind that the ‘4% rule’ for retirement still indicates that your ‘pile’ of capital is likely to get significantly drawn down over 30 years. It’s not like that pile is going to last forever in most scenarios.

It gets drawn down since many people decide to stick a bunch in a money market or savings that pays like 1%. They have a plan that does well for them, then as soon as they retire to go into ultra conservative mode and run away from the plan that got them there. Maybe change from aggressive growth to a growth and income that will pay you most of what you want in dividends and let’s the capital ride.

 

[SEIOWA CLONE]

I guess I know a lot of no ones.

Average S&P return over the last 30 years is just shy of 10%.

You realize that stat means nothing at all, correct. Maybe you should go into the investment field, hell proving to average 10% over the last 30 years should have people throwing billions at you.

 

[BCClone]

You realize that stat means nothing at all, correct. Maybe you should go into the investment field, hell proving to average 10% over the last 30 years should have people throwing billions at you.

Lol, you must not know that there are billions in index funds. What do you think the S&P has returned over the last 30 years then?

 

[KnappShack]

Lol, you must not know that there are billions in index funds. What do you think the S&P has returned over the last 30 years then?

Mass Investors Growth Fund - MIGFX

Established in 1935

Over its life its earning over 10% per.

Seems like a pretty long track record

 

[BCClone]

Mass Investors Growth Fund - MIGFX

Established in 1935

Over its life its earning over 10% per.

Seems like a pretty long track record

Honestly when you use the long track records, the returns are better. It’s when you get down in the 3-5 year runs when the returns can look poor.

 

[KnappShack]

Honestly when you use the long track records, the returns are better. It’s when you get down in the 3-5 year runs when the returns can look poor.

NASDAQ can look really ******* bad over short terms, but longer terms smooth out that volatility.
The market looked pretty rough in the late 1920s too. Buy and hold. Don't duck and run

 

[SEIOWA CLONE]

Lol, you must not know that there are billions in index funds. What do you think the S&P has returned over the last 30 years then?

Sure there is, but are you the one averaging 10% return per year over a 30 year period? Statistics are great, but in this discussion, they are basically worthless, because it's an average, meaning that some stocks like Apple grew while others didn't.
Now if you know which stocks are going to return 10% per year over the next 30 years than you should be investing not only your money but other peoples as well.

Your 20-to-30-year average also shows nothing, because most people, unless they purchased an Apple or Microsoft are not going to hold a stock over that long of a time period. People made fortunes owning Enron stock also, until the company went bankrupt. Its all about getting in and holding on till the best time to sell, which unless you are a Warren Buffet type, most of us do not have that type of knowledge.

 

[Jayshellberg]

Honestly when you use the long track records, the returns are better. It’s when you get down in the 3-5 year runs when the returns can look poor.

Not sure what you are arguing or upset about. Sounds like you think the IPERS should provide a much higher guaranteed benefit based on market returns and the contributions participants you
or your spouse put in.

I don’t have a dog in this race, but have experience on the subject, Having said this, the expectation that a defined benefit plan provide an return a market rate of return is unrealistic. Over the past 50 years, the market has returned 10 percent on average. However, very few people, myself included, have earned such a return. Plus, the IPRPS have a fiduciary responsibility to its participants. Therefore, rather than investing 100 percent in equities, they also invest in fixed income, real estate, and cash-like investments. Consequently, an 5-6 percent return in more realistic.

If you want a market rate of return without guaranteed income for life, the stock market can provide this, but not a defined benefit plan to my knowledge. They are just different animals.