In response to Pension Problem Too Big To Ignore? Jack Dean at Pension Tsunami pinged me with an interesting anecdote:
Hello Mish
I had a call today — the first of its kind — from a retired teacher who is drawing a CalSTRS pension. She has a disabled son and is scared to death about the future solvency of the fund — mainly for his sake, because when she dies he’ll really need the pension that she’ll pass on to him.
It’s disturbing to see what our politicians have put in motion.
She is correct to be worried, very worried. Promises that cannot be met, won’t be met.
Pension debt keeps racking up despite the soaring stock market.
Chart from the Bloomberg article Pension Crisis Too Big for Markets to Ignore.
Meanwhile, market valuations are the most stretched in history by many measures.
GMO 7-Year Expected Returns
Source: GMO
*The chart represents local, real return forecasts for several asset classes and not for any GMO fund or strategy. These forecasts are forward‐looking statements based upon the reasonable beliefs of GMO and are not a guarantee of future performance. Forward‐looking statements speak only as of the date they are made, and GMO assumes no duty to and does not undertake to update forwardlooking statements. Forward‐looking statements are subject to numerous assumptions, risks, and uncertainties, which change over time. Actual results may differ materially from those anticipated in forward‐looking statements. U.S. inflation is assumed to mean revert to long‐term inflation of 2.2% over 15 years.
Forecast Analysis
GMO forecasts seven years of negative real returns. Allowing for 2.2% inflation, even nominal returns are expected to be negative for seven full years.
Even +3.0% returns would wreck pension plans, most of which assume six to seven percent returns.
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- Criminal Witch Hunt in Dallas Pension Fiasco
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Mike “Mish” Shedlock
Passing on a pension, now that is nonsense.
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The whole government pension system is nonsense. I would not be surprised if CalSTRS actually allowed that.
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During 2015, the two pension plans for Chicago city employees paid out $999 million in retirement benefits to 29,286 retirees. During that same year, the two funds generated just $90 million in investment income.
http://reason.com/blog/2017/03/30/two-numbers-that-show-how-screwed-chicag
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Yes, when did that become a feature of pension funds? I can understand a spouse getting benefits, but a child?
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It says a *disabled* child. Judging by this comment and those following, reading comprehension is not a right wing strong point.
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a very polite up yours
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Phil is a Soros paid troll, taking a break from committing political violence on Soros’ payroll.
He suddenly started posting in the last month as Hilary called for rebellion against the US government
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Nothing convinces one’s antagonist, like calling them ignorant. I notice that is a trait most liberals share. Well done Phil, I’m certain you changed many opinions with your “Enlightened” response.
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You get employee disability payment when you pass away on the job, but forget about pension. I think, she is the kind that needs government protection.
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None of you guys even know what you’re talking about. Your disabled adult kids can even qualify for your Social Security benefits. Lots of you would benefit from Googling things before you post.
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Hey Phil you idiot — social security benefits are far different than a pension!
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Just to duplicate the comments above, being a CPA I have looked at several pension plans but I have never seen pension plans that cover adult children. In fact I have never seen one that covered minority children. Now she might have kind of insurance outside or the pension, but plans use actuarial tables to determine life expectancy and those do not factor in children. I would kind of say BS on that story and my advice is if she is planning on that she needs to seek financial advice.
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Though it is no longer in Contract there was a period of time whereby NYC policemen have the right to assign their pension to anyone they choose. I know this because my retired NYC police officer BIL has that ability.
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The scary part is the state think it’s OK for this person to be around children.
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Wish I could like more than once! Totally agree.
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I’ve been simply amazed at that most people have no clue about the coming financial meltdown and what terrifying consequences could be on store. Even so-called financial experts I know are either blind to numbers, or won’t accept a reality of potential mass impoverishment. It truly looks like a Darwin moment is around the corner… Buckle up laddies!
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The writing was one the wall when debt per household reached $48,000.00
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might be true-after all, in many pensions an employee like a teacher can get a late in life MBA say at age 55 then build on the higher comp for that to get higher pension for their remaining lives, or they can work 2 summers to build more income or get paid for a couple of years vacation accumulationed–thats how they build high earnings in last couple of years from which to get pension for life–or more if it goes to a beneficiary which if true is outreagous.
it could be if you have a physicaly challenged (vs handicaped) child, pension can be continued, but then, who pays for that great benefit.
who pays for anythngs anymore–everybody wants. nobody wants to pay, its not a bottomless pit.
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My mother worked for Nassau County in New York, she passed her pension on to my brother when she died. He gets 50% of what she was getting, for the rest of his life. There were no restrictions, he did not need to be physically challenged/handicapped in any way. She was allowed to pass it on to any children and could have even split it between my brother and me.
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Generally you accept a smaller monthly payment to have your pension continue for the benefit of someone else when you die, normally your spouse. The pension fund will use the difference to fund a life insurance policy on the life of the annuitant in some cases so that the extra cost after death Is covered by the insurance proceeds. I’m sure some pensions work differently however.
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So these public employees work for 20 yrs, then draw pensions for 40yrs based on an imaginary return that the public employees managing the pension don’t actually achieve…
… and somehow there is even more money left over to fund an annuity?
The basic pension was always too good to be true (aka: a scam). there is no money left over for an annuity. She worked half a career (maybe) and drew from “her” retirement funds (that she didn’t actually pay, unlike private sector employees) based on imaginary returns that other lazy corrupt public employees didn’t get.
No sympathy. Public employees didn’t work a full career, and subscribed to a scam that was too good to be true.
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I don’t see how any retirement fund may remain solvent when it is hereditary. You also may have the older retirees marrying the much younger spouse and then the pension pays on for 20+ more years after the retiree passes.
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The irony is this teacher worked for maybe 20 years.
Has an a pension she can live comfortably on.
Has nearly free medical.
For the next 40 years…
And wants to pass on her benefits to her son…
And CAN’T UNDERSTAND why her pension plan is bankrupt.
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Yeah, well it’s not like HER education included any subjects like ‘rational economics’ or ‘societal contracts’ or ‘logic’ or ‘history’ or ‘practical maths’. So if we would just cut her some slack, that would be a nice feeling.
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Apparently her subjects also did not include basic math — because she obviously failed that
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Remember this the next time you hear teachers are “underpaid”. The pension burden literally DOUBLES their salary – and don’t forget health benefits, vacation time, sick leave – that they “accumulate” and get “paid out” at the end, and LASTLY, they get it ALL in 80% of the working days of the general public!!
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Tim, it’s 180 classroom days (36 weeks). Do the math: 36/52 ≈ 69%. The government-school model today stems from the ante bellum era of an agrarian economy.
Oh, and don’t forget the several “teachers’ meeting days” (always on a Friday, natch) when they’re not in the classroom, but which days are counted in the 180. Worse, the typical college student who majors in ‘education’–think pedagogy, not subject-matter knowledge–is in the lowest quartile of her/his class.
This pathetic scenario is a large part of the reason that American children are far behind those in many other countries with advanced industrial economies – our head-to-head competitors in world markets. U.S. teachers in government schools are government employees in government unions. Worst of all, if their parents don’t have the means, our kids’ zip codes determine where they go to school. Besides denying ‘choice’ in education to innocent children who had the bad judgment to choose to be born to poor parents, this system tends to ensure multi-generational poverty and ongoing demand for government support and services. . .which ensures more Dumbocrats working in government.
For reasons of political funding and GOTV volunteers, elected Democrats rig the system to mandate that we send OUR children to schools they wouldn’t be caught dead sending THEIR own children to. Besides being the rankest kind of hypocrisy, it is also industrial-strength racism and a moral outrage. . .and all for the benefit of teachers who couldn’t care less about giving innocent the tools they need to escape the poverty to which teachers’ unions would otherwise consign them.
THESE CHILDREN REQUIRE CHOICE IN K-12 EDUCATION. The U.S. has choice in colleges and universities. Why not in primary and secondary education, too?
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For crying out loud, the kid’s disabled…different set of rules apply…Next!
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No.
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OMG – passing your pension to a child. What have these idiots done???
Give everyone a 401K like the rest of industry. These Government workers are pure pigs. There are plenty of programs to support pure disability and I would be surprised if she is not collecting on all of them now.
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My mother had the government version of a 401K along with that pension! It’s called Deferred Compensation. I would not call my mom a pig but the Civil Service Union got all they could for their members.
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The “pure pigs” are the politicians who made the deals with the devils (the union leaders) to allow the government pension plans. There were no government unions until JFK made it possible by executive order. It was the worst thing he ever did.
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“She has a disabled son and is scared to death about the future solvency of the fund — mainly for his sake, because when she dies he’ll really need the pension that she’ll pass on to him.”
Sheesh.
Two Words
Life Insurance
…
Pension Queen … has that been coined yet?
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Would like to see a copy of her beneficiary designation. Maybe she married her own son.
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BTW government employees get 1.5 times the pay/benefits that equivalent private sectors employees are compensated. No wonder they are all demoncrats. Although I suppose the republicans are just as guilty at handing out largess at the taxpayers expense.
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My mother was a staunch Republican. The administrations she worked under shifted back and forth between the two parties. The benefits only got better and better. Oh, and she had free health insurance for life for herself and my father too. It’s the unions that control this, not the political parties.
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No doubt unions contribute to the problem but who gives in to their unreasonable demands. Its the responsibility of the management in this case govt. to negotiate what is fair and not give in to their extortive demands. I would put the blame at 50/50.
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A potential problem here is that the government manager might also be in the union, or was before becoming a senior manager. Therefore, s/he has no incentives to negotiate hard and take a strike, if necessary.
This is one more reason–if any were needed–that Trump should reverse Kennedy’s Executive Order No. 10988 that legalized unions for government employees.
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Yes, I agree, the politicians give in to the unions. My point was that it didn’t matter which party was in power, the unions got their way.
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Yeah…..And it’s the responsibility of the Mafia to protect those they shake down, darnit!
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Those kinds of moral equivalencies are 100% B.S. The Repubs can never hand out enough ‘largess’ because there’s not enough in existence to overcome how the Dumbocrats bribe and compromise federal employees. If Trump wanted to do something serious with an executive order, he’d issue one reversing No. 10988 that JFK issued on January 17, 1962, giving government employees the right to unionize. He did this over the strenuous and unequivocal opposition of Walter Reuther (founder of the United Auto Workers) and George Meany (head of the AFL-CIO). Not until unions for government employees at all levels are outlawed do we have any prayer of brining out-of-control government to heel.
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Even the SEC is unionized!
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Wow! There are a lot of assumptions here! I guess that’s America! Let’s hope her son becomes destitute. The seven deadly sins, also known as the capital vices or cardinal sins, is a classification of vices (part of Christian ethics) that has been used since early Christian times to educate and instruct Christians concerning fallen humanity’s tendency to sin. In the currently recognized version, the sins are usually given as wrath, greed, sloth, pride, lust, ENVY, and gluttony.
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It is the false accounting tricks that allow these charades to continue. If cities had to pay the real pension cost they would be bankrupt or they would provide no services other than pay for pensions. Extend and pretend, that is until you can no longer hide the truth. These pensions should have already failed.
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Agree 100%.
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Wow! There are a lot of assumptions here! I guess that’s America. Let’s hope her son becomes destitute. The seven deadly sins, also known as the capital vices or cardinal sins, is a classification of vices (part of Christian ethics) that has been used since early Christian times to educate and instruct Christians concerning fallen humanity’s tendency to sin. In the currently recognized version, the sins are usually given as wrath, greed, sloth, pride, lust, ENVY, and gluttony.
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I’ve never seen ‘wrath’ listed in there. I’ve seen only ‘anger’.
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Jim, I’m trying figure out your point. Are you suggesting that those who do not get government pensions are envious? Very funny, but if so I am guessing you are one of those pigs at the trough? Which would mean guilty of greed, sloth, and gluttony, but certainly not pride.
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Hi CJ, I don’t have a government pension. I do understand who the real enemy is. It’s definitely not a retired school teacher trying to provide for her son. The fascists in control of our government are the real enemy. Trillions wasted on bankster bailouts, corporate giveaways, welfare fraud, earned income credits, F-35s, on and on it goes. Before everyone assumes my political leanings, I will tell them I voted for Ron Paul in 2008 and 2012 and I voted for Donald Trump in 2016. The wealth of this country has been and continues to be squandered in many ways by an elite few. I am tired of the divisions amongst us created by these oligarchs. I do not live within the left/right republican/democrat paradigm. Escape the matrix!
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Thank you Jim; much better. Maybe I’ll bump into you sometime outside the matrix.
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“The fascists in control of our government are the real enemy.”
Isn’t that a variation of ‘shoot the messenger’?
The problem has been, is, and will be for the foreseeable, government.
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Pensions can get passed on to offspring? I thought beneficiaries had to be a spouse? Good Lord. That means the pension could still be paying benefits 30 years or more after mama moves on. No wonder the ship is sinking.
I hope I’m still around when the money runs out and the panic sets in. We’ll see widespread riots in upscale neighborhoods started by old fat wrinkled entitled-minded codgers who were stupid enough to believe the lies and fairy tales.
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When I left teaching Biology at high school level in CA after 12 years service I decided to transfer the funds out of CalSTRS (into GoldMoney).
During the mandatory “interview” I had with a CalSTRS advisor who handled the paperwork for the transfer I was asked why in the world I would do such “an insane thing”.
I explained my reasoning, and that include the ultimate insolvency of the CalSTRS fund by the time my benefits would come due.
He simply wouldn’t accept/believe that would ever be a problem with full benefits being paid out to all beneficiaries into the foreseeable future.
There are going to be a lot of shocked pensioners eating Kibble very soon.
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And Bits!
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It better be bits… it better be bits…
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Yes, …but only if that means “Bit”coins!
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God gave some beauty, others brains, and some both, but did he create so little gold?
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Mad as it may seem, it appears that Calstrs pensions do in fact provide a range of survivor benefits http://www.calstrs.com/sites/main/files/file-attachments/survivor_benefits_0.pdf.
I suppose it is some kind of pension/life insurance or pension social security hybrid rather than a simple pension.
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Many pension plans (in America and elsewhere) offer various survivor benefits, but each benefit must be paid for by reducing the amount of pension for the primary pensioner. The larger the survivor benefit, the greater the cost to the primary pensioner. Essentially, the primary pensioner is paying for insurance in order to provide these benefits. The insurance is paid for by reducing the pension amount they are supposed to receive. It’s a simple concept. I’m surprised that so few people understand this. I’m even more surprised that, Ishmael, a CPA, wouldn’t know this.
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This doesn’t make sense though. They’re idiots if they think the money will be there so far in to the future! They must have included this option to fool people in to never getting their money.
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The public employees already admitted to believing in something that was too good to be true… and if you have ever wandered into a local municipal building it is hard not to notice the drop in IQ.
If you believe you can “work” for 20 yrs and then get a pension for a bigger amount for the next 40 yrs, then it stands to reason you are dumb enough to believe they will pay your offspring after that
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” if you have ever wandered into a local municipal building it is hard not to notice the drop in IQ.” Ha Ha I certainly have noticed that! I do everything I can to avoid municipal buildings, I have a problem trying to deal with idiots.
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Repetitive Realist.
To what extent would a pension need to be reduced to pass lifetime benefits to a child? I would guess much more than half.
The incomplete anecdote implies she presently lives on her pension. Few places in America would support her on much less than half a pension.
Would you guess such a reduction has been applied here?
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Corporate pensions are now almost extinct. Public pensions will soon be extinct too. Bankers continue to confiscate purchasing power from pensions and pension funds. Bankers are also slowly inflating away 401k plans and IRAs, which were supposed to replace pensions. Printing is the bank’s war on retirees, and future retirees.
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There are many pension plans around the world, both public and private, that are fully funded and well run. There are very few in the US. I don’t know why this is the case. But I do feel sorry for many Americans who are relying on a pension that may not be there for them.
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Repetitive Realist.
To what extent would a pension need to be reduced to pass lifetime benefits to a child? I would guess much more than half.
The incomplete anecdote implies she presently lives on her pension. Few places in America would support her on much less than half a pension.
Would you guess such a reduction has been applied here?
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We just need to keep jacking up interest rates until returns take care of the shortfall. A rate of 12-15% should do it.
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Higher interest rates will collapse many of the assets held by the pension plans, far more severely than just implied by interest rate sensitivity models. The only way to reform pension plans is through benefit reductions to all beneficiaries including retirees. The already-retired cannot be left untouched.
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I agree with you Mark, but – good luck with that.
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Wow. Feudalism in the public sector or total, epic ignorance. Even if the pension fund was sound, the teacher expected the pension to pass on to her son?
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Many pension plans (in America and elsewhere) offer various survivor benefits, but each benefit must be paid for by reducing the amount of pension for the primary pensioner. The larger the survivor benefit, the greater the cost to the primary pensioner. Essentially, the primary pensioner is paying for insurance in order to provide these benefits. The insurance is paid for by reducing the pension amount they are supposed to receive. It’s a simple concept.
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A pension plan that assumes 7-8% return (in fantasy land) is somehow going to fund this lady’s retirement, while also funding a life insurance policy / annuity that gets (maybe) 4.5%?
Basic math problem here. Even if the pension got the return that CalStrs fraudulently assumes, it wouldn’t fund an annuity for her son. It doesn’t even cover the teacher’s benefits.
Yep, CalStrs committed fraud and they are still doing it. No chance they would get 7-8% (or even close). But its easy to see how they can pull a confidence scam on this “teacher” who obviously can’t do basic math. Lets hope she wasn’t a math teacher, but based on the idiocy that comes from California politics, maybe she did.
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Repetitive Realist.
To what extent would a pension need to be reduced to pass lifetime benefits to a child? I would guess much more than half.
The incomplete anecdote implies she presently lives on her pension. Few places in America would support her on much less than half a pension.
Would you guess such a reduction has been applied here?
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I would indeed believe that she has opted to reduce her expected pension amount in order to provide a survivor benefit for her son. The amount of the reduction will depend on calculations by the pension, most likely based on life expectancy and actuarial tables. This decision is normally made at any time before she begins receiving her pension, and is normally not allowed after the pension has started. The amount of the pension reduction pays for the “insurance” as some people have previously mentioned. Many pensions offer this feature in order to simplify the process for their members. If you do not opt for this provision before you begin your pension, then you can still use your pension income to buy an insurance policy to cover a disabled child. I repeat again, it’s a simple concept. As to whether her pension will survive in the future, I have no idea, given that so many have commented that most US pensions are doomed to fail. I struggle with this idea, as there are so many well run, fully funded pensions in other countries (as I mentioned in earlier comments).
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I am struggling to believe any pension could be “well run”. The most in danger must be the defined benefit ones, but even the defined contribution ones will have to realize, they are in trouble with their promises. Let me just point out that pensions used to be mostly invested in the most solid investments like government bonds. But with ZIRP, even the most conservative ones had to load up on risky investments to achieve any returns.
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Pass on a pension? Thats just gotta be wrong. I have a pension and it’ll get passed on to nobody.
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Many pension plans (in America and elsewhere) offer various survivor benefits, but each benefit must be paid for by reducing the amount of pension for the primary pensioner. The larger the survivor benefit, the greater the cost to the primary pensioner. Essentially, the primary pensioner is paying for insurance in order to provide these benefits. The insurance is paid for by reducing the pension amount they are supposed to receive. It’s a simple concept.
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basic math problem here. The CalStrs scam doesn’t cover the teacher’s own benefits, never mind an annuity for her son.
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Repetitive Realist.
To what extent would a pension need to be reduced to pass lifetime benefits to a child? I would guess much more than half.
The incomplete anecdote implies she presently lives on her pension. Few places in America would support her on much less than half a pension.
Would you guess such a reduction has been applied here?
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I would indeed believe that she has opted to reduce her expected pension amount in order to provide a survivor benefit for her son. The amount of the reduction will depend on calculations by the pension, most likely based on life expectancy and actuarial tables. This decision is normally made at any time before she begins receiving her pension, and is normally not allowed after the pension has started. The amount of the pension reduction pays for the “insurance” as some people have previously mentioned. Many pensions offer this feature in order to simplify the process for their members. If you do not opt for this provision before you begin your pension, then you can still use your pension income to buy an insurance policy to cover a disabled child. I repeat again, it’s a simple concept. As to whether her pension will survive in the future, I have no idea, given that so many have commented that most US pensions are doomed to fail. I struggle with this idea, as there are so many well run, fully funded pensions in other countries (as I mentioned in earlier comments).
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So the question I have is how can I short these promises and make money off the politicians lies?
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Well, the S&P 500 returned just under 12% for 2016. The public pensions averaged 1.5% so there is significant performance shortfalls to be overcome. I can understand a pensioner being worried.
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Why do you assume the S&P is an appropriate benchmark for a pension (any pension)?
That is a completely bogus comparison — almost as fraudulent as CalStrs “assuming” they can get 7-8% even though they rarely ever hit their assumption.
Politicians (the ones known for lying constantly) promised public employees something that was way too good to be true (retire after 20yrs of barely working???). Its a scam. Always was a scam. And making ridiculous assertions about what they might have got if they had put 100% into equities is a hustle on top of a hustle.
Irony is: after screwing over the public all these years, the public employees are getting screwed by other public employees!! Karma
These horrid public employees are getting exactly what they deserve.
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Most folks don’t have a clue,,,,
https://www.forbes.com/sites/adamandrzejewski/2016/11/26/mapping-the-100000-california-public-employee-pensions-at-calpers-costing-taxpayers-3-0b/#13dc085e3945
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“GMO forecasts seven years of negative real returns. ”
In fairness, didn’t Jeremy Grantham make this call a few years ago already?
The S&P 500 returned almost 12% in 2016. Just sayin’.
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S&P is not an appropriate benchmark…
and in a year when the S&P (inappropriate though it is) got 12%, pensions barely eeked out 2% on average — 10% less than the all-equity index.
If stocks return their long term historical average of (about) 6.75%, and subtract 10% from that (still not a good benchmark, but playing along for fun): the pensions would be expected to lose about 3.25%
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I doubt that pensions fund returns are adjusted for inflation, so some might even be able to pay face value. In bogus inflation terms, that is.
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Most Americans had our pension promises converted into IRAs or 401Ks by force many years ago. Zero sympathy for the corrupt and lazy public sector who thought they are better than the public they failed to serve.
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I draw a municipal pension. The City saw these issues coming about 8 or so years ago. They increased our donation into the fund by 25%, increased the minimum retirement years from 5 to 10, and increased full retirement to the rule of 85 versus 80. I did not hear anyone complain. We all knew the issues with pensions. I also do not get my health care free. I pay $1300 per month (spouse and self) for health care insurance and another $50 per month for dental. It’s not free. Maybe others get it free but not here. Also we had to pay into social security so a good chunk got taken out of my paycheck every month. Still working a part time job. My spouse does get half my pension if I die first. My mom and dad got screwed by his pension. My dad took his at 55 without survivor benefits and died two years later. Probably stupid but I doubt he felt he was going to die so soon. Just went to bed one night and did not wake up. My mom was left with basically nothing at age 55. We’re all not dumb. I have a master’s degree in Civil Engineering. Graduated cum laude from the University of Missouri. Registered Professional Engineer. Passed it all on the first try.
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If you are getting healthcare for $650 a person (for two) as a retiree, then you are getting massive subsidies that taxpayers do not get. And dental for $50/month? Are you kidding me? You think the private sector gets anything like that?
Learn to keep quiet when you obviously got a better deal than the public you supposedly served.
PS — its very government bureaucrat of you to confuse academic degrees with intelligence. anyone with real world experience knows the difference between what works in the classroom and what works in the real world are vastly different. Government likes to assume lots of academic degrees = smart. In the real world, there are lots of smart people with very basic degrees, and lots of really dumb people with doctorates.
Getting an academic degree and getting an education are not equivalents, as everyone outside of academia and government knows.
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If you think getting an engineering education is easy, go after it. It is not like a degree in “fill in the blank” studies. I also do not get any subsides from the tax payers. $1,300 per month is about what my brother pays for him and his wife. They paid $15,000 a year and he worked on the private side. I also worked on the private side for years so I know the difference. I will admit that the pension is nice. Much more than someone would get from a 401K by putting in 15% per year. I agree an academic degree and an education are not the same. John Kerry is proof of this concept. Personally the dumbest person to walk the face of this earth and he went to Yale. I would not pay him to lick snot from the street. BTW, I built and repaired wastewater treatment plants. Smells nasty but the stink was “green” to me. Paid well. Next time you flush your toilet, think of me. I know where it goes and it is not under the house.
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Thank you for your post here KHS. You are a good example of how everyone who has a government job is not necessarily a greedy idiot.
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In my neck of the woods, most people younger than you (in their 30s and 40s) are paying $650/month. One of them has a health condition, but several are gym rats and one runs marathons regularly. None smoke. So why are they paying as much or more than a retiree? Older people need more healthcare on average — your monthly bill should be higher than a 30 or 40 something.
I don’t know anyone who gets dental coverage for $50 month.
You might be the exceptional municipal worker that proves the rule that most are worthless — but then everyone says they are the exception. We can’t tell from a blog comment if you really are an exception, only that most “exceptions” are not.
Missouri may have functioning civil engineering projects. My previous state holds the distinction of having a major roadway bridge collapse on a clear spring night — no flooding or hurricane, no barge hitting the pilings, no massive fire weakening the structure. The bolts simply rusted thru and the bridge collapsed… 4 months after its most recent inspection. Public workers supposedly inspected the bridge every six months; nearby residents reported the bridge making weird sounds for at least 11 months before it fell down. You don’t need an engineering degree or even a nursery school gold star to figure out the lazy engineers defrauded taxpayers and got 8 people killed. They were driving over the bridge when it collapsed, sending them into a river 70 ft below at 60mph.
The engineer who claimed to have performed the most recent inspection retired a month after the bridge collapse, with full pension and full benefits. He was never charged with anything.
And last I visited that same area, another major bridge is under emergency repair after it was discovered (by a marine biologist diving under the bridge) that many of the structural supports and rivets are lying on the river bed below…. I don’t have your fancy civil engineering degree, but I am quite sure that is not where the support structure is supposed to be.
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“You don’t need an engineering degree … They were driving over the bridge when it collapsed, sending them into a river 70 ft below at 60mph.”
With an engineering degree you would have compensated for acceleration due to gravity from the fall.
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Are you referring to eCONomists as government employees with academic degrees?
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There are many examples of well run pension plans, both public and private. I’m not sure why some comments here immediately assume all public plans are scams. Maybe it’s because so many public plans in the US are in deficit. If you want to look at some well run plans, look to your northern neighbor. For example, in the Canadian province of Ontario there is HOOPP (Ontario Hospital Pension) which is 122% funded (yes a 22% surplus), has $70 billion in investments worldwide, and earned a return of over 10% in 2016 with a ten year average return greater than 9%. They also use very conservative projected rates of return (<5% unlike many US plans that use 7-9%). Also OTPP (Ontario Teachers) is 105% funded, has $175 billion invested worldwide, and has a 10 year average return of greater than 10%/yr. Their projected rates of return are only 4.75%, very conservative. These are just a couple of examples. You can check out their websites (they are in English). Other countries with excellent public pension systems include Denmark, Australia, the Netherlands, Finland, Switzerland, Sweden, Singapore. Perhaps Americans can learn from what happens in other countries?
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If you worked one day for the city of Stockton CA they granted you health care for you and your spouse for life. Wonder why Stockton is BK.
Now a little history on CA pensions. They use to basically pay you 2/3 of your income after 30 years. This is not considering all of the jiggering that took place. Then Gray Davis came to office. CA was running a surplus in 2000 because of the Dot Com and since it would never occur to a Democrat to give the money back to the citizens he hiked up all govt employees to a 100% after 30 years. This created a huge unfunded obligation for the state besides the other existing unfunded obligations. Even with the stupid assumptions of actuaries state and local govt in California are under funded by somewhere between $100 to $400 billion.
Now some one here was bemoaning that private employees say crapping things about the salary and benefits that public employees get. Well it is the private employees most without pensions who have to pay for what the public employees get. People who do not work for the govt have been enslaved by the public workers and the public workers like it that way.
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In Kalifornia the situation has only gotten worse under governor Moonbean. Illinois used to be the most fiscally insolvent state but now that the dummycrats have complete control in CA the state is screwed. No hope.
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CalSTRS has it easy. I manage UK pension funds that also come with statutory and built-in inflation uplifts, and I’m running at 105% of technical provisions basis with minimal to no employer contributions owing to the overfunded status, which we clawed our way back to by investment performance and hedging since 2008.
Their top investment officers get a lot more money than I do, so I guess I should have been focusing on BS’ing and negotiating my own deal more than on actually delivering performance.
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Performance? You mean our US public pension fund managers are supposed to know what they’re doing? What’s wrong with getting 1.5% returns, can’t they always go back to the taxpayers for more funding?
These guys make one awful decision after another :
https://www.bloomberg.com/news/articles/2017-02-13/calpers-gave-up-900-million-since-lowering-stock-allocation
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I used to have wet dreams about doing business with Calpers. They are famous for not knowing what they are doing.
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FWIW, I’ll take the CIO job at half the salary if the performance bonus is still relevant. Here’s what I have done running $5B over the past nine years:
1-yr: 17.7%
3-yr: 12:0%
5-yr: 9.6%
7-yr: 10.2%
9-yr: 8.2% (yep, through the GFC … I started just before the meltdown)
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So you walked into finance and someone immediately handed you control of a $5 billion portfolio?
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No, just in this job. There were 15 years before that
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nice returns. hope they take care of you.
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Hi Mike. It sounds like you do a fine job managing that pension. Unfortunately, most Americans will refuse to believe that any pension fund, either public or private, can be well run. They would rather complain and hurl insults, then try to solve their pension problems. It’s the same with their terrible health care system. They could look around the world at some wonderfully managed health care systems and learn, but would rather fight with each other over systems that are doomed to fail. Very strange.
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Bravo, Mike! Bravo!
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