I can only see this as one of two things - either an effort to shove more money into the stock market or the only permitted investment choices will contain a significant percentage of state and municipal bonds.
We have had this conversation where I work because we have people on different terms of service. I say that pensions are a scam and should be outlawed. At first they look at me like I am insane. Then I explain that a pension is nothing more than wages foregone now with the promise to pay in the future, when the entity that is making the promise may not exist, or might have lost all the money through bad investments. I also explain that waiting for a pension turns many people into indentured servants, because they are getting close enough to their pension that they won't leave and find a better gig. I have been in both these positions and would be better off today if they just paid me more money in the here and now. After explaining this most people agree with me.
I can only see this as one of two things - either an effort to shove more money into the stock market or the only permitted investment choices will contain a significant percentage of state and municipal bonds.
Yes to both of your assumptions. Where the former is concerned that is of course all that a 401K is, a government-backed gambling subsidy for Wall Street.
@minuteman
Also, the fact that the FED dollar is losing value steadily and consistently means that pensions will be inflation-ravaged pittances by the time you're eligible to draw them.
Okay so there's a lot misconceptions about this whole thing. This new system does not seem so bad, and is actually an improvement for people like the guy above who served for 8 years.
The previous system was kind of an all or nothing deal. If you served for 20 years or more, you got a good pension (50% of pay, right after you retire). Everyone else basically got nothing. I believe military personnel were allowed to contribute to the TSP (The 401K plan for Federal Workers) but they didn't get a matching contribution.
What they're doing now is basically giving the military their TSP match (5% dollar for dollar) that the regular federal employees get. So if you serve for 15 years, you can hopefully build up a decent 401K. At the very least they'd be better off than the previous system where they would get basically nothing.
In order to pay for this match, they reduced the pension somewhat for the over 20 years people. However, keep in mind the over 20 years people do get a benefit of the 401K match, so even then they might still get the same thing. This is being Grandfathered in so most of the people near retirement won't be affected.
Overall, I think it's probably a more fair system, since most Vets don't serve for over 20 years. The TSP is actually a pretty well managed and cheap 401K system, with decent investment options. Not great, but better than most 401Ks.
Also Congressmen don't get that lucrative of a pension. That's a total myth. They have the same thing as normal federal employees. It takes 5 years to vest and you get one percent pay for each you were employed. So a one term congressmen gets nothing. If you were in congress for 10 years you'd get like $18,500.
There is a middle ground - once a servicemember leaves active duty they can affiliate with the reserve forces and still draw a pension at age 60 rather than upon immediate retirement. I served 9 years active duty and 14 years as a reservist. When I'm 60 I'll get about 60% of what I would have received for an active duty retirement.
About time. I did eight years and got nothing other than what I had put aside for myself.
ReplyDeleteI can only see this as one of two things - either an effort to shove more money into the stock market or the only permitted investment choices will contain a significant percentage of state and municipal bonds.
ReplyDelete----and yet you'll still get loads of boys signing up on their knees.
ReplyDeleteWe have had this conversation where I work because we have people on different terms of service. I say that pensions are a scam and should be outlawed. At first they look at me like I am insane. Then I explain that a pension is nothing more than wages foregone now with the promise to pay in the future, when the entity that is making the promise may not exist, or might have lost all the money through bad investments. I also explain that waiting for a pension turns many people into indentured servants, because they are getting close enough to their pension that they won't leave and find a better gig. I have been in both these positions and would be better off today if they just paid me more money in the here and now. After explaining this most people agree with me.
ReplyDeleteIts all a scam:
ReplyDeletehttp://www.pbs.org/wgbh/frontline/film/retirement-gamble/
What are these GIs going to invest in?
I can only see this as one of two things - either an effort to shove more money into the stock market or the only permitted investment choices will contain a significant percentage of state and municipal bonds.
ReplyDeleteYes to both of your assumptions. Where the former is concerned that is of course all that a 401K is, a government-backed gambling subsidy for Wall Street.
@minuteman
Also, the fact that the FED dollar is losing value steadily and consistently means that pensions will be inflation-ravaged pittances by the time you're eligible to draw them.
Okay so there's a lot misconceptions about this whole thing. This new system does not seem so bad, and is actually an improvement for people like the guy above who served for 8 years.
ReplyDeleteThe previous system was kind of an all or nothing deal. If you served for 20 years or more, you got a good pension (50% of pay, right after you retire). Everyone else basically got nothing. I believe military personnel were allowed to contribute to the TSP (The 401K plan for Federal Workers) but they didn't get a matching contribution.
What they're doing now is basically giving the military their TSP match (5% dollar for dollar) that the regular federal employees get. So if you serve for 15 years, you can hopefully build up a decent 401K. At the very least they'd be better off than the previous system where they would get basically nothing.
In order to pay for this match, they reduced the pension somewhat for the over 20 years people. However, keep in mind the over 20 years people do get a benefit of the 401K match, so even then they might still get the same thing. This is being Grandfathered in so most of the people near retirement won't be affected.
Overall, I think it's probably a more fair system, since most Vets don't serve for over 20 years. The TSP is actually a pretty well managed and cheap 401K system, with decent investment options. Not great, but better than most 401Ks.
Also Congressmen don't get that lucrative of a pension. That's a total myth. They have the same thing as normal federal employees. It takes 5 years to vest and you get one percent pay for each you were employed. So a one term congressmen gets nothing. If you were in congress for 10 years you'd get like $18,500.
http://www.snopes.com/politics/socialsecurity/pensions.asp
So that's my two cents on this.
There is a middle ground - once a servicemember leaves active duty they can affiliate with the reserve forces and still draw a pension at age 60 rather than upon immediate retirement. I served 9 years active duty and 14 years as a reservist. When I'm 60 I'll get about 60% of what I would have received for an active duty retirement.
ReplyDelete