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The Millionaire Cop Next Door

forbes.com

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Re: The Millionaire Cop Next Door

#21

Post by theboss »

breakend wrote: post #10

Having been raised in a single parent home with a government employed mother, I know first hand that it is extremely difficult to raise a family on a government salary. Like another commenter said, these plans also are paid for from the government paycheck in part by the workers, reducing their current salary. Often, these government workers are also raising families and putting their kids through school. Without suc…

I accidently upvoted you and now I have NP idea how to remove it.

It depends on what you do. A secretary will make far less than the chief of police but they both happen to be government workers....how is that not obvious..?

Re: The Millionaire Cop Next Door

#22

Post by ars »

bsder wrote: post #18
melling wrote: post #8

Earlier quoted context omitted.

The real question is can we afford it. Public pensions are not fully funded while the employee is working. In many cases there won't be enough people paying their benefits in the future so taxes will need to be increased or benefits cut.

We can afford it if the people in charge of the pensions would put the money away when they're supposed to aka NOW . Instead, everybody treated pension funds like piggy banks, looted them, and now want to run away with the money with the "Oh they're so greedy ."

That doesn't make it affordable.

That just makes it unaffordable much earlier - which is useful granted, but doesn't actually solve the problem.

Re: The Millionaire Cop Next Door

#23

Post by nardi »

noname123 wrote: post #4

I think it's great that police officers, teachers and gov't employees with seniority make six figures with pension in some of the better unionized municipalities. Their work provide a valuable and concrete service to the community. I think startup enthusiasts on the other hand are kind of like starting a band, providing entertainment/art for an audience and for the performer to satisfy an itch. Life is a finite thing…

Of course it's great. I wish everyone could make that much money. Unfortunately, if they're making more, someone else is making less, as their salaries are paid by taxation. And taxation hurts the poor more than the rich. You see where I'm going with this?

Re: The Millionaire Cop Next Door

#24

Post by dalke »

nilsimsa wrote: post #13
noname123 wrote: post #4

I think it's great that police officers, teachers and gov't employees with seniority make six figures with pension in some of the better unionized municipalities. Their work provide a valuable and concrete service to the community. I think startup enthusiasts on the other hand are kind of like starting a band, providing entertainment/art for an audience and for the performer to satisfy an itch. Life is a finite thing…

I just think we shouldn't be bankrupting the state and cities to pay for these pensions.

Going back in time, when the person first started as an employee, the employer made a promise that the person would receive a pension upon retirement. That was part of the employment contract negotiation. People decided on a job based in part on the entire earnings, which includes both salary and pension. Some people are willing to take a lower salary in order to have a higher pension, while others prefer it the other way around.

If the state and cities are going bankrupt then why did they enter the contract in the first place? What was the economic planning they did which let them conclude - apparently falsely - that they would be able to keep their side of the bargain, and how has it broken down?

Personally, I believe it's a combination of continued pressure to lower taxes and continued pressure to outsource government work to more expensive private businesses, especially when tied to the philosophical idea that the government should be small enough to 'drown it in the bathtub.'

In other words, another solution to not going bankrupt is to raise taxes, rather than breaking existing contracts.

Re: The Millionaire Cop Next Door

#25

Post by hudibras »

Guys, guys, I hate to break this to you, but I think Forbes picked an example that may not be representative of the typical government pension.

I'm not saying that I disagree with the North County Times of Carlsbad, California, but I think that most government pensions are not that generous. $30K/year is more likely, and those employees may not be entitled to Social Security benefits either.

http://www.cepr.net/index.php/op-eds-&-columns/op-eds-&-colu...

http://money.cnn.com/2013/07/23/retirement/detroit-pensions/

Re: The Millionaire Cop Next Door

#26

Post by zo1 »

DeadHitchhiker wrote: post #11
bruceb wrote: post #6

Earlier quoted context omitted.

Should you get paid near $80k a year for the next 26 years when you are not working? I also think it should be adjustable depending where you are living. Do you live in the area and so plowing some of that money back in to the local economy? If not there should be a reduction. England is reducing some benefits for those who live abroad and thus not spending money in the country.

> Should you get paid near $80k a year for the next 26 years when you are not working? Yes. Why not? Because that offends your sensibilities about work? Because you feel that people should work until they're 65~70 to retire, if they ever manage to? Right now a number of school teachers are working until their late 60s to make a pittance upon retirement, trading down from houses to mobile homes to even make their reti…

"> Should you get paid near $80k a year for the next 26 years when you are not working? Yes. Why not?"

They got paid a salary their entire working career, which they should have been taking out of to save up for retirement. You know, like the rest of society does.

Re: The Millionaire Cop Next Door

#27

Post by zo1 »

bsder wrote: post #18
melling wrote: post #8

Earlier quoted context omitted.

The real question is can we afford it. Public pensions are not fully funded while the employee is working. In many cases there won't be enough people paying their benefits in the future so taxes will need to be increased or benefits cut.

We can afford it if the people in charge of the pensions would put the money away when they're supposed to aka NOW . Instead, everybody treated pension funds like piggy banks, looted them, and now want to run away with the money with the "Oh they're so greedy ."

You can afford it, of course! Assuming you take debt out against your unborn children, and grandchildrens' future labor. If you're fine with that then keep repeating: "Yes we can!"

Some of the stats I've seen claim that the US has trillions in unfunded liabilities such as these pension funds. Anyone have any concrete stats we can reference?

Re: The Millionaire Cop Next Door

#28

Post by anifow »

patio11 wrote: post #14

I sympathize with the general direction of the criticism ("defined benefits pensions are much, much more valuable -- and expensive -- than people typically give them credit for"), but $2 million is strictly superior to a $80k annuity, even if one's assumption is 4% annualized post-inflation returns or, more pessimistically, a 4% safe draw-down rate. Cash doesn't expire when you expire, pensions (mostly) do. The fair…

Yes, the author is pretty off-the-mark and I would say misleading. Here are some scenarios worked out with www.numbercanvas.com

Early Retirement, Average Lifespan: $1 million

Early Retirement, Long Lifespan: $1.5 million

Average Retirement, Long Lifespan: $1.25 million

Average Retirement, Average Lifespan: $650,000

Early Retirement, Short Lifespan: $480,000

http://pastebin.com/QU5dnCe8

Re: The Millionaire Cop Next Door

#29

Post by joshAg »

zo1 wrote: post #26
DeadHitchhiker wrote: post #11

Earlier quoted context omitted.

> Should you get paid near $80k a year for the next 26 years when you are not working? Yes. Why not? Because that offends your sensibilities about work? Because you feel that people should work until they're 65~70 to retire, if they ever manage to? Right now a number of school teachers are working until their late 60s to make a pittance upon retirement, trading down from houses to mobile homes to even make their reti…

" > Should you get paid near $80k a year for the next 26 years when you are not working? Yes. Why not? " They got paid a salary their entire working career, which they should have been taking out of to save up for retirement. You know, like the rest of society does.

you do realize that the workers negotiated a pension with the city in exchange for lower salaries during the years in which they work, right? This pension is their retirement savings.

The city's benefit is that they don't have to pay as high salary as they otherwise would (without a pension); that means the city can take the money they save on salary each year, invest it, and hopefully get a high enough return that they save money compared to paying a full salary without the pension. Essentially, the city wants to borrow money from the workers at A% interest and then go invest it (maybe in itself, maybe in more traditional investments) and hopefully get an ROI of B%, where B > A.

The workers' benefit is that they get a "guaranteed" retirement fund (ie less risk) that they don't have to manage or worry about and depending on the circumstances, a higher total compensation than they would without the pension (ie the city pays them interest for essentially loaning the city money) (ie better returns).

If the city's investments of the saved salary money returns more than what is needed to fund the pensions, the city gets to keep that extra money.

Re: The Millionaire Cop Next Door

#30

Post by Ntrails »

patio11 wrote: post #14

I sympathize with the general direction of the criticism ("defined benefits pensions are much, much more valuable -- and expensive -- than people typically give them credit for"), but $2 million is strictly superior to a $80k annuity, even if one's assumption is 4% annualized post-inflation returns or, more pessimistically, a 4% safe draw-down rate. Cash doesn't expire when you expire, pensions (mostly) do. The fair…

I am thrilled that you're able to design a risk free portfolio returning inflation + 4% annually. Please share this with the rest of the world, that we may all have better annuities...

People massively undervalue pensions - especially those with additional benefits such as spousal, early retirement, minimum payment periods etc.

The only valid valuation for any asset remains what it would cost in the market, and as such $2m is the correct value. It is entirely possible you'd rather have the cash, but it's not objectively superior.

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