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sreeb.
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June 6, 2012 at 4:38 PM #19855June 6, 2012 at 4:59 PM #745188
an
ParticipantYes they should (for those who were not injured during their time of service). For those who were injured, it’s the least we can do for their sacrifice (i.e. take care of them financially for the remaining of their life, since the likelihood of them finding a job when injured is reduced, especially if they lost both legs and an arm). They should pay active military men and women more (at least similar to police), give them 401k & SS. But since even with prop B, police pension are preserved.
June 6, 2012 at 8:15 PM #745195mike92104
ParticipantI think the person we sent overseas to get shot at deserves a pension much more than the rude B&^%$ behind the counter at the DMV.
June 7, 2012 at 4:49 AM #745208Anonymous
GuestI made my points on the other thread (before it degraded into name-calling by those who didn’t seem to have any actual counter-arguments.)
Here’s a summary:
– Any long-term obligation made by managers/politicians is fraught with peril, and history has proven this. Pension contracts make commitments that must be met anywhere from 10-60 years in the future. Anything that is promised that far in the future by someone who isn’t accountable for honoring it is going to have a tendency to be overgenerous or generally prone to corruption.
– Think about how a pension works: You make promise to pay someone a yet-to-be-determined amount in retirement when they start working (say age 25) The exact amount of the obligation isn’t typically determined until the final years of their employment (30 years later), and the money isn’t completely paid out for decades after that. There’s a lot of hard math and guesswork involved, and plenty of incentives to cheat along the way for short-term gain. If anything goes wrong – a miscalculation, an overly-generous agreement, etc. in the decades-long process, the whole thing can collapse. It’s just too brittle a system.
– The reason private-sector pensions are going away is because shareholders have become wise to the issues described the prior points, and accounting changes have made it is harder to hide the obligations on the financial statements. Basically the market has spoken. Government has been able to get away with hiding pension costs longer because taxpayers don’t scrutinize the books as much as investors do.
– Military pensions are also a growing problem as life expectancies increase, but we don’t see the impact because it just gets piled on with the national debt that will be monetized away eventually. Plus “half-pay” doesn’t sound very generous – if you do the math you see that it can be though. But the public doesn’t do the math. Of course military pensions are also political land-mines, as no one dares question military pay.
June 7, 2012 at 6:18 AM #745209blake
ParticipantLet’s not forget about the relationship between the people who make the promises and the ones who benefit from them.
June 7, 2012 at 9:00 AM #745221briansd1
GuestMilton Friedman, Reagan’s man on economics, said we should outsource our military.
The Brits outsourced to Indians during the days of empire and we could do the same. Big burly Indians can be very effective killing machines.
June 7, 2012 at 9:27 AM #745225EconProf
Participant[quote=harvey]I made my points on the other thread (before it degraded into name-calling by those who didn’t seem to have any actual counter-arguments.)
Here’s a summary:
– Any long-term obligation made by managers/politicians is fraught with peril, and history has proven this. Pension contracts make commitments that must be met anywhere from 10-60 years in the future. Anything that is promised that far in the future by someone who isn’t accountable for honoring it is going to have a tendency to be overgenerous or generally prone to corruption.
– Think about how a pension works: You make promise to pay someone a yet-to-be-determined amount in retirement when they start working (say age 25) The exact amount of the obligation isn’t typically determined until the final years of their employment (30 years later), and the money isn’t completely paid out for decades after that. There’s a lot of hard math and guesswork involved, and plenty of incentives to cheat along the way for short-term gain. If anything goes wrong – a miscalculation, an overly-generous agreement, etc. in the decades-long process, the whole thing can collapse. It’s just too brittle a system.
– The reason private-sector pensions are going away is because shareholders have become wise to the issues described the prior points, and accounting changes have made it is harder to hide the obligations on the financial statements. Basically the market has spoken. Government has been able to get away with hiding pension costs longer because taxpayers don’t scrutinize the books as much as investors do.
– Military pensions are also a growing problem as life expectancies increase, but we don’t see the impact because it just gets piled on with the national debt that will be monetized away eventually. Plus “half-pay” doesn’t sound very generous – if you do the math you see that it can be though. But the public doesn’t do the math. Of course military pensions are also political land-mines, as no one dares question military pay.[/quote]
Great summary of the underlying factors explaining how pensions have become such a time-bomb for our financial future. Workers under 40 should be especially upset.June 7, 2012 at 9:46 AM #745226poorgradstudent
Participant[quote=harvey]- The reason private-sector pensions are going away is because shareholders have become wise to the issues described the prior points, and accounting changes have made it is harder to hide the obligations on the financial statements. Basically the market has spoken. Government has been able to get away with hiding pension costs longer because taxpayers don’t scrutinize the books as much as investors do.
– Military pensions are also a growing problem as life expectancies increase, but we don’t see the impact because it just gets piled on with the national debt that will be monetized away eventually. Plus “half-pay” doesn’t sound very generous – if you do the math you see that it can be though. But the public doesn’t do the math. Of course military pensions are also political land-mines, as no one dares question military pay.[/quote]
-There has been a pretty steady march of corporations continuing to screw over the little guy buy cutting benefits and perks like pensions (although some companies do have pretty sweet matching for their 401k plans). This trend might reverse itself if the economy ever gets back to 5-6% unemployment, when companies fret more about keeping their talent rather than cutting costs.-Enlisted military pay just isn’t very good at all, and there are roughly 5x more enlisted military than officers. A decent chunk of officers are in highly skilled professions (doctor, pilot) where sticking around for full retirement comes with a significant earnings cost. Retaining good talent in the military is already a problem, and cutting pensions without increasing salaries would only make that problem worse. Of course, with the ends of the wars in Afghanistan and Iraq we should be able to continue cutting our forces, unless Romney gets elected. Then, we’re probably screwed in terms of over exuberant military spending and use of force.
June 7, 2012 at 10:34 AM #745230Anonymous
Guest[quote=poorgradstudent]-There has been a pretty steady march of corporations continuing to screw over the little guy buy cutting benefits and perks like pensions (although some companies do have pretty sweet matching for their 401k plans). This trend might reverse itself if the economy ever gets back to 5-6% unemployment, when companies fret more about keeping their talent rather than cutting costs.[/quote]
Cutting a pension isn’t necessarily “screwing” anyone, and I think that there really isn’t much evidence to support the idea that replacing pensions with more predictable forms of compensation is some sort of underhanded negotiating tactic. Pensions are just a form of compensation, period. As long as we have a free labor market, companies don’t ultimately have the power to “screw” anyone. People leave jobs for better paying ones all the time – if someone feels they are being “screwed” they can go work somewhere else.
[quote]Enlisted military pay just isn’t very good at all […][/quote]
Like I said, do the math and you might be surprised.
Take the typical enlisted retirement package after 20 years service and calculate the NPV of the cash flows. You’ll find the number turns out to be a pretty substantial bonus for someone who may be less than 40 years old.
The “1/2 pay after 20 years” convention for military pay has been in existence and untouched for a very long time. I don’t remember the exact year the basic parameters were set but it was around the 1920s for the current system and has historical roots back to the civil war. People live much longer today and the system will need to change to reflect that reality. Today it is not uncommon to be paying a military retirement for 40 years after they’ve retired with 20 years service. A system that pays people 60+ years as compensation for 20 years work is just not sustainable.
June 7, 2012 at 11:06 AM #745239dumbrenter
Participant[quote=briansd1] The Brits outsourced to Indians during the days of empire and we could do the same. Big burly Indians can be very effective killing machines. [/quote]
Wow. I just do not understand why folks with self-professed liberal attitudes say such things.
Anyway, between the white settlers and the rangers and maybe Custer there are not many left to do this job for you. Try Mexicans.
June 7, 2012 at 11:19 AM #745241dumbrenter
Participant[quote=poorgradstudent] There has been a pretty steady march of corporations continuing to screw over the little guy buy cutting benefits and perks like pensions (although some companies do have pretty sweet matching for their 401k plans). [/quote]
All benefits including pension & perks are part of compensation. As harvey put it: stockholders of companies have become more alert to the consequences of such long term plans. The debates on this site indicates that only a few taxpayers have gotten wise to it so far.
The little guy is so busy screwing himself (or herself) that not much contribution is needed from the corporations in this department. What else you call folks who prefer to buy IPads before saving up for a rainy day? On basis can somebody with a negative net-worth, $0 in retirement funds think they need an entertainment device?
And they vote, actually they might be the majority of the population.June 7, 2012 at 12:00 PM #745243bubba99
ParticipantCalifornia retirements that give 3% per year of employment with no cap or age penalty for police and fire are just not sustainable. Military pay, and retirements come no where close to this. Even Federal law enforcement get only 1.7% per year of service with a penalty age of below 55.
California is almost double Federal pension calculations.
June 7, 2012 at 12:25 PM #745245briansd1
Guest[quote=dumbrenter][quote=briansd1] The Brits outsourced to Indians during the days of empire and we could do the same. Big burly Indians can be very effective killing machines. [/quote]
Wow. I just do not understand why folks with self-professed liberal attitudes say such things.
Anyway, between the white settlers and the rangers and maybe Custer there are not many left to do this job for you. Try Mexicans.[/quote]
Actually, I don’t see how outsourcing our military is incompatible with liberal values.
I’m sure we could create an “American Legion” of the biggest baddest fighters in the world. Fighters could be lured by the promise of becoming American citizens and that itself is compensation. It would be a win-win.
June 7, 2012 at 12:50 PM #745249Always studying
ParticipantThis is one topic that I can actually add value to. I’ve been lurking on here for years. I retired from the Marine Corps last year, as an E-8 with 22 years and 1 week. My retirement pension is worth just under 30K a year, it will never decrease and will only increase with whatever COLA raises we get. It is not enough to live on but it helps.
We do have medical insurance that covers our family, this year it only costs $548; which is great, however, in the next few years it will increase upwards to $1500 a year.
I was 40 when I retired, during my service I used tuition assistance to earn a bachelors degree and the post 9/11 GI Bill to earn an MBA, so I was able to find a second career after I retired.
The pension helps in the wage gap in the civilian world. I had to start over at a software company, I am not complaining I really enjoy my job and my coworkers, but the average 40 year old at my company is making much more money than I am, because they have much more time in the civilian workforce. My pension helps close that gap.
The military is looking at switching to 401K systems; the problem is that whoever joins now is signing up for the pension system, so whatever changes are made will not take effect for at least 20 years. The pension and other benefits are a great retention tool, although most service members get out after their initial contract, but those of us who stick it out and take advantage of the benefits are pretty lucky and happy.
June 7, 2012 at 1:55 PM #745252Anonymous
GuestThanks for the data. We can use your example to “do the math” as I was suggesting.
Counting just your $30K income and assuming you live to age 70 (and using a typical 4% discount rate), your pension is worth a little over $500K.
What that means is that if you had a 401K you’d have to accumulate that much in your 22 years of service in order to withdrawal $30K a year for life after retirement. Of course you could not live as long or live longer but age 70 is a pretty typical life expectancy for a 40 year-old today.
The S&P 500 had roughly a 6% annualized gain over the past 22 years, so if you simply invested in the market you would have to save over $11k per year, each year, for the past 22. That’s fairly significant for someone who made $60K at the end of their career.
This doesn’t count medical benefits, which makes the value of your pension much higher. It also doesn’t count COLA increases but some would say the discount rate I used is on the low end, which offsets the COLA.
So, that $30K per year might not seem like much, but it easily makes you half-a-millionaire. Not bad for a 40 year old.
No doubt you earned it, but my concern is that our country cannot afford to promise $500K+ pensions to many thousands of military retirees.
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