patrick.net

marcus says

$5 million annuitized at 5% is 250K a year for 30 years

Is 5% the current annuity rate?

Booger says

Is 5% the current annuity rate?

I didn't mean to use the word as representing an annuity investment product. But when you do a financial calculation (i used a calculator function) to find out what payment you could get monthly or annually on an amount of money that starts in this case at $5 million and goes to zero over a period of time, with equal payments paid out over that time (basically an annuity) I chose 30 years for the time frame and 5% for the interest rate (or internal rate of return).

5% is a reasonable assumption. You can do better than that in the stock market. A bit worse with bonds. A person would probably have a portfolio and not an annuity for the whole thing, paying out fixed payments. But the annuity calculation I described is the way to do it, and it requires an interest rate assumption. 5% is fairly conservative.

B.A.C.A.H. says

marcus says

I was middle aged when I started teaching

during the fallout from the dot.com collapse, I read an article in the SF Chronicle about teachers who started in middle age, and how their social security got messed up.

I did not know this, but California teachers are opted out of social security. It means, they don't pay into it, nor do their employers. They do the pension instead. The teachers who started late, would receive a low social security based on contributions before going into teaching. But, because they started late, nor would they accrue a large pension benefit.

27 years = 90% of last salary plus benefits (average of last 2 years, something like that). Starting at 30, they can work will 57 and get full pension. then get another job and get a second pension. or just retire and not wait till social security which kicks in at 65-70 depending on your retirement age.

personal

marcus says

How do you spell clueless ?

F_O_R_T_W_A_Y_N_E

Can you kindly refute his ideas and give up the personal attacks?

marcus says

5% is a reasonable assumption

There are websites devoted to this. No reason to assume when there are online tools.

Onvacation says

Can you kindly refute his ideas

THe way it works has nothing to do with his ideas. He said 90% in 27 years. It takes 37.5 year to get 90%. The multiplier is 2.4.

AS for social security, I explained above. It gets substantially reduced unless you paid 30 years into it. I'm not sure how someone gets much more than 10 years in, if they teach from age 30 to age 67.

zzyzzx says

No reason to assume when there are online tools.

Maybe you don't understand, the online tools, if decent, require an assumption. If not, an assumption is being made for you. It's basically the reverse of the tools for calulating a mortgage payment. YOu have to choose an interest rate. If the tool doesn't ask you for an interest rate, it's becasue they assume you're too uniformed to come up with your own assumption.

marcus says

personal

Yeah, cut that out marcus.

personal

personal

Marcus, this is not a battle you will win. Stop with the personal attacks or you're going to get nuked.

Marcus you explain this to us then:

https://transparentcalifornia.com/salaries/all/ <-- millions earned a year, a lot of it is in education (probably main driver of the costs and debt). Students can't afford to pay tuition going into debt, and I see so many earn millions a year.

https://transparentcalifornia.com/pensions/all/ <-- millions in pay yearly which sure as hell doesn't add to to 37 years needed. Clearly there are ways to get around it. Let me remind you that people who pay taxes don't have even a fraction of those benefits and pay.

personal

personal

Government is for government. Period.

marcus says

www.youtube.com/embed/NjkNNDuAb9A

Wasn't trying to make you cry marcus. I apologize if I did. Just asked a simple question backed by data shown on transparentcalifornia.

marcus says

Maybe you don't understand, the online tools, if decent, require an assumption. If not, an assumption is being made for you. It's basically the reverse of the tools for calulating a mortgage payment. YOu have to choose an interest rate. If the tool doesn't ask you for an interest rate, it's becasue they assume you're too uniformed to come up with your own assumption.

I was looking at this one:
https://www.schwab.com/public/schwab/investing/accounts_products/investment/annuities/income_annuity/fixed_income_annuity_calculator
It doesn't allow you to put in an interest rate. But yes some of them do allow you to put in an interest rate. Actually the first one (I can't find it now) was an actual site where you can buy an annuity, so the rates were based on current annuity rates.

Right. AS I said, I'm really just trying to give a realistic estimate of what $5 million is actually worth in terms of a 30 year fixed income. But one where the people are managing it themselves rather than a guaranteed income stream of an annuity.

Arguably a pension should be compared to the latter. But, whatever. EVen over the next few decades, I would consider 5$ realistic for an actual annuity, but I'm sure not what you would get now.

MY estimate of 30 years was also obviously very high. The website annuity you showed is for a sort of life insurance annuity product, which is like a pension, in that the term is based on how long you live.

Fortwaynemobile says

Wasn't trying to make you cry marcus.

That's not me. It was a reference to our Fuehrer.

Marcus, you can "explain off" / rationalize, etc the gold plated benefits all you like, what-EVER.

This is the reality: many Californians will not agree to being tax donkeys for that stuff. Instead of arguing the merits, rationale, fairness, or whatever, we'll just leave for Nevada or some other such place. The Reno or Carson area is not so far away for us to visit the region or our relations who haven't yet followed us for Greener Pastures.

There have always been places with lower state taxes. That's nothing new.

I don't really think that California taxes are all that significant a part of the high cost of living in California. Housing is by far the biggest component, and I think we already knew that a lot of retiring boomers are going to have to sell - to take that equity for retirement and move somewhere where housing is cheaper. .

The sad thing about pensions is that more of us don't have good pensions. I don't really know. IF I had a job where my salary was 40% to 80% higher, with 401K options, and maybe even some matching on the part of my employer, would I complain about government workers pensions ? Perhaps. I think it's somewhat selfish and short short sighted.

Marcus, do you know what the typical salary for a college educated person (all ages groups, plus experience, not fresh out of college) is in the United States?

$65,000. Nor does it come with lifetime health insurance and a guaranteed pension with minimal contributions, usually just a 401k.

California Teachers are exceptionally WELL PAID and receive LAVISH BENEFITS that only Senior Executives have access to in the private sector.

The way to fix the problem is to increase the base pay 5% ONE_TIME_ONLY, then put all the responsibility for contributing to a pension on the Educator. ALL of it.

marcus says

I don't really think that California taxes are all that significant a part of the high cost of living

That's hilarious, Marcus. Keep telling yourself that.

B.A.C.A.H. says

That's hilarious, Marcus

I know that California is one of the least tax friendly states. My point is that when you compare the cost of living in California to the cost of living in say Nevada, what does the difference in state taxes (percentage wise not including the fact that incomes are higher in California) represent as a fraction of the higher cost of living ?

A small fraction, no ?

marcus says

The sad thing about pensions is that more of us don't have good pensions. I don't really know. IF I had a job where my salary was 40% to 80% higher, with 401K options, and maybe even some matching on the part of my employer, would I complain about government workers pensions ? Perhaps. I think it's somewhat selfish and short short sighted.

You did have one of those jobs, working as a investment guy, remember? You've told us about it. You also told us you blew it.

That's why you had to take the job as a math teacher in your middle age. Once again, why is it the taxpayers responsibility to pay for your retirement with a pension, when you didn't take care of that issue on your own in the private sector?

Sounds like an entitlement mentality.

marcus says

I didn't mean to use the word as representing an annuity investment product. But when you do a financial calculation (i used a calculator function) to find out what payment you could get monthly or annually on an amount of money that starts in this case at $5 million and goes to zero over a period of time, with equal payments paid out over that time (basically an annuity) I chose 30 years for the time frame and 5% for the interest rate (or internal rate of return).

A whole paragraph to describe one word - amortization. Are you forgetting your math?
5% could be reasonable.

marcus you still haven't answered my question, just a kind reminder.

FortWayneIndiana says

marcus you still haven't answered my question, just a kind reminder.

He won't. He has never answered my question either. "Why should government pensions be higher than what SS would provide?"
Because he can't.

marcus says

I know that California is one of the least tax friendly states.

I heard RE radio show - if you count Prop-13 tax revolt, the taxes are one of the lowest in the country.
Perhaps we should have Prop-13 for sales-tax and income-tax to be fair.

marcus says

what does the difference in state taxes (percentage wise not including the fact that incomes are higher in California) represent as a fraction of the higher cost of living ?

A small fraction, no ?

Yep. The higher sales tax, the higher property tax, parcel tax this, parcel tax that (and yes, renters pay those), higher vehicle registration, this-and-that junk fees, little here, little there, each one a small fraction, no?

Says a "civil" servant.

Hilarious.

Strategist says

He has never answered my question either. "Why should government pensions be higher than what SS would provide?"

Silly question. While it's true that I don't pay into social security, and I pay in to a different pension fund insteaad, who said the one was supposed to be equal to and a substitute for the other ?

I could say, why should someones 401K pay better than SS. It's a stupid question.

As I've said many times, police or teachers pensions are simply a form of compensation. If it was all paid in the form of salary, you wouldn't have this complaint. And it wouldn't be as high as you think, becasue they wouldn't have EVER underfunded salaries (that doesn't even make sense - you pay it or you don't).

It's a form of compensation that affects the threshold for the quality of hires for jobs such as police and teachers and many other government jobs. Why is this not easy to understand ?

I will admit that listening to you, and given the mishandling of pension contributions, I wish the jobs had simply paid better, without the pension. It's probably a better incentive anyway. Then you could argue that we're over paid, but I wouldn't have a pension, just like you. And you would be happier. We should all be in the same boat, right ?

Funny, I thought the socialists were supposedly the ones that want everyone to have the same low income. Could have fooled me. Apparently it's an American thing that just goes well with American self centeredness.

Funny, I thought the socialists were supposedly the ones that want everyone to have the same low income. Could have fooled me. Apparently it's an American thing that just goes well with American self centeredness.

Nice straw man. Nobody said they want all to be poor. They just do not want public sector employees to use the power of the state to gain compensation above what is available to the similarly skilled private sector tax payers.

"What about me ? I don't have that."

Don't ever say that about someone born into extreme wealth. But if someone has a decent paying government job, that was open to anyone capable and wanting to do that work, " THAT'S UNFAIR !"

I thought markets work. How come there aren't too many people going in to teaching and law enforcement if the following were happening ?

HeadSet says

They just do not want public sector employees to use the power of the state to gain compensation above what is available to the similarly skilled private sector tax payers.

Isn't the job market a market ? And why aren't you a cop or a teacher if it's such an awesome deal ?

marcus says

Isn't the job market a market ? And why aren't you a cop or a teacher if it's such an awesome deal ?

Had I known then what I know now - I would have been a fireman and be a few years away from a lavish six figure pension for life.

I think most people realize that gravy train is over and that no one entering the Public Sector today will see those types of benefits.

The question is how much will the people in the system now have to cough up to keep the system from imploding. If the public sector and unions were smart, they would compromise now while they still can before this shit blows up on them during the next recession where they risk losing much more.

marcus says

As I've said many times, police or teachers pensions are simply a form of compensation. If it was all paid in the form of salary, you wouldn't have this complaint.

Yes we would - because the pay would be more transparent. Many people don't even understand how the pensions compensation works and don't realize how generous it is.

I look up the kindergarten teachers in my school district and see young women in their 30's making $80K a year with a pension. That is great compensation for a kindergarten teacher, even for California, not to mention the lifetime pension benefit.

socal2 says

That is great compensation for a kindergarten teacher, even for California, not to mention the lifetime pension benefit.

True, but then I'm not sure that teaching kindergarden for 40 years is a walk in the park.

socal2 says

Had I known then what I know now - I would have been a fireman

Yeah, fireman is the one of these jobs that were discussing where you could pay less, without sacrificing quality. It's the one where you here of 1000 applicants for a small number of openings, and people volunteer and work other angles to get their foot in the door. They work those long shifts where basically they're just on call. something like two days on and then 4 days off. And then there is a risk factor, so they get their pension sooner. I would argue that they could definitely get the same great people paying less.

But police, or public school teacher is far less of a sweet deal.

marcus says

B.A.C.A.H. says

That's hilarious, Marcus

I know that California is one of the least tax friendly states. My point is that when you compare the cost of living in California to the cost of living in say Nevada, what does the difference in state taxes (percentage wise not including the fact that incomes are higher in California) represent as a fraction of the higher cost of living ?

A small fraction, no ?

Sales taxes
income taxes
property taxes
gas taxes
business taxes
various fees added to every product

Marcus if you work for government you are very sheltered from difficulties taxpayers have when it comes to saving. Because to save one has to have enough income to save, almost no one in private sector has money left over to save, to put into retirement after paying taxes and basic cost of living. It all gets taken away to pay government, so people have very little left to save.

Most entitled people in the world I ever had to work with, were the teacher unions (didn't matter red or blue, both super entitled trying to fuck others over for personal gain).

While I agree the pension system in CA is overly generous, I don't see a way to fix it. It is my understanding that the pensions are constitutionally protected by the state so it is hard to see any reform coming. Even if the pensions bankrupt the state, the tax payers are on the hook. It is the cozy relationship between public sector unions and the government that perpetuates this imbalance.

Marcus has a point about folks upset that "others" are getting a better deal. We all could have gone into public sector work - but chose not to do so -probably because the initial pay is not all that great. The state and county pensions are awesome - no doubt. Federal workers - not so great. Reagan reformed the system in the mid-80s so that new employees were moved to 403b and reduced pension payouts. So, the pension hit is really more at the state/county/city level.

Why would we expect unions to cede benefits they have won? Of course not... And unions can be good to keep wages high and keep the consumption economy going. What is sad is that private sector unions are destroying themselves with two-tier pensions. They sell out the new employees with poor pay and benefits so that the savings there can help them keep their high level of compensation. Basically, they are selling out. I experienced this first hand and I will never participate in a union again - I was getting 50% the pay, etc.. for doing the EXACT same work. Sometimes unions are their own worse enemy.

Fortwaynemobile says

both super entitled trying to fuck others over for personal gain

Newsflash, I have the same problems saving and I pay the same kind of taxes. Did you think my income was tax free ? I'll be teaching for about twenty years and am not going to have a pension all that much higher than what you will get from SS (if you put in the years with above SS defined income min for full benefits) . My SS from before that will be deeply discounted becasue of WEP laws.

Teachers aren't entitled and they aren't wanting to fuck others over. Some may have a false sense of doing something for the community, i.e. doing SERVICE work. And for some it's not false. But that part of it is intrinsic for some, and certainly not a cause for entitlement.

What you confuse for entitlement is the fact that they have a union and collective bargaining.

Workers in America have been getting screwed over since the Reagan era, or even before. Unions destroyed, and real incomes have decreased. GOvernment workers are the one sector of the job market that has been screwed over less than everyone else. You want them to be equally screwed over as everyone else ?

Are you a socialist ?

Why didn't you become a cop ? You would have been a great cop (partly kidding) ?

marcus says

But police, or public school teacher is far less of a sweet deal.

Agreed.

Fire fighting is the biggest racket. Outside of wildfires, the US doesn't have a fraction of the structure fires we had 50 years ago due to better building codes, sprinklers and fire alarms. Fire fighters have to justify their existence, so that is why you see a big ladder truck responding to normal paramedic calls. Can't tell you how many times I've seen a huge fire truck outside the old folks home near my house.

When I was in highschool I got arrested for a fake ID and had to do 100 hours community service. I ended up working at the fire station a bunch of hours on my Christmas/Spring break cleaning the trucks and their bathrooms. It was like a frat house with a big TV, nice kitchen and a bunch of dudes having fun and planning on the big dinner they were going to make that night. All the bathroom stalls had a stack of porn 3 feet high!