patrick.net

Well, converting a pension to a defined contribution plan means more drain on the tax payer dollar for the short-term, as the new hires would no longer be required to pay in and the tax payer has to fully foot the bill for the current and future retirees who already have a pension contract. We wouldn't see any savings, if there are any, for at least another 10 or 15 or perhaps more years. Defined contribution plans don't perform as well as pensions anyway, but that's a whole 'nother topic (have we forgotten already what happened to our 401ks in 2008?).

For every dollar that tax payers put in to a public pension plan, some multiple of that is paid out to retirees. Not funding it just means more poor retirees, and now we're back to tax payers footing the bill. There's really no way around it. Pay less now or pay more later. Those seem to be the choices.

Pensions are always underfunded. It's the nature of the instrument. That's not really a sky-is-falling issue though, because we will never have a day when all government employees in a pension decide to all retire on one particular day and start taking benefits.

I don't think we have to have a riot about it. Besides, U.S. citizens are panzies compared to the Greeks and the French. We don't scare our government nearly as well as they do.

Well, converting a pension to a defined contribution plan means more drain on the tax payer dollar for the short-term, as the new hires would no longer be required to pay in and the tax payer has to fully foot the bill for the current and future retirees who already have a pension contract.

Your suggestion is based on the premise that we must pay for the pension contracts. Let the states and local govts go bankrupt and have the Cadillac gold plated pension funds fight it out for the leftovers in court with other creditors who also have contracts. In other words, fight like hell not pay for those lavishly inflated pension benefits which never should have been offered in the first place.. there was not enough money to make good on those contractual offers and they never should have been made. Let the bankruptcies begin so that we can create a more realistic, and more stable foundation for future economic growth in this country.

It is not "written in stone" that we make good on those pensions.. because if we do, we're forcing average workers to work until 67 or 70 to subsidize govt. pensioners retiring at 50. Screw that.

Your suggestion is based on state and local governments (i.e. employees of the state and local government) filing for bankruptcy so as to avoid paying pensions to state and local government employees (i.e. themselves).

It seems unlikely.

There are just too many people with a vested interest in keeping their own contributions that they made into the system. Same holds for Social Security. As broken as it might be, we want ours, because we paid in too.

I don't know if the Fox News gold advertisements are enough to generate the bubble. I know about a dozen older couples who religiously watch Fox News yet they have ignored me for years about gold. They still insist on buying General Electric & Bank of America and have been despite the fact that their retirement accounts nearly got wiped out buying those stocks. Furthermore, the angry left seems to hate gold with a passion and most liberals I know refuse to acknowledge that gold can even act as a store of value let a lone go up in value. They insist it's worthless. Between the right's refusal to buy into gold and the left's hatred of gold, I really can't see it bubbling.

theoakman says

Furthermore, the angry left seems to hate gold with a passion and most liberals I know refuse to acknowledge that gold can even act as a store of value let a lone go up in value. They insist it’s worthless. Between the right’s refusal to buy into gold and the left’s hatred of gold, I really can’t see it bubbling.

I don't think I'm really part of the "angry left", but I don't see gold as a store of value. That doesn't mean I hate it though. I think it's very pretty, and also very shiny.

Value is determined by supply and demand. Gold supply is limited, no doubt, but what exactly is the demand? Besides jewelry and some niche electronic applications? It just seems to me that gold is valuable only because people think it is valuable...

tatupu70 says

theoakman says

Furthermore, the angry left seems to hate gold with a passion and most liberals I know refuse to acknowledge that gold can even act as a store of value let a lone go up in value. They insist it’s worthless. Between the right’s refusal to buy into gold and the left’s hatred of gold, I really can’t see it bubbling.

I don’t think I’m really part of the “angry left”, but I don’t see gold as a store of value. That doesn’t mean I hate it though. I think it’s very pretty, and also very shiny.
Value is determined by supply and demand. Gold supply is limited, no doubt, but what exactly is the demand? Besides jewelry and some niche electronic applications? It just seems to me that gold is valuable only because people think it is valuable…

Thank you for proving my point. You refuse to even understand why it's valuable. You can be told time and time again why but you still think it's only valuable because people "think it is valuable". Fact of the matter is, Gold's value is in the fact that it is the only form of honest money to ever function properly.

theoakman says

Fact of the matter is, Gold’s value is in the fact that it is the only form of honest money to ever function properly.

Does that create demand? Indians used to use beads as currency--does that make them valuable today?

tatupu70 says

theoakman says

Fact of the matter is, Gold’s value is in the fact that it is the only form of honest money to ever function properly.

Does that create demand? Indians used to use beads as currency–does that make them valuable today?

Indian consumption has nothing to do with true global demand for gold. It's 1% of the story. You cannot apply the typical consumption model of a commodity to gold. We have 5000 years worth of gold sitting above ground that was never consumed. It functions as HONEST money. That's it. As for your beads comment, how did that work out? I'll say it again. Nothing else outside of gold/silver ever successfully functioned as honest money for extended periods of time. You just keep proving my point.

goldbugs: honest men in a dishonest world

theoakman says

tatupu70 says

theoakman says

Fact of the matter is, Gold’s value is in the fact that it is the only form of honest money to ever function properly.

Does that create demand? Indians used to use beads as currency–does that make them valuable today?

Indian consumption has nothing to do with true global demand for gold. It’s 1% of the story. You cannot apply the typical consumption model of a commodity to gold. We have 5000 years worth of gold sitting above ground that was never consumed. It functions as HONEST money. That’s it. As for your beads comment, how did that work out? I’ll say it again. Nothing else outside of gold/silver ever successfully functioned as honest money for extended periods of time. You just keep proving my point.

Yeah I think they meant Native Americans. They used to use beads as currency.

I don't have a strong opinion about gold's inherent value either way - but arguments based on it being the only "honest" money serve to sway me away from your position.
Hmm....

pkowen says

theoakman says

tatupu70 says

theoakman says

Fact of the matter is, Gold’s value is in the fact that it is the only form of honest money to ever function properly.

Does that create demand? Indians used to use beads as currency–does that make them valuable today?

Indian consumption has nothing to do with true global demand for gold. It’s 1% of the story. You cannot apply the typical consumption model of a commodity to gold. We have 5000 years worth of gold sitting above ground that was never consumed. It functions as HONEST money. That’s it. As for your beads comment, how did that work out? I’ll say it again. Nothing else outside of gold/silver ever successfully functioned as honest money for extended periods of time. You just keep proving my point.

Yeah I think they meant Native Americans. They used to use beads as currency.
I don’t have a strong opinion about gold’s inherent value either way - but arguments based on it being the only “honest” money serve to sway me away from your position.
Hmm….

Sway away then...I heard the same thing when Gold was at $600. I'd like you to name another form of honest money that ever existed to disprove my point.

theoakman says

Sway away then…I heard the same thing when Gold was at $600. I’d like you to name another form of honest money that ever existed to disprove my point.

Not trying to disprove. "Honest money" sounds like an emotional point of view, not one of logic

logic did not give rocks (diamonds and gold) a value greater than food and clothes. The whole system is based on what women want. Women have the whoo-haw, so they make the rules. They like gold, poof, gold is worth more than food. No logical reason.

All I’m saying is _ Don’t focus entirely on pensions just because you don’t have one. It’s not the sole cause of the loss of money and won’t be what fixes the system if all the other parts aren’t fixed as well.

I've gone out of my way to point out the pensions are not the "only" problem. In fact, I've repeated that point. I can only assume that any future assertions from you on this point are willfully dishonest. I have SS income coming, hopefully, and I have my personal savings through IRA and 401k. My problem is with public employees who demand retirement pension far beyond anything that they've contributed.. because anything beyond what they've put in beyond reasonable interest (5% annual compounded interest) is coming out of the backs of hardworking Americans. Fck the public sector employees who demand one cent beyond that. Let them live like the rest of us. Because regular Americans will end up subsidizing their excessively lavish retirements.

theoakman says

Thank you for proving my point. You refuse to even understand why it’s valuable. You can be told time and time again why but you still think it’s only valuable because people “think it is valuable”. Fact of the matter is, Gold’s value is in the fact that it is the only form of honest money to ever function properly.

Buy gold today at market rate? unlikely since the seller will put up additional market up. Ever look at the Home Shopping shows on TV peddling gold and silver coins at 2-3x so called market rates... eeek.. not so honest after all. You certainly could not turn around and resell it at same prices on same day.

If a public sector employee retires now at around $90k/year income after 30 years in public service.. that means that they likely started out at around $18K/year back in 1980 which wasn't bad back then if benefits were good. Public sector employees don't have to pay SS like most regular folks. So if you take the 6% annual pension payment that we pay in the private sector for SS compounded and they pay that into their pension program without obligation to pay into SS, my problem is that these individuals, at age 51 or 52, are demanding that we pay retirement benefits to themselves of 80% or more of their peak salary years. Please. No one gets that who works in the real world. Yet that's what govt. employees receive. It's outrageous. Fck public employees who leech off average Americans. They are a huge part of the problem even if they're too dishonest to admit it.

ZippyDDoodah says

Public sector employees don’t have to pay SS like most regular folks.

Why are people continuing to repeat this lie in 2010?

Most public sector employees, including *ALL* federal government employees pay social security taxes. Some state programs (those that have private retirement plans) opt out, though most do not. The SSA estimates this to be less than 30% of state and local employees at present according to their website. Note that these people pay no SS tax *AND* receive no benefits, because they have a separate retirement plan.

Not all states are stupid like California and paying out 90% of peak salary to people for 30+ years after they retire.

Zlxr says

It’s only a select few that get 3% which times 30 years would equal 90% of their salary.

theoakman says

Indian consumption has nothing to do with true global demand for gold

Sorry, I wasn't very politically correct. I should have said Native Americans used to use beads as currency. Does that make them valuable today?

And I wasn't alive to know for sure, but I don't think the debased their currency back then...

After thousands of years, we all quit believing in God--in anything, really--but we *still* believe in Gold.

I think parts of Orange County, CA and the suburbs of NJ back their own currency with granite countertops and fake boobs for the wifey.

Most public sector employees, including *ALL* federal government employees pay social security taxes

I stand corrected. Federal employees started paying SS back in 1984. Previously federal employeed did not pay into SS. Many state and local govt. workers (and railroad employees) do not pay into SS. Although that's useful to know, it doesn't change my main point. There still remain some serious questions to be answered - Do these govt employees who pay SS, are they able to collect SS benefits + govt. pension, or only SS like the rest of us in the private sector? If they collect SS + govt. pension, what, if anything did they contribute into that pension system versus what are they collecting, and when can the begin to collect? Can they start collecting benefits at age 50? If they can collecting their govt. pensions at age 50 or 52, that's a huge problem, because that lavish benefit has to be paid for by others.

With SS, you can't start collecting until you're 65 unless you agree to take reduced benefits.

Another point - With the massive expansion of government, Federal workers are now paid FAR more than their counterparts in private industry http://ur.lc/j6i . On average, federal employees earned $71,206 per year, compared to $40,331 in the private sector. Are these federal employees also getting a lavish pension that they paid little or nothing into which is being subsidized entirely by the "average $40,331" folks? Leeches sucking the blood out of private sector workers

It’s only a select few that get 3% which times 30 years would equal 90% of their salary.

I don't believe it. Please cite. As I understand it, there's not a state/local/federal worker who worked at least 20 years, who will these days (now) retire at anything less than 50% of their highest years salary. But they can start collecting after just 20 years. Why, at such a young age, are they not required to work until 65 before receving their benefits like the rest of us? It's the early retirement age, like in Greece, which is sucking the money out from everyone else. And I use the term "sucking" because they are taking out far more in benefits then they ever put into the system.. the opposite of what happens to most of us with SS, in which our contributions keep increasing but the benefit rise does not correspond to the increased contributions

Those that worked for government for 30 years retiring now get 70% - 90% of their HIGHEST EARNING years in pension, and often they artificially inflate those "highest" earning years with overtime and sick days, or transfer to a temporary high-paying job. Google it.

Not all states are stupid like California and paying out 90% of peak salary to people for 30+ years after they retire.

I think you're mistaken in that 70% - 90% of peak salary in pension, even if they're only 50 years old, is paid out by city and state govt. pension plans across the country. I had my eyes opened to this recently with a 51 year old neighbor who "retired" from the City of Houston at 50% of her salary after only 20 years of working there. That, and other pension program articles I've read lead me to believe that it's not "just" California, but the modus operandi for many/most city and state pension retirement systems.

What's even more unfair is that the govt. pension programs are defined payouts. That is, while the rest of us watch our IRA/401k retirement nesteggs rise and falll with the stock market, government employees are insulated from any downside because taxpayers end up subsidizing them if there's a shortfall. They're "special" in that that they a) demand that taxpayers fund any shortcoming to their lavish pension system b) they can start collecting at age 50 and c) they typically collect FAR more in pension $$ and benefits than they put into the system, even considering compound interest

68 year old private sector workers having to work to subsidize the lavish retirement cruise ship vacations of 'retired' 50 year old government workers is not an exaggeration.

theoakman says

They still insist on buying General Electric & Bank of America and have been despite the fact that their retirement accounts nearly got wiped out buying those stocks.

The market is only down 30% from the peak, so you really cannot be "wiped out". Also these companies pay dividend, and their dividend increase rate outpace the inflation.

Gold, on the other hand, can go down 70% and stay there. What is worse? It doesn't pay dividend or generate any profit.

I am not a goldbug, but if Euro zone starts to unwind, then gold could still hit $2500/oz by July just as the OP has suggested.

I was arguing against buying gld calls back in January, as the markets were telling me that no big move would happen until at least March, and that the $ would appreciate. Both of these loose predictions turned out to be accurate.

If you want to speculate, now is the proper time to start buying the teeny GLD calls. I am eyeing up the SEP 150/170 call spread. You could buy it for around .60 now, or just buy the SEP 150 calls for .95 or so.

Gold doesn't cause cancer, or oil spills, or risk too much on margin.

ALso - a lot of these “so called cushy retirements” are being used to help family members who are currently unemployed.

Why should govt workers be treated any more "special" than everyone else? Do you think that private sector workers who don't have lavish retirement plans like govt workers aren't also facing trouble taking care of family members who were laid off? That's what chaps me off, is that the govt workers demand that they be treated more special than others. It's like a welfare mentality, and it needs to stop

Regarding the 90% of highest earning years being typical or not typical, I checked locally the City of Houston, not known for lavish benefits, and their pension system pays out 90% of the City employee's highest 78 paychecks, and they can retire anytime with those benefits after 30 years, at age 51 if they started working at age 21 - http://ur.lc/j6n . On top of that, they also get health insurance and social security benefits (although they paid into SS, so that SS is not a big deal). Seems that 70% - 90% of top earning years in pension payments is TYPICAL across the US with govt pensions, not some isolated example like in California. Govt workers are sucking out far more benefits than they contributed and that's the crux of the problem.

Very few people retire at 50 because they have to have 10 years and it doesn’t always pay so well.

Public sector employees have become so spoiled and detached from the real world, that they believe that retirement at age 50 with 50% of their former salary is not being paid so well. Age 50, you should have to work until you're 65 unless you save for it YOURSELF.

Gold is heavy and could hurt you if you dropped it on your foot.

ZippyDDoodah says

Do these govt employees who pay SS, are they able to collect SS benefits + govt. pension, or only SS like the rest of us in the private sector?

What does that mean? When did pensions in the private sector get outlawed if you collect SS?

Zippy, although far too much of a drama queen, is correct. Like Greece government pensions in the US as currently structured are simply not financially sustainable and abuses of the systems are rampant. Not all, but a majority.

xenogear3 says

theoakman says

They still insist on buying General Electric & Bank of America and have been despite the fact that their retirement accounts nearly got wiped out buying those stocks.

The market is only down 30% from the peak, so you really cannot be “wiped out”. Also these companies pay dividend, and their dividend increase rate outpace the inflation.
Gold, on the other hand, can go down 70% and stay there. What is worse? It doesn’t pay dividend or generate any profit.

Rofl, give me a break. First off, those 2 companies were dead in the water and both got bailed out. BAC had a few bailouts and GE was given the luxury of issuing 100 billion in FDIC backed bonds. They were going straight to zero. And btw, the dividend from GE sucks.

As for the market only being down 30%, good luck buying into it. Their current and future revenue streams aren't reflected in the price today and the market is incredibly overbought.

tatupu70 says

theoakman says

Indian consumption has nothing to do with true global demand for gold

Sorry, I wasn’t very politically correct. I should have said Native Americans used to use beads as currency. Does that make them valuable today?
And I wasn’t alive to know for sure, but I don’t think the debased their currency back then…

No, because beads, salt, tobacco, or any other commodity currencies have always ended in widespread inflation because the supply of them can easily be increased.

pkowen says

theoakman says

Sway away then…I heard the same thing when Gold was at $600. I’d like you to name another form of honest money that ever existed to disprove my point.

Not trying to disprove. “Honest money” sounds like an emotional point of view, not one of logic

There have been several studies that showed prices in gold over the long term remain flat and they have dated them back to the 1300s using prices in Sterling. It's based on facts, not emotion.

theoakman says

As per deficits, spoken like a true Keynesian.

It's a beautiful philosophy... If the economy recovers, claim success regardless of the degree government "stimulus" affected it. If the economy doesn't recover, simply claim that not enough was spent. Like many of Freud's theories, it's a blanket approach - covers all circumstances.

This great recession really scared lots people.

I bet they are buying guns, gold and bottle water.
This explains why the bottle water is more expensive than milk and orange juice :)

ZippyDDoodah says

Previously federal employeed did not pay into SS.

That's because they used to pay into a system just like social security that predated it by over 30 years -- a system that SS was based on. In 1984 they folded the old system into SS.

ZippyDDoodah says

Do these govt employees who pay SS, are they able to collect SS benefits + govt. pension, or only SS like the rest of us in the private sector?

Why on earth do you think private sector employees "only" get to use SS? I have an excellent private retirement plan from my private employer -- 50% match on my 401(k). Some people still get pensions, though that's pretty rare these days.

And, yes, many public sector employees (the unionized ones in general) do have separate pensions in addition to social security, and they pay into them.

This isn't exactly hard information to find.

Why on earth do you think private sector employees “only” get to use SS? I have an excellent private retirement plan from my private employer — 50% match on my 401(k). Some people still get pensions, though that’s pretty rare these days.

Congrats. That comes out of private money, not taxpayers' and that's a huge difference. Also, you can't collect on that $$ at age 50 without massive penalties, can you? The main problem, which you appear too dishonest to address, is that public pension recipients are taking out FAR more than they contribute, and average taxpayers are being asked to foot the difference.. Which means 68 yrs olds asked to continue to work so that govt. retirees can enjoy 90% of their peak earning years starting at age 50 or 52. It's absurd beyond belief, and like in Greece, it's bankrupting our country. Earlier you made the assertion that 90% pension payouts after 30 yrs were uncommon for govt. employees. Yet the 90% payout, or a percentage very close to it, is common. I cited an example upthread.

It's not like that information was exactly hard to find asswipe

ZippyDDoodah says

Congrats. That comes out of private money, not taxpayers’ and that’s a huge difference

Oh, it gets worse. Did you know that their SALARIES and BENEFITS come out of tax dollars? You'd almost think that they were employees of the government or something!

ZippyDDoodah says

The main problem, which you appear too dishonest to address, is that public pension recipients are taking out FAR more than they contribute, and average taxpayers are being asked to foot the difference..

If you have a problem with the way that a public employer chooses to compensate its employees, why not vote for people who will change it? If you can't find someone who will, why not run your self?

ZippyDDoodah says

Earlier you made the assertion that 90% pension payouts after 30 yrs were uncommon for govt. employees. Yet the 90% payout, or a percentage very close to it, is common. I cited an example upthread.

Yes, you found an example. That still doesn't make it common. I can find an example of a giant idiot posting on a forum, but that doesn't necessarily make it common.

Here's some more competition; I have to admit, this one left me speechless. The 3/2 (1186 sq.ft.) at 2386 Krueger Dr, Concord, CA is renting for $1,595 (with a half month free rent incentive); it was recently renovated. I expected to see a long time owner with deep pockets and a low cost basis. But no, it was bought in 2005 for $480k and was financed to the tune of $350k by an outfit called Najarian Loans. The current zestimate is around $245k. There appear to be subsequent refies. Wow, talk about a money pit; that is one expensive mistake. Maybe it will cash flow for his kids...

OMG! The bathroom is like- ick!

Better to get someone in there to pay the utillities than put up with looters. Indeed a money pit, but it looks like that's as deep as they could dig it.