Mom's retirement plan = investment for me?

[Ed Miller]

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Thanks, DC, for articulating why this is definitely neither a "no brainer" nor "obvious."

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It's definitely not a no brainer. My first reaction when I heard about my mom's option was "no brainer" also, but then I thought about it more and talked about it with Clark, and it's definitely not a no brainer.

The scary thing about it is that if her mom lives to be 100, she could be royally screwed (though an extra $500/month might not make an enormous difference in that case).

BTW, the plan has an annual cost of living increase capped at 2%/year.

Fortunately, in 40 years, Elaine and I plan to be filthy rich and capable of supporting four 100+ year old parents and a full-service peacock farm.

[buffett]

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Elaine and I plan to be filthy rich and capable of supporting four 100+ year old parents and a full-service peacock farm.

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No geese?

[ElaineMonster]

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BTW, the plan has an annual cost of living increase capped at 2%/year.


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More fun for this mathematical adventure:
Even with the 2% cap, there's something in the plan that assures that my mom maintains 80% of the purchasing power of her original benefit amount.

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Fortunately, in 40 years, Elaine and I plan to be filthy rich and capable of supporting four 100+ year old parents and a full-service peacock farm.

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Ed is exaggerating again. The peacock farm will be self-serve.

[DesertCat]

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More fun for this mathematical adventure:
Even with the 2% cap, there's something in the plan that assures that my mom maintains 80% of the purchasing power of her original benefit amount.


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This is a california state employee, pension, right? Is there any concern whether california can afford to pay all of it's pension promises? I.e. San Diego as an example.

Very soon the accounting standards folks will be updating how local governments account for pensions, and it's expected to expose many municipalities as having huge, previously unreserved pension liabilities. There are two ways out, large tax increases, or bankruptcy to reject the excess pension commitments.

I don't know if states will be subject to these rules, but the rules don't create the problems, they will just be shining a bright light on a some problems that have been well hidden. No matter whether your pension is public or private, the ability of the former employer to pay all it's promises should be a strong consideration when you make these plans.

I can't handicap the odds of anything bad happening to your moms pension. If you thought it was a reasonably likely event within the next twenty years, you'd want to maximize the payout now. Sorry I come off as a negative ninny, good luck and best wishes.

[ElaineMonster]

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This is a california state employee, pension, right? Is there any concern whether california can afford to pay all of it's pension promises? I.e. San Diego as an example.


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Yup, California PERS. Hence my concern:
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My mom works for the government, so her retirement plan is already being sucked dry by the Terminator. It shouldn't affect her so long as she cashes in now, but her younger colleagues are screwed.

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To be honest, I had the same concern about Ed's mom since Louisiana is making all sorts of promises to their residents that they simply can't afford to keep.

Ultimately I think I'm going to encourage my mom to take her entire benefit.

She gave the city 25 years of her life, truly beleiving she was a public servant. She refused private sector offers of employment that paid more because she felt she could be less biased and do more good by staying where she was. She derserves the full benefit now.

[Sniper]

ok.. having given this some more thought... one more curveball (and one clarification) to add to the equation...

Do you think that you can manage your portfolio to achieve market beating returns in the long term?

On the other side of the equation, you've mentioned COL adjustments, does that also mean that your (and sister) payouts will be 50% of your mothers monthly at that time, and your payout will also increase based on the same COL adjustment rules?

[LittleOldLady]

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This is a california state employee, pension, right? Is there any concern whether california can afford to pay all of it's pension promises? I.e. San Diego as an example.


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Yup, California PERS. Hence my concern:
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My mom works for the government, so her retirement plan is already being sucked dry by the Terminator. It shouldn't affect her so long as she cashes in now, but her younger colleagues are screwed.

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To be honest, I had the same concern about Ed's mom since Louisiana is making all sorts of promises to their residents that they simply can't afford to keep.

Ultimately I think I'm going to encourage my mom to take her entire benefit.

She gave the city 25 years of her life, truly beleiving she was a public servant. She refused private sector offers of employment that paid more because she felt she could be less biased and do more good by staying where she was. She derserves the full benefit now.

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I am not as concerned about Louisiana defaulting as maybe I should be because Mary Landrieu put the Louisiana pension funds on a sound footing when she was state treasurer. Now as to whether they will stay that way....I just looked up the figures, and the unfunded liability in my pension fund (Louisiana has 13) has been diminishing steadily over the years and is shortly going into the black--although how Katrina and Wilma have affected that I don't know, the figures not of course being that up to date.

Besides which the Louisiana elected officials have a cushy pension deal, and they are not likely to default on that.

I suppose that if Louisiana did default, I would get my full Social Security back--but maybe not. It won't be a whole heck of a lot in any case, but I resent not being able to collect the pension I earned by working at non-Louisiana state jobs, just because I also worked for the state of Louisiana.