<p>Are we talking safe withdrawals?
I like 2.5 percent…</p>
<p>I like 2 percent better but I am a little more conservative. :)</p>
<p>So some people who followed the 4 percent rule are already screwed. So much for simulations.</p>
<p>"In today’s lasting low-return environment—and with the U.S. economy possibly taking a back seat to other parts of the world for decades to come—more recent studies suggest the safe withdrawal rate is more like 2.5%. Still, the 4% rule is deeply ingrained, and financial planners say it remains a valuable rule of thumb.</p>
<p>The rule states that each year you can withdraw 4% of a portfolio’s value, raising the annual withdrawal amount by 3% to account for inflation, and be confidant that your money will last through 30 years of
retirement. This rule, based on a mix of 60% stocks and 40% bonds, was popularized in the 1990s when markets were roaring. It was back tested through modern U.S. market history.</p>
<p>The investment firm T. Rowe Price gave the 4% rule another look, beginning with a retirement date of Jan. 1, 2000. It found that the Internet bust and financial crisis would have laid waste to the finances of anyone practicing the 4% rule since that date. If you had retired on that date with a portfolio of 55% stocks and 45% bonds and begun withdrawing 4% a year (plus inflation), your portfolio would have fallen by a third over 10 years. You would have only a 29% chance of your money lasting 30 years"</p>
<p>A friend of mine retired with a pension of 180,000 after working for the govt for over 30 years. Sounds high. It is about 70 percent of the salary over the last few working years. It is closer to 50 percent of the true pay. </p>
<p>If this person worked in the private sector, this person would have made about 1 million a year. </p>
<p>The govt got a great deal with this person. That means taxpayers got a great deal. This person made a lot of money for the state…</p>
<p>We rarely get the full picture of what really goes on…</p>
<p>People look at the headlines… 6 figure pension and freak out…</p>
<p>I don’t know about the monte carlo simulations used for that 4% rule but usually these simulations assume certain distributions over a set of variables and then randomly pick from variable values and run them. They frequently do not contain a worse case scenario which would consist of running the simulation with each worse case for each variable together.</p>
That’s not a very generous plan then… in MA it would be at least 62%.</p>
<p>
Like the guy at the MBTA who retired after 23 years at age 48 with his full pension of $130K/year and immediately got a nice job working for the pension fund at another $225K/year?</p>
<p>But, since the MBTA’s pension fund is “private” even though they get hundreds of millions in public funding every year, nobody really knows what kind of egregious double-dipping is going on.</p>
<p>Governor Patrick recently asked for a huge tax hike but was recently embarrassed over a high-paying employee that was moonlighting (may have been a no-show job). She lived in New Haven but worked in Boston. How’s that for a commute? She resigned of course. A good chunk of the tax hike is to shore up the MBTA’s finances.</p>
<p>Another area is the Turnpike Authority. The benefits for toll-takers are monstrous compared to what we pay for toll-takers in NH. And then there’s Mayor Menino’s son.</p>
<p>But those situations are used to say the regular guy has to fat a pension which is just not true. I will also say it again the pension funds where that goes on in NJ are adequately funded but it is the teachers that are blamed. None of those things exist for teachers.</p>
<p>Notrichenough after years as a teacher in NJ the max is 45% going to 41% for a recently hired teacher. Spousal benefits would lower that.</p>
<p>BTW, the MWRA was a dumping ground for patronage jobs too. I don’t know if there were pension abuses too but there were a lot of highly paid marketing positions created there. Why do you need a lot of marketing people to do water and sewer? The amounts of money that went through that place - people were screaming about their water and sewer rates for a long time. My mother was very happy that she didn’t have city sewer - it saved her a ton of money.</p>
<p>I read the first page and my eyes had trouble with the double-spaced type. It looks interesting but I think that most would prefer the Readers Digest of that.</p>
<p>It sounds like legislation is a little on the loosy-goosy side. This is not surprising considering how legislatures are constructed.</p>
<p>I was involved with lobbying lawmakers in NH several years ago on home education issues. You had a bunch of people from a variety of backgrounds that really didn’t know a lot about homeschooling, history, practice, impact of laws, etc. Yet they were going to establish rules that could have major impacts on families. There were also other vested interest groups (teachers unions, superintendents, etc.) that were pushing in the other direction. Basically we’ve also done a show of force at the State House which has been effective in the past.</p>
<p>The main thing is that legislation is messy and often done in the absence of anything resembling deep analysis and understanding of future impacts which is why we often have to go back and fix laws when they injure innocent parties.</p>
<p>I don’t know if you can fix this. The lack of expertise on a lot of issues by lawmakers isn’t really solvable as lawmakers can’t be experts on everything that they have to deal with. This is assuming that they have the public’s best interest at heart which we know isn’t generally true as most have reelection on their minds.</p>