High Five vs High Three

[James48843]

There is a good article outlining what the impact would be on retiring with a "high five" calculation vs. a "high three" as is present:

http://www.fedsmith.com/article/2618/financial-impact-salary-freeze-retirement-computation-change.html

I would point out- that in 1984, when we had the last big changes to prop up the buget, they changed from CSRS to FERS, and upped the retirement age for social security by two years. (from age 65 to age 67), and went from a retirement based on the "high one" to a "high three".

Here we are 25 years later, and we're about to do it all over again . Worse retirement pay, a decade of flat stocks, and we're about to enter a time of deflation.

10 more years to go. Ugh.

[felixthecat]

This article points to something I really don't get...if a CSRS and FERS employee both make 100,000 a year before retirement....why would there be such a drastic difference in retirement pay for CSRS $58,818 and a FERS retiree (1% factor) would receive $31,370?

Is this correct in the article? Obviously the CSRS retirement looks sweeter bases on this article. I know the FERS has the thirft savings, but that is mainly based on what a person puts into their future retirement. If they don't put much into the thrift savings...then this is quite stunning.

What am I missing here? :blink:

[James48843]

yes Felix, that is correct.

CSRS people don't get social security benefits.

FERS people do.

they developed FERS in 1986 to reduce the cost to the government of the retirement benefits of people.

FERS was desiged to save the government money, and to make FERS employees save for their own retirements. Hence the TSP matching funds.

IF the stock market does well, and IF the employee socks away at least 10% per year for full matching funds and full funding, their combined FERS and TSP and Social Security should meet or exceed the old CSRS numbers. But that means they MUST save for their own retirement with FERS and TSP.

Unfortunately, some employees don't understand that THEY are responsible for their own futures now.

[WorkFE]

James,
Correct me if I'm wrong but when calculating all three legs of the FERS employee the offset would be much closer correct?

[James48843]

That's what I said:

...their combined FERS and TSP and Social Security should meet or exceed the old CSRS numbers.

IF a person saves at least 10% of their salary into the TSP, and IF the stock market performs at historic returns (7 to 8% annually over the long run) and IF Social Security is still there when someone turns AGE (whatever it will be by then...65/67/..and now they are talking age 69 possibly...) then FERS + TSP + SSI should equal or exceed CSRS .


The trick is betting that the stock market remains solid, and the person invests in stocks instead of just "G" that whole time, and that Social Security will be there when they will get there.

Long shots, no?

[alevin]

I am no longer counting on SS myself, and I've got 11-13 years to go yet. Ugh. at least the house is paid off and I'm finally socking $ into TSP full 15% to make up for a few years I only put in 5% while paying off the house. and working on the Roth.

Might actually recoup cost of added house insulation via reduced utility bills within a few years, now that the house is fully insulated. I calculated my November cost difference in kilowatts per degree the other day when paid my electric bill-approximately a 45% reduction in kilowatts per degree last month.

Cost/kilowatt is reduced 2% this year from last year-but supposed to go back up 8% next year, so the reduced heating needs in terms of kilowatts/degree was definitely timely.

Yippee! that means those $ can go towards retirement now too-or help offset increased food/gas costs.

[WorkFE]

Sorry James, did not see your entire post for some reason.

[Steel_Magnolia]

they developed FERS in 1986 to reduce the cost to the government of the retirement benefits of people.

FERS was desiged to save the government money, and to make FERS employees save for their own retirements.
Yes, FERS was developed for three reasons: savings to government, more hands-on responsibilities for employees, and retirement portability.

But like so many government programs it hasn't worked as envisioned. Yes, because of TSP and Social Security, the system is more portable than CSRS. But the pay-off envisioned by making the system more hands-on has not been realized because they missed the education piece.

And the savings to the government was the biggest miss in the FERS program. In most of the 1990's I was in a position that used rangers to accomplish some of my department's duties. As department head I had to keep a handle on the budget. When figuring personnel costs, I figured 7.5% for benefits if the employee was CSRS and 35% for benefits if the employee was FERS. We never could figure out why there was such a disparity in benefits costs.

But for a few years if hiring came down to one CSRS employee and one FERS employee, my agency hired the CSRS employee almost every time because of the difference in personnel services cost.

Was it the same in your agency in the 1990's?

Maggie

[Mike]

we're about to enter a time of deflation.
As long as we use fiat currency that can be created out of thin air by educated-yet-idiotic-and-reckless bearded men, all roads lead to inflation, not deflation.

[James48843]

The National Commission on Fiscal Responsibility is now talking about their plans and cuts on C-Span-3

http://www.cspan.org then click on cspan3

Among the proposals- raising the social security age to 69, cuts of almost ALL deductions on tax policy.


Here is a link to their plan:
http://www.cspan.org/pdf/debtCmsn120110.pdf

It needs 14 votes out of 18 members in order to move forward in Congress. They are talking about voting on Friday.

[James48843]

Here are some of the anti-federal worker proposals:


YOU are the target in many of these proposals:

10262






Mandatory Savings: Cut agriculture subsidies and modernize military and civil service retirement systems, while reforming student loan programs and putting the Pension Benefit Guarantee Corporation on a sustainable path.

1.10.3 Impose a three-year pay freeze on federal workers and Defense Department civilians. Out of duty and patriotism, hardworking federal employees provide a great service to this country. But in a time of budget shortfalls, all levels of government must trim back. In the recent recession, millions of private sector and state and municipal employees had their wages frozen or cut back, and millions more lost their jobs altogether. In contrast, federal workers’ wages increase annually due to automatic formulas in law, providing them with cost-of-living-adjustments totaling more than five percent in the last two years. This proposal would institute a three-year government-wide freeze on federal pay at every government agency, including the Department of Defense civilian workforce. This proposal will save $20.4 billion in 2015.

1.10.4 Reduce the size of the federal workforce through attrition. The federal government currently employs about two million people, and extends federal staffing through thousands more contractors. Washington needs to learn to do more with less, using fewer resources to accomplish existing goals without risking a decline in essential government services. Over time, the Commission recommends cutting the government workforce – including civilian defense – by 10 percent, or by 200,000. As part of the transition to a smaller, more efficient workforce, this would mean hiring only two new workers for every three who leave service. This proposal will save $13.2 billion in 2015

1.10.5 Reduce federal travel, printing, and vehicle budgets. Despite advances in technology, federal travel costs have ballooned in recent years, growing 56 percent between 2001 and 2006 alone. Government fleets, meanwhile, have grown by 20,000 over the last four years. Printing costs are still higher than necessary despite technological advancement. We propose prohibiting each agency from spending more than 80 percent of its FY 2010 travel budget and requiring them to do more through teleconferencing and telecommuting. We also recommend a 20 percent reduction in the nearly $4 billion annual federal vehicle budget, excluding the Department of Defense and the Postal Service. Additionally, we recommend allowing certain documents to be released in electronic-only form, and capping total government printing expenditures. This proposal will save $1.1 billion in 2015.

1.10.6 Sell excess federal real property. The federal government is the largest real property owner in the country, with an inventory of more than 1.2 million buildings, structures, and land parcels. Holding this unneeded property carries maintenance costs and forgoes the opportunity to sell potentially valuable property. We propose directing the GSA to loosen agency restrictions associated with selling unused buildings and land. This proposal will save at least $100 million in 2015.

3.3.13 Pilot premium support through FEHB Program.
(Saves $2 billion in 2015, $18 billion through 2020)
The Commission recommends transforming the Federal Employees Health Benefits (FEHB) program into a defined contribution premium support plan that offers federal employees a fixed subsidy that grows by no more than GDP plus 1 percent each year. For federal retirees, this subsidy could be used to pay a portion of the Medicare premium. In addition to saving money, this has the added benefit of providing real-world experience with premium support.


RECOMMENDATION 4.1: REVIEW AND REFORM FEDERAL WORKFORCE RETIREMENT PROGRAMS. Create a federal workforce entitlement task force to re-evaluate civil service and military health and retirement programs and recommend savings of $70 billion over ten years.
Military and civilian pensions are both out of line with pension benefits available to the average worker in the private sector, and in some cases, out of line with each other across different categories of federal employment. The Commission recommends a federal workforce entitlement review to analyze civil service and military retirement programs in order to 1) Make program rules more consistent across similar programs, and 2) Bring both systems more in line with standard practices from the private sector. The review will have a ten-year savings target of $70 billion; recommendations of the task force would receive fast track consideration in Congress. Examples of program design reforms that the task force should consider include:
Use the highest five years of earnings to calculate civil service pension benefits for new retirees (CSRS and FERS), rather than the highest three years prescribed under current law, to bring the benefit calculation in line with the private sector standard. (Saves $500 million in 2015, $5 billion through 2020)

Defer Cost of Living Adjustment (COLA) for retirees in the current system until age 62, including for civilian and military retirees who retire well before a conventional retirement age. In place of annual increases, provide a one-time catch-up adjustment at age 62 to increase the benefit to the amount that would have been payable had full COLAs been in effect. (Saves $5 billion in 2015, $17 billion through 2020)


Adjust the ratio of employer/employee contributions to federal employee pension plans to equalize contributions.
(Saves $4 billion in 2015, $51 billion through 2020)

RECOMMENDATION 4.10: GIVE POST OFFICE GREATER MANAGEMENT AUTONOMY
The Postal Service has run multi-billion dollar losses since 2007, and in 2010 maintained an operating deficit of $8.5 billion, even after receiving a $4 billion bailout from Congress the previous year. With the dramatic expansion of electronic mail, the volume of traditional air-mailed items will continue to fall, only worsening these enormous budget shortfalls and requiring even more federal funding in the future. To put the Postal Service on a path toward long-term solvency, the Commission recommends reversing restrictions that prevent the Postal Service from taking steps to survive – such as shifting to five-day delivery and gradually closing down post offices no longer able to sustain a positive cash-flow.

[James48843]

http://www.gonzotimes.com/wp-content/uploads/2009/02/vaseline_20368g_20l_profile.gif

[Steel_Magnolia]

Yeah, we're going to need the petroleum jelly and I'll bet we don't even get a kiss. :(

[Buster]

To show the ridiculousness of this whole article..this proves it by the example ;




Defer Cost of Living Adjustment (COLA) for retirees in the current system until age 62, including for civilian and military retirees who retire well before a conventional retirement age. In place of annual increases, provide a one-time catch-up adjustment at age 62 to increase the benefit to the amount that would have been payable had full COLAs been in effect. (Saves $5 billion in 2015, $17 billion through 2020)




Hey Dumbasses..The retiree hasn't got a COLA for two years now...DUH!:rolleyes:

[WorkFE]

Well that makes the math easy. Zero carried forward = zero

[alevin]

Umm, did anyone notice the part about FEHB defined contributions "subsidy?" I sure did.

[Steel_Magnolia]

Umm, did anyone notice the part about FEHB defined contributions "subsidy?" I sure did.
Yeah, none of it was good but that was the piece that made my eyes pop. :( Pretty scary to contemplate.

[Mike]

It's sad yet comical how strong the entitlement mentality is in some people.

Lest some of you forget, we have a trillion dollar deficit. We have a debt that is approaching our GDP. These things must be brought under control, or investors will lose confidence in the country's ability to repay its debt and will demand higher yields on US treasuries. That means soaring interest rates, costlier loans for cars and homes, and an explosion in the cost to service the debt.

The only solution to this gigantic problem is to increase revenue (raise taxes) and cut costs (cap or cut benefits and spending in all federal programs / agencies). As a country, we've lived high on the hog for too long, and it's now time for all of us to make sacrifices to correct this long-running problem of overspending.

I'm sick and tired of people claiming to care about restoring fiscal sanity yet when it comes time to make the hard decisions, they scream bloody murder if *their* taxes are raised or if *their* benefits/programs are cut. Do you really want to cling to your cushy benefits and pay at the expense of the country? Are you really that selfish and short-sighted?

In WWII, many gave their lives for the greater good. Now, all we are being asked to do is make a bit of a financial sacrifice (and unlike many in the private sector, we aren't being laid off). The fact that so many are so vocal in opposition to this and are unwilling to do their part is flat-out sickening.

I welcome the pay freeze and the caps on benefits. These things are long overdue. I'm sure I'm in the small minority saying these things as a federal employee.

[Warrenlm]

Re FEHB.....How about this new approach...retirees are about to experience the "real world" and the subsidy will pay a portion of the medicare premium?

For federal retirees, this subsidy could be used to pay a portion of the Medicare premium. In addition to saving money, this has the added benefit of providing real-world experience with premium support.

Did anyone see anything taking retirees out of the "active emplyee" status in FEHB and placing them in Medicare B?

[Warrenlm]

YOU are the target in many of these proposals

Including you, young man, and YOU advocated enlarging the deficit and debt to expand the welfare state.

[James48843]

It's sad yet comical how strong the entitlement mentality is in some people.

Lest some of you forget, we have a trillion dollar deficit. We have a debt that is approaching our GDP. These things must be brought under control, or investors will lose confidence in the country's ability to repay its debt and will demand higher yields on US treasuries. That means soaring interest rates, costlier loans for cars and homes, and an explosion in the cost to service the debt.
....

Lest some of you forget, that if we simply let the Bush tax cuts expire, and stop spending on the two wars we are engaged in, we would have a balanced budget.

It's that easy. Let them expire, and bring our soldiers back within our borders.

[WorkFE]

It's sad yet comical how strong the entitlement mentality is in some people.

I'm sure I'm in the small minority saying these things as a federal employee.

I believe you disrespect alot of folks here on this MB and you read well but don't hear Jack. "(and unlike many in the private sector, we aren't being laid off)" Strap up brother I've been there. Took a minimum wage job +2 to get the bills paid and will do it again when the time comes.

"entitlement mentality" No I believe most just want the taxes, cuts, freezes and everything else to be well thought out and fair. Not targeted for political points.
Have a great day Mike

[Nate]

The only solution to this gigantic problem is to increase revenue (raise taxes) and cut costs (cap or cut benefits and spending in all federal programs / agencies)
Im no economist, but I can guarantee quite literally, this is not the only solution. Nowhere near all agencies & programs need to be cut, and im a conservative. Just trim the pork.

bring our soldiers back within our borders. And speaking of borders......I didnt choose to fight in Iraq just to come home to a war on my own border. Millions of illegals taking jobs, driving wages down on those jobs in effect making them claimed to be jobs "most americans that dont want to do", then send the "untaxed" currency out of the country out of our economical circullation.... not to mention what its costing our medical and legal system. "Factories are overseas, production is going to be focused on expensive new "green" projects, high-speed trains & the like....global warming hoax, pork pork pork.
I say secure the borders, illegal is clearly in the dictionary, give them a time frame to apply for a visa, then deport. Bring the factories home, charge higher taxes for imported goods....make the correct tax incentives so that its cheaper to manufacture in the US once again.

[Steel_Magnolia]

Mike, the sky is not falling. Take a deep breath.

While I do appreciate your concern, there are ways to address this problem. James just expressed some IMHO excellent options. There are others too. They can even take my home mortgage interest exemption. But when they start playing with the retirement fund they are changing the rules of the game. It's very tricky to try to plan a retirement with financial security when they tell you you're playing chess but they promised you going in that it was checkers.

I'm already retired so I don't have a dog in the hunt. But fair is fair. And for the record, widened eyes doesn't equate to entitlement mentality.

But you're okay in our book anyway, dude. Thanks for popping in on us. We need you to stick around more often.

Maggie

[WorkFE]

It's very tricky to try to plan a retirement with financial security when they tell you you're playing chess but they promised you going in that it was checkers.

Some folks have more reaction time to adjust plans than others. Landing on your head is not a bad thing, you get used to it:laugh:

[Steel_Magnolia]

Some folks have more reaction time to adjust plans than others. Landing on your head is not a bad thing, you get used to it:laugh:
Yeah, that's true. :cheesy: But I just hope that they give people time to get a helmet on before they dump them on their heads.:rolleyes:

[Aviator_Guy]

There is a good article outlining what the impact would be on retiring with a "high five" calculation vs. a "high three" as is present:

I would point out- that in 1984, when we had the last big changes to prop up the buget, they changed from CSRS to FERS, and upped the retirement age for social security by two years. (from age 65 to age 67), and went from a retirement based on the "high one" to a "high three".

Here we are 25 years later, and we're about to do it all over again . Worse retirement pay, a decade of flat stocks, and we're about to enter a time of deflation.

10 more years to go. Ugh.

I just hope they don’t tamper with the (22.5K) max employee contributions per year for those over age 50. I’m 53 and according to my FERS calculations, my FERS annuity and SSA retirement annuity are almost irrelevant if I can continue to work until the SSA retirement age 67. My TSP savings are quickly moving to the top of my income streams when I retire. My realistic goal is 1 to 2.5 M from age 56-67. :cool::cool:

[alevin]

Congrats. I'm same age and hoping and praying to achieve 30-50% of your estimate by age 65-66.5. My retirement life will be pretty basic to extremely basic if any of the 3 legs are missing.

[Steadygain]

Congrats. I'm same age and hoping and praying to achieve 30-50% of your estimate by age 65-66.5. My retirement life will be pretty basic to extremely basic if any of the 3 legs are missing.

Alevie, my darling little sister and good friend !!

You will be good -- so long as there are not Global and widespread sweeping changes that defy everything we'd ever known so far.

Those changes are NOT likely to happen during 'our remaining years' - but they are simply beginning to take place.

Your house is paid in full -- and that is usually the biggest expense. If anyone knows how to live simply and humbly - YET Happily and be content -- it is you.

All the widespread FEARS have been shouted over and over in the generations before us -- and in the bigger picture -- we are good !!

[alevin]

Thank you Steady, my good friend. You're always good for a morale boost on this subject.

[Steadygain]

Thank you Steady, my good friend. You're always good for a morale boost on this subject.

It's from the heart and I just try to KEEP IT REAL !!

Millionaires are all over the place Alevie --- I mean really and for some very crazzzzy reason -- we come to think we'll need a few M to get by.

We NEVER -- NEED (and here the stress is Need) that much -- Never.


Look at Birch -- he's got Ms (plural) - yet he's checking his wifes' tires and making sure he gets his money's worth -- and doing everything possible to maintain and enjoy what he's always known.

There is no way in hell - his daughter is going to let him give her a bunch of money --- so he's saving it up for grandchildren that are YET to come.


If you force yourself to drive $60,000 (+) cars, and stay at 5 Star exclusive places every where you go --- and spend thousands every week on body wraps and massage and pedicures and all....

...have regular outings with the Country Club Ladies and go to the Dining Places that cater to those types ....

then you would 'cease to be my sister' and I wouldn't know you.


Enjoy the LIFE you have and be grateful you are REAL and that the River has its place and spending time with a Vietnam Vet and helping a neighbor is more rewarding than being 'plastic' and empty.

You're wonderful the way you are -- having too much money can mess people up -- so be careful what ya wish for.

Always there for ya !

Steady

[alevin]

Steady, dear friend, the lifestyle I live now, is based on my net takehome after all the paycheck subtractions. If I am to maintain the middle middle class lifestyle I have now, I will have to do substantially better in tsp between now and 66-if I had to live on tsp alone in my retirement years even with the projected optimistic balance, I'll be living a pretty pinched lifestyle comparatively speaking, not much better than if living on unreduced SS alone. I will need a minimum of 2 legs of my little stool, but it'd be a balancing act even then.

[Steadygain]

I understand that -- totally -- and thanks for allowing this open discussion.


You know there is something far above all of this and 'The Balancing Act' is (and always has been) a driving force to make 'us' what we are.


For NOW -- let's deal with today -- and live one day at a time.


Tomorrow we can drive down to FL and slice some of Birch's tomatos and have a BLT ;)

[alevin]

I understand that -- totally -- and thanks for allowing this open discussion.


You know there is something far above all of this and 'The Balancing Act' is (and always has been) a driving force to make 'us' what we are.


For NOW -- let's deal with today -- and live one day at a time.


Tomorrow we can drive down to FL and slice some of Birch's tomatos and have a BLT ;)

Yep, blue skies over me, nothing but blue skies do I see. Let's go see Birch, I hear he grows better tomatos than I do this time of year (bet they aren't heirlooms tho):toung:

[WorkFE]

http://www.myfoxorlando.com/dpps/news/offbeat/spanish-woman-claims-she-now-owns-sun-dpgonc-20101126-gc_10808147

You may want to wish for some clouds. The sun is going to get expensive. :D

[James48843]

http://www.myfoxorlando.com/dpps/news/offbeat/spanish-woman-claims-she-now-owns-sun-dpgonc-20101126-gc_10808147

You may want to wish for some clouds. The sun is going to get expensive. :D

She's too late.

Icarus already filed for it long, long ago.


http://www.littlegreenfootballs2.com/wp-content/uploads/icarus_72.jpg

[WorkFE]

No matter I am not paying either one of them $H!T.
In fact I'm thinking about filing a law suit for burning my Lawn.:laugh:

[SkyPilot]

It's sad yet comical how strong the entitlement mentality is in some people.

Lest some of you forget, we have a trillion dollar deficit. We have a debt that is approaching our GDP. These things must be brought under control, or investors will lose confidence in the country's ability to repay its debt and will demand higher yields on US treasuries. That means soaring interest rates, costlier loans for cars and homes, and an explosion in the cost to service the debt.

The only solution to this gigantic problem is to increase revenue (raise taxes) and cut costs (cap or cut benefits and spending in all federal programs / agencies). As a country, we've lived high on the hog for too long, and it's now time for all of us to make sacrifices to correct this long-running problem of overspending.

I'm sick and tired of people claiming to care about restoring fiscal sanity yet when it comes time to make the hard decisions, they scream bloody murder if *their* taxes are raised or if *their* benefits/programs are cut. Do you really want to cling to your cushy benefits and pay at the expense of the country? Are you really that selfish and short-sighted?

In WWII, many gave their lives for the greater good. Now, all we are being asked to do is make a bit of a financial sacrifice (and unlike many in the private sector, we aren't being laid off). The fact that so many are so vocal in opposition to this and are unwilling to do their part is flat-out sickening.

I welcome the pay freeze and the caps on benefits. These things are long overdue. I'm sure I'm in the small minority saying these things as a federal employee.

These are not "entitlements", but rather Earned Benefits. Our benefits are not "welfare" doled to us, but rather compensation remunerated per agreements.

So many confuse the issues in this regard.

[Viva_La_Migra]

She's too late.

Icarus already filed for it long, long ago.


http://www.littlegreenfootballs2.com/wp-content/uploads/icarus_72.jpg
Great Iron Maiden song. :D

[Birchtree]

Are you sure that wasn't Iron Butterfly?

[Buster]

it was Smash Mouth

LQj--Kjn0z8

[Mike]

Lest some of you forget, that if we simply let the Bush tax cuts expire, and stop spending on the two wars we are engaged in, we would have a balanced budget.
Overly simplistic and way way off: http://www.reuters.com/article/idUSN1415708320100114 - FY 2010 combined spending for Iraq and Afghanistan operations = $136.8 billion. While significant, that's not even 15% of the deficit we have. In fact, the total cost of the conflicts since 2001 is a hair shy of our current annual deficit. On the tax side, according to this: http://www.nytimes.com/interactive/2010/11/13/weekinreview/deficits-graphic.html the revenue netted by letting all of the Bush tax cuts expire is $226 billion (for 2015).

It's that easy. Let them expire, and bring our soldiers back within our borders.
It isn't that easy. If it was, would Obama have bothered with appointing a commission to look at the long-term funding problem our government has? Even if we do what you suggest, all else staying the same, we are over $600 billion short of a balanced budget. The system as it currently exists is unsustainable. Period.

Kudos to the commission for having the balls to step up to the plate and propose a solution to a problem Congress has been unwilling to address.