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401K vs pension plans - West Virginia teachers win the right to go back

Discussion in 'Finance and Investment' started by mshheaddoc, May 26, 2008.

  1. mshheaddoc

    mshheaddoc Howdy Moderator Emeritus 15+ Year Member

    Apr 24, 2002
    Wild west of Mistytown
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  3. IceMan0824

    IceMan0824 Holy crip, he's a crapple 5+ Year Member

    Dec 7, 2006
    With a pension plan that generous, why would any of the teachers care to leave it.

    The pension pays out $2500 a month, which equates to $30,000 a year. If we imagine that I want my 401(k) to give me such income at retirement (and assuming a safe withdrawal rate of 4%), I would need $750,000 in my 401(k).

    This $2500 a month is paid by the pension for a worker who works for 30 years at an average salary of $50,000 or $1,500,000 (1.5 Million) over the his/her work life . For this worker to have that amount in his 401(k), he/she would have to save 50% of his/her salary (I am assuming of course that there are no gains, no compounding interest, or match).

    Even if we add in gains, compounding interest and a match, the teachers would have to save a high percentage of their salary just to keep up with the overly generous pensions plan.

    Hell yea, give me the pension each and evey time, that is until the pension runs out of money and West Virginia can't pay it teachers and retirees.

    Then it becomes a new game of who to blame, the teachers who bled the system dried even when the good people (investment managers) told them that the payout was not sustainable, or the investment managers who couldn't beat the system each and every time and screwed over the good working people (teachers).

    Hmm, kinda reminds me of another current problem this nations has. Something about security in our social society.
    Last edited: Jun 4, 2008
  4. IceMan0824

    IceMan0824 Holy crip, he's a crapple 5+ Year Member

    Dec 7, 2006
    Sorry to repost, but I just had to share this

    Never mind to the constant reference in the article to the state's pension plan being underfunded to handle its obligation. Never mind that the 401(k) style plan was enacted to try to avert the problem. This should not cost any more money, it will just magically appear when we need it. Heck, the state would probably just print more money and send it to us.

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