Friday, March 10, 2017

Puerto Rico teachers' pension crisis is a cautionary tale for a lot of public workers


Mary Williams Walsh has a disturbing front page story in the New York Times Friday, “Pension crisis in Puerto Rico fleeces young” . The article focuses particular on the teachers’ fund.

Teachers were excused from Social Security FICA contributions and the “cash value” (so to speak) of their contributions did not begin to accumulate until late in their careers.

The article describes it as a legal Ponzi scheme.



Puerto Rico has had a minor effect on the portfolios of retirees who have moved into bonds for more stability.  But it certainly sets a bad example.  The story is also cautionary to public employees who may have outdated arrangements that seem to end-around social security taxes.

The conservative National Review, in a stinging article by Ike Brannon and Logan Albright, writes, “Puerto Rico is using a phony pension crisis to sabotage reform”.
 
Wikipedia attribution link for p.d. map of the territory.  I have never visited it, but it was a popular “gay” destination from NYC in the 1970s.

Sunday, March 05, 2017

New York Times "Retirement" insert today makes some potentially controversial recommendations (term instead of whole life)


The Sunday New York Times (March 5, 2017) has a special business insert section, “Retirement, with many current articles by Kerry Hannon and others.

The focus of the whole section is the longer life expectancies, especially for women, compared to shrinking retirement social nets provided by employers.

Of particular interest is the column Life Stages, on p. 5.   It recommends that breadwinners, by the time they are in their 40s, buy term life insurance (not whole or universal life), with zero cash value at the end.  These have the lowest premiums.  Whole companies, like PrimeVest, have dedicated themselves to marketing to customers to sell conversion of whole life to term.  I had a rather curious job interview about this possibility on the spring of 2002 while still in Minnesota.


 
The insert also indicates that women typically have larger out-of-pocket medical expenses than men.
The section also maintains that 19% of Americans continue work after age 65.  I work, but most of it is “for free”, well, sort of, and this is a long term bad example for other people besides me.