Investments vs pensions

It's been the big question for all time.  The internet abounds with anecdotes about pensions.  Almost all pensions these days are for government employees only.  The internet shows $26k/year for state governments, taxed as regular income.  The internet mentioned 1 with a $28k/year pension & $200k fund which lions believe is rare.  Most animals are going to have under $20k/year pensions.

Lions believe it could take many millions to equal the value of any pension, since no passive investment will ever keep up with inflation.  On the other paw, if an animal gets really lucky & gets a 10% return on stonks, a pure stonk fund only has to be $400k to equal a pension.  

That would devote 3.5% of the yield to inflation.  The lion kingdom will not get 10%.  It's in treasuries & slightly higher mutual funds.  The maximum in a real good economy would be a 3.5% yield after inflation.  That would need $800k in stonks to equal a pension while the treasuries became worthless.  Treasuries need to yield 5.4% to break even with inflation after taxes.

Lions believe the realistic yield from stonks will be 5% because a lot of the principal will get taken out during a down market, there will be drag from government deficits, disasters, natural resource depletion. The minimum size just depends on longevity.  There's still hope human progress will continue outpacing the challenges though, there will be ways to avoid taking out money during a down market & the happy path will be the most likely outcome. 

$26k/year isn't much in lion minds.  Even if social security doesn't go to 0, the total would only be roughly $50k/year which still sux.  Money to survive is going to be at least $24k without housing costs, disasters.  Lions are hoping to travel.  On the other paw, lions may end up not being able to burn that much if they tried.

 Any passive fund will eventually be drained by inflation so the answer is really what sucks less.  Above a certain point, becoming well off is 1 of the possibilities from investments that doesn't exist with a pension except for career politicians.  Members of congress currently get $90/year from a pension.  The POTUS gets $250k.  No worker is going to beat that.

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Lions pondered pre-tax IRA to roth conversions.  Basically not going to happen while working because of the taxes.  Lions have to max out their 401k just to keep taxes sane.  A conversion would undo the tax break.

 

After retiring, the IRA to roth conversion is the #1 destination for RMD's.  It would probably have to start as soon as possible to keep the taxes low.  There's no limit to the amount, but you now have to wait 5 years before taking money out of the roth. 

The government wants to tax the money in your IRA so they want to allow as many rollovers as they can get & the biggest rollovers they can get.








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