Re: pension plan

[Gordon Coleman <gcoleman@sfu.ca>]

Dear all,

If you've already voted, of course don't read this. I hope there are only a tiny handful of folks still in that position (and still reading).

I analyze the problem this way. Do you maximize your RRSP contributions every month? Do you increase your contributions each time your salary goes up? Do you take joy in rebalancing your portfolio quarterly as the experts say we should, carefully adjusting your ratio of equity to bonds as you approach retirement (plus maintaining a suitable balance of Canadian vs US vs international equity)? Do you judiciously chart a path between your future retirement needs and the challenging financial demands of the present that we've heard so much about? Are your children's RRSP contributions maxed out? Is your rainy day fund in place in case the roof blows off, and is your kitchen reno fund on track? Can you speak knowledgeably about the current rates of return on annuities?

If you can answer "yes" to all the questions above, congratulations! You are an amazing financial planner. You definitely can handle the responsibility of a Defined Contribution model. You've got the organization skills, the willpower, and the knowledge to ensure you'll have a comfortable retirement.

But know this: you're in a tiny minority. SFUFA's own statistics suggest that most of us fall at the very first hurdle, since the current fund consists so much of the employer's automatic contributions and so little of our own voluntary contributions.

I admire all the folks who've been carrying out mathematical and financial analyses of the problem. But I'm convinced that this is a case of expertly studying the trees in entirely the wrong part of the forest. The correct domain of knowledge here is psychology. We know that the Present Self is hopelessly optimistic in thinking about the desires and capabilities of the Future Self. There's an Ingmar Bergman festival on at Cinematheque this week. Today you're too tired to go. Today you're too frazzled, too busy, juggling too many things. Today you won't go. But you'll plan to go on Friday. Except that when you get to Friday, it turns out the person making the decision about the trek downtown at that point in time is equally tired, frazzled, busy. And you don't go. As a species we're simply terrible at balancing present and future needs. That's why most of us are so bad at saving for retirement.

And that's why a Defined Benefit plan will ensure a happier, more comfortable retirement for the vast majority of us. We think our Future Self wants freedom and flexility and liberty and choice. But probably we don't. I most definitely do not want to be facing these complex decisions when I'm 65. I do not want to be wondering how long I'll live, and researching LIFs, and dealing with self-interested sales people, and getting ripped off by our Canadian banking oligopoly and the paltry annuity rates they'll be offering. I want to know, to the penny, how much my pension will be in my first year of retirement, and how much my pension will be if I work another two years, and how much it will be if I decide to go at 60 instead. The Defined Benefit plan offers all of that.

As has been said on this list already, "Know thyself." I do, and that's why I'm convinced that Defined Benefit is far and away the best collective decision we can make for the greatest number of us.

Gordon

Gordon Coleman
Head, Resource Acquisition, Management, and Metadata
Simon Fraser University Library
~~~~~~~~~~~~~~~
gcoleman@sfu.ca
778-782-3916


________________________________________
From: Francesco Berna <francesco_berna@sfu.ca>
Sent: Saturday, November 24, 2018 12:02 PM
To: Yildiz Atasoy; Krishna Pendakur; Tamon Stephen
Cc: Eugene McCann; academic-discussion@sfu.ca
Subject: RE: pension plan

Dear Yildiz and Eugene,

Thank you very much for sharing your personal situation. I can totally relate and would love very much to retire at 71 with a decent DB plan. But the more I read these threads the more I realize that the fundamental issue here is not choosing between a DB vs a DC plan. This vote it is essentially about allowing or denying each of us to have the possibility to have that choice. By voting yes we are starting a path that will eventually force everyone including the ones who would prefer to stay with the current plan to save a considerable part of their salary in a way they don't appreciate. This is despite the BCPP fund substantially operates very much like any other financial fund (the proposed 10.15% is based on the "calculative logic" that most of us abhor). Moreover it appears that we could already use the current SunLife DC plan to put that 10.15% in a fund  that will substantially allow to have the benefits proposed by the BCPP plan. So although I am very much in favor of having the possibility to join a DB plan, I realize that the path that SFUFA is currently proposing will have a serious impact on the financial flexibility of each member of our community. Thus, I am torn because I see an element of selfishness more in voting yes than in voting no.

Francesco


________________________________________
From: Yildiz Atasoy [yatasoy@sfu.ca]
Sent: November 24, 2018 10:46 AM
To: Krishna Pendakur; Tamon Stephen
Cc: Eugene McCann; academic-discussion@sfu.ca
Subject: Re: pension plan

Dear all,

I made my decision and voted in favour of switching to the college plan. I don't have a financial advisor or an accountant. I earn my salary and pay my mortgage. I have no inherited wealth. Thus, my financial situation is simple and straightforward. I do not allow a 'calculative logic' to dominate my life choices either.

The 10 per cent personal contribution required by the proposed plan makes sense to me.

Sincerely,

Yıldız

Dr. Yıldız Atasoy

Director, Centre for Sustainable Development<http://www.sfu.ca/cscd>

Professor, Sociology<http://www.sfu.ca/sociology-anthropology/People/faculty/yildiz-atasoy.html>

Associate Member, the School for International Studies

Associate Member, Department of Geography

Simon Fraser University


NEW BOOK: Commodification of Global Agrifood Systems and Agro-Ecology: Convergence, Divergence and Beyond in Turkey<https://www.routledge.com/Commodification-of-Global-Agrifood-Systems-and-Agro-Ecology-Convergence/Atasoy/p/book/9780415820509>


Mailing Address:

Simon Fraser University

Department of Sociology and Anthropology

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Burnaby, BC, Canada V5A 1S6

E-mail: yatasoy@sfu.ca

Fax: +1 (778) 782-5799


________________________________
From: Krishna Pendakur <krishna_pendakur@sfu.ca>
Sent: Saturday, November 24, 2018 9:35:59 AM
To: Tamon Stephen
Cc: Eugene McCann; academic-discussion@sfu.ca
Subject: Re: pension plan

Regarding tamon’s last point: Sfufa can negotiate over retiree health benefits and could seek to improve them, eg to equalize them with pre 2001 hires. Whatever this costs would have to be given up from other improvements to salary or benefits (as usual).
Krishna

Sent from my iPhone 6!

> On Nov 24, 2018, at 9:02 AM, Tamon Stephen <tamon@sfu.ca> wrote:
>
> Hi Eugene,
>
> Thanks for the candid illustration of your situation, it is interesting and informative.  I believe that there are a number of faculty in similar circumstances - for instance, Lucas Herrenbrueck mentioned student loans recently, as have others earlier in the discussion.  Given the housing market here, I think the overall picture you paint is gradually becoming the norm here, especially with respect to not putting additional money towards retirement.
>
> However, I disagree with your overall take on it.  Your take is that someone should to be forcing you to save.  You don't seem to consider that you may actually be making very good decisions with your money.  I think among faculty, very few of us are extravagant.  Even where we have expensive tastes, honestly, we barely have the time to act on them.  Many of us are spending most of our income on basic stuff since housing here takes so much of it.
>
> Let's say you vote NO and let yourself keep the 10% of salary for 2019-2020.  Say that's $7000 after taxes.  What would you do with it?  For example, you could use some of it to take a modest vacation with your family.  Fix up one or two things around the home.  But the kid one thing that they don't really need.  Pay a babysitter and go out for a nice dinner.  Travel to a regional meeting you might not have gone to (if your grants won't cover it).  And maybe put the rest to paying off some of your debts early.  Or the RRSP.  All of these would be good things to do.  What about the $7100 in 2020-21?  And the $7200 in 2021-22?  Etc.?
>
> What if you save it until you are 70?  Well, you can take the same vacation.  Your arthritis may limit your hikes.  You can send your kid a postcard.  I think for a lot of us, what we do at 50 is going to be significantly more important than what we do at 70.  Should you donate to stop climate change in 2020 or 2040?    In very many cases tough decisions younger faculty are making against saving are actually *great* decisions.  The problem is that people who talk up retirement (financial advisors are the biggest culprits, though all DB marketing suffers from this) try to shame them or frighten them with a fear of "running out of money" at 92.
>
> Well, maybe.  But you are already preparing for 92 by buying your townhouse.  If you can get your mortgage and other debts payed off, you can probably live quite cheaply, especially once your kid is no longer dependent.  Say that by 70 you are a retired empty nester with your house paid off.  What expenses are going to force you to cash out and move to Abbotsford?  Likely CPP and OAS will continue to exist in some form.  (Indeed, if you do well in retirement, OAS gets clawed back - this starts at around $76,000 right now - so high regular pension payments may turn out to be less effective than you might expect.  This is the kind of detail where expert advice may help, though you can also look into it on your own.)
>
> Health care of course is a worry, but note that for instance assisted living in BC for non-rich people charges a percentage of after-tax income: <https://www2.gov.bc.ca/gov/content/health/accessing-health-care/home-community-care/care-options-and-cost/assisted-living>.  So you may as well have run through your money at that point.  In short, it may actually be a great idea to spend now while our health is good, our families are young and our careers are bright, and try to cut back in our 70's, 80's and 90's (assuming we are lucky enough to make it there).
>
>
> Several of the things you write also apply to me.   I'm mortgaged and don't have an accountant or a financial advisor.  I don't think I can beat the markets, and wouldn't expect a financial planner to do so either.  I'm also somewhat distrustful of state pension funds ... but, here is where I start to lose you ... BCCPP _is_ a state pension fund.  So I don't understand why you want to invest in it, and especially why you feel comfortable forcing me to invest in it.
>
> Overall, BCCPP smooths out some risks (stock crash) while being more exposed to others (inflation, presumably one of the reasons SFU fled DB in the 1970's).  Note that interest rates are going up, and the cost-of-living-adjustment for BCCPP is capped at 2.07%.  Between BCCPP and CPP, I personally have more trust in CPP to at least hold its current value.  (Note the recent post that CPP is _increasing_ its contribution and payout rates.  Interesting news, I had missed that.)   That's partly from spending some time trying to figure out what BCCPP is and how it can be held accountable.  It is unclear.  I have the feeling that we may as well be asking ICBC to run our pensions.  My sense is also that BCCPP is easier damage if and when we get our own Rob Ford here - college teachers are an inviting target politically, while CPP is hard to reduce since it affects _all_ seniors.
>
> A few technical comments:
>> Mandatory pre-tax savings are much more beneficial to one’s future than voluntary post-tax savings.
>
> Mandatory vs. non-mandatory is mostly distinct from pre-tax and post-tax.  I like pre-tax and hate mandatory.
>
>> Junior colleagues would benefit from learning from my experience and finding a way to squirrel away the 10%, even though I know how very very hard it is here in Vancouver.  In the long run, they’d be glad to have had the decision taken out of their hands each month and to see the financial benefits down the line.
>
> I don't understand what you are saying here.  You don't learn much by having things taken out of your hands.  (Active learning and all that.)  Honestly, I think that an underrated fringe benefit of the Sun Life setup is that it encourages us to explore investments in a fairly limited environment.  There's some value in doing that early on, as you may eventually want to become more active.  If you don't want to learn anything at all, then the suggested course of action is just to put it in the SFU Balanced Fund, which should provide similar investment returns to what is happening inside BCCPP.  No neurons need to fire.
>
>> much improved health benefits
>
> Yes, this is an important point, but I believe it should be addressed in another way.  I do think it would be a good think if we could trade say 1% of salary to get people hired after 2001 the same benefits options as those hired before.  I suppose by now some people who were mid-career hires after 2001 may already be retiring, especially if they have health issues?  I think that a fair solution to the medical issue should involve extending benefits not just to current employees, but also to this currently small group of retired employees.   (Has there been any discussion of this?  Thoughts from SFUFA?)
>
> Have a great weekend all,
>
> Tamon
> ________________________________________
> From: Eugene McCann <emccann@sfu.ca>
> Sent: November 23, 2018 8:03 PM
> To: academic-discussion@sfu.ca
> Subject: Re: pension plan
>
> Dear all,
>
> I have been reading this discussion with interest … the sort of bemused fascination one might have when encountering a context very different from one's own.  That is to say that I don’t see myself in much of what’s been discussed.  Let me tell you a bit about myself, then, as someone who supports the move to the Defined Benefit plan.
>
> I am just under 50.  I make massively more money than my working class parents ever did.  My income is nowhere near the high end of incomes at SFU.  I ‘own’ a townhouse (I rent it from a bank, actually, but I do accrue equity in the process).  I came to Vancouver in 2003, so the market was already insane and my mortgage debt reflects that.  My income is the only large or stable/predictable one in my household.  I have a child (with all the joys and expenses that entails).  My household is still saddled with significant student loan debt from the US.
>
> We have not, and will not, benefit from any significant intergenerational wealth transfer (inheritance or ‘family money’).  We have never ‘maxed out’ our RRSP limit.  Indeed, we have almost never contributed any money to RRSPs because we never have available funds.  We do not have a tax accountant.  We do not have a financial advisor (not for a want of trying, in the latter regard, but everyone we’ve tried to engage has either seemed marginally competent, unaffordable, or uninterested in working with us, given our (relatively) paltry resources.)
>
> I do not trust my ability, as an individual, to manage, benefit from, ‘play,’ or ‘beat’ the financial markets, even with the help of a competent financial planner.  I do not trust the idea that state pension funds will be available in any robust way by the time I retire.
>
> I also do not trust myself to make decisions like squirrelling away 10% of my salary for retirement.  But I fully believe that I should do this and I wish I had been doing it for years. But, as a songwriter once said, “If wishes were fast trains to Texas … how I'd ride.”  I always found other things that needed the money in expensive Vancouver.  If only somehow I had been forced to (as opposed to have to make a rational choice to) squirrel that money away each month.  If only there were a way that that sort of external discipline could be engrained in my retirement plan.
>
> So, that’s me.  And here’s what I believe:
>
> - I am not saving enough for retirement.
>
> - Mandatory pre-tax savings are much more beneficial to one’s future than voluntary post-tax savings.
>
> - Junior colleagues would benefit from learning from my experience and finding a way to squirrel away the 10%, even though I know how very very hard it is here in Vancouver.  In the long run, they’d be glad to have had the decision taken out of their hands each month and to see the financial benefits down the line.
>
> - While I have some equity in real estate, to cash out and use that to live I will need to leave Vancouver when I retire and head to a town I will probably hate living in.
>
> -The Defined Benefit Plan is a massive boon to someone like me because it provides me with what seems to be a reasonable and predictable retirement (not to mention what seem to be much improved health benefits).
>
> Maybe others on this list will see themselves in the description of me that I have provided above.  Or, maybe I’m unique.  Either way, that’s me.  And I am voting for a switch to the Defined Benefit plan.
>
> Best,
> Eugene McCann
> Geography
> PS as this is a ‘personal testimony,’ if you like, I am not up for debating the ins and outs of it.  I am throwing it out here in case it resonates with others.  I offer it as another reference point for discussion.  If others want to point out mistakes in my reasoning, that’s fine.  Indeed, I’ll read them and, no doubt, learn.  But please forgive me when I don’t respond.
>
>
> On Nov 23, 2018, at 5:17 PM, Steve Whitmore <whitmore@sfu.ca<mailto:whitmore@sfu.ca>> wrote:
>
> Thank you, Lucas, for adding a bit of levity to a complex and potentially divisive discussion.
>
> I am now glad that I never had kids (a couple hundred 1st year students every year is, no doubt, an equivalent penance for my sins).
>
> NB. When housing started to get out of control in the lower mainland, the SFU administration had the foresight to provide housing  (at 20% below market value) for faculty/staff (i.e., the Verdant complex). I suggest that the Community Trust consider expanding that policy when they undertake future developments.
>
> Cheers,
>
> Steve Whitmore
>
> From: Lucas Herrenbrueck [mailto:herrenbrueck@sfu.ca]
> Sent: November 23, 2018 4:58 PM
> To: academic-discussion@sfu.ca<mailto:academic-discussion@sfu.ca>
> Subject: Re: pension plan
>
> On the other hand, having "too much retirement income" doesn't mean you have to spend it. You can still give the remainder to your kids and/or charity. A big plus: your kids will have an interest in you living longer if they benefit from your pension. Whereas if every year you're alive you draw on their future bequest...
>
> Well, I couldn't resist saying the above but as a young faculty I am definitely aware of the constraints of present living. I spent my first 2+ years at SFU paying back high-interest college loans, and I would not have appreciated the extra 10% in pension contributions. Stands to reason that in the future more and more new faculty will start with debt. If you're 50 and started your SFU career debt-free, please consider this. And if we do move to the pension plan, maybe some other way to help new faculty can be found.