BUZ LIVINGSTON: Advice not heard from your advisor or pension woes still around

Published: Sunday, March 10, 2013 at 10:27 AM.

Municipal pensions are contributory like the SWFD where participants contribute 8 percent of their salary to the plan. Until plans are adequately funded (80 percent), contribution levels shouldn’t drop. Florida’s municipal pensions not only deal with the variable equity returns and the drag of fixed income rates but legal, actuarial and investment advisor fees.

These well-compensated interests downplay the obvious deficits. Further complicating matters is local governance. By law, a board of trustees oversees/monitors the pension but plan participants often dominate boards. Nothing is harder to change than someone’s mind when it affects their pocketbook.

Florida’s Chapter 175 and 185 provide incentives to establish local pensions plans. A 1999 amendment limited excess insurance premiums to enhance local pension plans but not to offset unfunded liabilities. In 1999, we closed two decades of a roaring stock market so only policy wonks worried about an unfunded liability looming.

The relatively modest market fluctuations of the 1990s also blinded the intelligentsia. The 1999 amendment was a bad idea and the oversight understandable but ignoring it today is fiscal madness. All local pensions have a tool they can use immediately, so let’s fix it. Insanity is repeating the same thing and expecting a different result.

A secure retirement depends on an income stream not linked exclusively to equities. Of course, stocks and bonds make asset management fees easier to bill.  

Social Security, pensions and annuity streams smooth out inevitable stock market swings and variable interest rates.   Rental real estate provides the same option as long as you understand the four Ts of rental property: Time, Trash, Toilets and Tenants.

Buz Livingston, CFP offers hourly financial planning and fee-only investment management to clients along Florida’s Emerald Coast.  Contact him at 267-1068, Buz@LivingstonFinancial.netor www.LivingstonFinancial.net.

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