I should begin this post by first stating that I am FedEx Freight driver with 4 1/2 years service. Just to clarify so the pro-union folks don't confuse with me with management. The goal of this post is to help us understand how our pensions situation sets up and how it compares with what the union has done with theirs.
Fact: December 2012-Teamsters run Union pension fund had liabilities of $34.9 Billion
December 2012-Teamsters run Union pension fund had assets of $17.8 Billion
Fact: There are currently 65,000 working union members funding retirements of 212,000
That means every worker is paying for 3.25 retirees to collect their pensions.
The union wants to represent you and your money to dig themselves out of a $17Billion deficit.
My understanding is that the union offers:
Fact: In June 2014, Teamsters Pension fund director calls to cut current and future retirees benefits by 30%. Thanks for your years of service grampa. If Walmart isn't hiring greeters you might check with McDonald's to supplement that lost income.
Even assuming that doesn’t happen, and the pensions keep getting paid out by future union members (such as yourself who will also need someone else to follow you so they can fund your retirement), there is no adjustment for inflation which has averaged a little over 3% since 2000. Adjusted for 3% annual inflation, using 2014 dollars, their pension payouts look more like this :
Subtract 30% from these numbers and that is what a union pension plan could do for you… assuming they don’t declare bankruptcy before then. If they can make enough promises to get FedEx drivers to pool in with their insolvency, you would really be doing them a big favor.
NOW I WOULD LIKE TO COMPARE THEIR PENSION PROMISES WITH FedEx's PENSION PLAN. Based on an annual salary of $50,000 with no raises ever.
The stock market has averaged annualized growth of 7% for the past 65 years. There are also dividends that should be considered but I will be conservative and use 6% and exclude dividends and the dividends being reinvested into your retirement account. Anyway, I have been very conservative in terms of income, how much is invested, etc. To reiterate, this is a conservative estimate based on constant income with no raises and less than annualized average market return. These numbers increase significantly with increased earnings and investment.
Why give away your money fund other people’s retirements… Look at social security as a classic example. Your retirement,and the security of your family, will be given over to a group who is $17Billion upside down.
Should you die before you have collected all of your retirement, the remainder will pass on to your heirs. This is one advantage of the cash-basis/defined benefit pension. It is yours whether you leave FedEx today or in 30 years. Any unused portion of your pension or retirement reverts to your next-of-kin. This is not the case with a union pension.
The average life expectancy for an American male is 76 years. For truck drivers, the average is less. However, using an annuity table, it seems pretty obvious that the FedEx pension and retirement plan is better than what the teamsters promise. And considering that they can’t fund the promises they have made to their present membership and retirees, they will promise you what they can’t give to you as well. For me, however, the fact that my wife will receive any unused pension/401K whether I die tomorrow or sometime after tomorrow makes me feel like it is a more responsible decision.
Or you can accept the promises of a group who isn’t able to keep the promises they have already made to other people. Educate yourself and don’t fall for promises of people who don’t keep their promises.
Fact: December 2012-Teamsters run Union pension fund had liabilities of $34.9 Billion
December 2012-Teamsters run Union pension fund had assets of $17.8 Billion
Fact: There are currently 65,000 working union members funding retirements of 212,000
That means every worker is paying for 3.25 retirees to collect their pensions.
The union wants to represent you and your money to dig themselves out of a $17Billion deficit.
My understanding is that the union offers:
$3000/month upon retirement at 65 years old for 30 years of working for the union. There is no growth nor adjustment for inflation. |
$2500/month upon retirement at 65 years old for 25 years of working for the union. There is no growth nor adjustment for inflation. |
$2000/month upon retirement at 65 years old for 20 of years of working for the union. There is no growth nor adjustment for inflation. |
Even assuming that doesn’t happen, and the pensions keep getting paid out by future union members (such as yourself who will also need someone else to follow you so they can fund your retirement), there is no adjustment for inflation which has averaged a little over 3% since 2000. Adjusted for 3% annual inflation, using 2014 dollars, their pension payouts look more like this :
$1235.96/month upon retirement at 65 years old for 30 years of working for the union. |
$1194.01/month upon retirement at 65 years old for 25 years of working for the union. |
$1107.35/month upon retirement at 65 years old for 20 years of working for the union. |
Subtract 30% from these numbers and that is what a union pension plan could do for you… assuming they don’t declare bankruptcy before then. If they can make enough promises to get FedEx drivers to pool in with their insolvency, you would really be doing them a big favor.
NOW I WOULD LIKE TO COMPARE THEIR PENSION PROMISES WITH FedEx's PENSION PLAN. Based on an annual salary of $50,000 with no raises ever.
Annual Salary | $50,000 |
Fed ex pension investment (3%). This percentage increases with your age plus years of service. | $1500 |
Fed ex 401K match (3.5%) | $1750 |
Union dues ($23.68 x 2.5 x 12months) | $710 |
Your personal 6% 401K investment. Seriously, if you’re not putting this much in there, you really should reconsider. The sooner the better. It not only reduces the taxes you pay today, it also gives you the benefit of compound interest and takes advantage of the highest company match. | $3000 |
If you're in the 28% marginal tax bracket, you are paying $2160 per year toward your retirement. | |
Total annual FedEx investment | $3250 |
Total gained from not paying union dues | $710 |
Total personal 401K investment | $3000 |
Annual retirement investment. | $6960 |
Why give away your money fund other people’s retirements… Look at social security as a classic example. Your retirement,and the security of your family, will be given over to a group who is $17Billion upside down.
$6960 x 30 years @ 6% annual compounded growth. | $572,989.20 |
$6960 x 25 years @ 6% annual compounded growth. | $398,852.81 |
$6960 x 20 years @ 6% annual compounded growth. | $268,727.97 |
The average life expectancy for an American male is 76 years. For truck drivers, the average is less. However, using an annuity table, it seems pretty obvious that the FedEx pension and retirement plan is better than what the teamsters promise. And considering that they can’t fund the promises they have made to their present membership and retirees, they will promise you what they can’t give to you as well. For me, however, the fact that my wife will receive any unused pension/401K whether I die tomorrow or sometime after tomorrow makes me feel like it is a more responsible decision.
$572,989.20 after 30 years of service | A $3000/month annuity that will last until you are 115 years old |
$398,852.81 after 25 years of service | A $2500/month annuity that will last until you are 91 years old. |
$268,727.97 after 20 years of service | A $2000/month annuity that will last until you are 83 years old |