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Author: Rayvt Big gold star, 5000 posts Top Favorite Fools Top Recommended Fools Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 75598  
Subject: Re: Buy years or buy stocks Date: 9/14/2013 8:45 AM
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The financial stability of a pension plan is always a concern and as I questioned earlier, the OP and other Colorado pension recipients should be well aware of its viability and what legislators can and can't do to it. One protection is that the state can't declare bankruptcy to get out of paying benefits. ...
However, pension benefits are protected in the constitution (I believe only 9 states do this).


Let me highlight the crucial part of what I said earlier: All the laws & state constitutional requirements mean nothing if/when the state has no money.

I recall reading a couple of years ago that California paid income tax refunds with VOUCHERS rather than cash. They didn't declare bankrupcy but they didn't have the money, so they gave out Monopoly money.

FWIW, looking at it from the viewpoint of a citizen & taxpayer, I'd call "pension benefits are protected in the constitution" a scam perpetrated upon the citizens by the people who ran the government. I read it as, "I've got mine Jack, and you peasants just have to suck it up and pay me." And it can be nullified if/when the citizens get sufficiently motivated.

But aside from all that political stuff, it's vital to look at the issue from the risk & asset/income allocation viewpoint. Money in your own account titled in your own name is YOURS. Money that the government has promised that they'll give to you is NOT yours.

Buying years is not the same as buying an asset (stocks). You are giving them money in exchange for them promising that they'll give you a larger monthly check in the future after you retire.
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