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Ed spent all his money over the years. He knew he would have a pension and healthcare. Now I hear complaining from him that it's not enough. I, on the other hand can afford to retire because I am either very smart and invested wisely; or stupid and lucky .
I am hearing about social security being means tested. All things being equal IMO social security and public pensions are
both being funded by taxpayers. So shouldn't pensions be means tested, too?
What is also missing in this thread is how much Ed contributed to his pension, and what would have happened if you had contributed the same amount for the same number of years into a 401K and/or Roth IRA type of account.
What could that have provided in terms of your annuity or investment income?
Last edited by NewToCA; 10-20-2012 at 09:28 AM..
Reason: can't spel
Public sector work has lower income during working years but better pension/health benefits later on.
This is definitely the conventional wisdom, but I don't believe it completely. SOME higher-level public-sector jobs pay much less than similar private-sector jobs, e.g. being a public defender or an ADA vs. working as a corporate lawyer, but MANY public-sector jobs pay at least as much as similar jobs with private companies. My sister, who just turned 50 this past summer, just retired from being a probation officer in California and will make at least 2/3 of her salary (as a pension) for the rest of her life (it might be 3/4 -- can't remember exactly, except that it's a lot, and it's adjusted for inflation!). She worked for the same public employer for 27 years. If she had gotten a similar job with a private company, e.g. being an officer in a privately-run prison, her pay would have been similar but her benefits would have been significantly worse (e.g., no pension -- just the 401(k) or similar options).
My mom also worked for the State of California for about 10 years before she retired; before that, she had worked something like 25 or 30 years for various private-sector jobs. Her social security for those 25-30 years of work is LESS THAN the monthly retirement she gets from her state job.
My point is that it seems that lower-level and mid-level public jobs have similar pay/benefits to private-sector jobs, plus WAY better pensions and benefits. (Again, at higher levels, this isn't true.)
I don't begrudge my sister or my mom (or anyone else in the same situation) anything, but I wonder sometimes if state treasuries can continue to fund benefits that are so out of proportion to what people in the private sector make.
When I started working, the common attitude was the private employment paid better, and retirement and benefits were the same. Private companies had retirement plans just like the government had. Then we went through the 80's, globalization, free trade etc. Private companies couldn't afford the retirement plans anymore, so the employees were given 401K plans. So now an employee of a private company should save his own money, build up savings in his 401k and then that combined with his SS should give him an OK retirement. BUT, if the private sector employee is dumb, then he didn't save and now he or she is stuck with just SS. Bad strategy. But that's how it works today. All in all, its probably worked out better long term for the guy who took a public sector job. That's what I told my son to do, but he didn't listen. Kids?
Currently federal government workers hired after 1984 are covered by SS. Prior to 1984, the federal government had a civil service retirement system plan. Some workers who were hired prior to 1984 could also switch into the SS system if they had enough credits and wanted to. .
Local governments have a mish mash of things going on. For example, in Connecticut, teachers, do not pay into SS but pay into and are covered by a state pension plan. In NY state, teachers both pay into SS and have a pension plan to which they also contribute.
There's no rhyme nor reason to it, each state and municipality can vary greatly.
What is also missing in this thread is how much Ed contributed to his pension, and what would have happened if you had contributed the same amount for the same number of years into a 401K and/or Roth IRA type of account.
What could that have provided in terms of your annuity or invesment income?
Quote:
Originally Posted by karen_in_nh_2012
I don't begrudge my sister or my mom (or anyone else in the same situation) anything, but I wonder sometimes if state treasuries can continue to fund benefits that are so out of proportion to what people in the private sector make.
Quote:
Originally Posted by wabanaki
do the government workers put in the same percentage as private company workers into social-security system ?.
NewToCA's point is a very good one, and it is at the core of the next two posts (or parts of posts) which I quoted above. Wabanaki's question has no single answer because "government workers" cover such a wide spectrum of situations: federal workers, state workers in the 50 different systems of the 50 states, county and municipal workers, public school teachers, fire fighters, and law enforcement. Those systems vary all over the map (pun intended) in terms of their generosity, their sustainability, and the degree to which they are funded by employee contributions vesus general tax revenue. So therefore, in response to Karen, the "state treasuries" may be funding these benefits in some states but not in others, and also to varying degrees among the states.
One example is California public school teachers for whom the same system applies from Kindergarten teachers through junior college instructors. They contribute 8% of their salary into the system from day one of employment, and the employers (i.e., the various school districts in the state) have to match that. This is a greater contribution than taxes on Social Security wages. The State of California (i.e., the taxpayers) do contribute slightly to this, to the tune of 2.5 percent. So in this case the state treasury bears a very small portion of the burden.
I do not know how typical or atypical this is vis à vis other states, or even vis à vis other California state employees, who have a system separate from that of teachers. I know that in some states the public employees get a free ride, more or less, and the taxpayer resentment of that is understandable. My main point is that we cannot paint "public employees" with the same brush - not even close.
Edited to add: I was still typing my post when Willow Wind posted just above, so I only saw that post afterwards. We are saying pretty much the same thing.
Ed spent all his money over the years. He knew he would have a pension and healthcare. Now I hear complaining from him that it's not enough. I, on the other hand can afford to retire because I am either very smart and invested wisely; or stupid and lucky .
I am hearing about social security being means tested. All things being equal IMO social security and public pensions are
both being funded by taxpayers. So shouldn't pensions be means tested, too?
Pensions are contributory and not weigthed toward benefiting lower income earners like SS. Since you are into fairness SS isn't and pensions are much more since what you get out is more directly connected to what you put in where SS is isn't as much. Much in life isn't fair so you were frugal and are now better off so life is better for you than your friend and that shouild make it ok in the end. Isn't it?did you have the option to invest at work, did your employer make a contribution also or weren't you eligible for a 401K
do the government workers put in the same percentage as private company workers into social-security system ?.
Most state and local government workers pay into both. Some states are non SS participants. Several that come to mind are Calif, Texas, Mass I believe don't along with a few others. If anyone knows that they do please correct me.
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