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Old topic and many states have begun to implement the needed reforms and the equity markets have boosted the funding rates of pensions. As has been coined here before the nation has a few suffering from Pension Envy. By ridding themselves of the pension system would they then be contributing to matching 401K/403B plans or just contributing less in employee compensation and losing even more talented and in demand skill sets to the private market. Hint Hint people the reason so many computer driven government programs struggle is if developed in house they don't have the best developers and if done on contract those companies may not have the best developers etc etc etc. How about sending the no pension state lawyer at 85K a year against the 1.5 million with matching 401K private counsel. Why do so many rich people get off better when charged? Their lawyers make ten times what the local prosecutor makes. People just want people retired with more money than them to go away and not have more money than them anymore.
My brother "retired" after 20 years in the Wisconsin state pension system - he worked for UW Madison.
He gets $1000 a month.
I have heard of California pensioners taking home 100K a year.
I will hopefully have 27 years in my state pension system - 30K a year.
Not all pensions are alike.
Pensions are very similar and within plans identical. The working years salaries and the individual dollar amounts paid in by beneficiaries as you know is what makes the difference. If the employee contributes it is expected that those contributing more will receive more. Even at the same salary scale the employee who works 40 years will get more than the employee who works 30. California and other high income states have higher overall pension costs because of a higher cost of living and resulting salaries. The key is working in a high cost of living state with resulting higher pension and retiring to a lower COLA state with your higher pension if that works for you. So that Calif pension looks even better in Wisconsin and that Wisconsin pension looks lower in California. Yes not all pensions are alike as some allow you to qualify for SS and others don't. Many California pensioners don't get SS so to compare with a pensioner who also gets SS is not a valid comparison unless you add in their SS. So what is your combined pension and SS benefit at age 66 FRA or don't you get SS?
The cities and states are not dealing with the reality that the private sector did years ago. We are not a wealthy nation anymore and the tax base is not there to support lavish pensions or in some cases a basic pension.
The best solution is to rid themselves of the pension system and just let the employee(s) fund their own pension.
Let's take the links one by one:
1. "Pandemic of pension woes...." The title is designed to catch our eye and make us read, but when we actually read we find nine states cited whose pension systems are seriously underfunded. That is indeed a serious problem for those nine states but the title is yellow journalism.
2. "Westchester, Rockland officers...." These local instances of fraud should be, and can be rooted out. It is inaccurate to generalize them as endemic to pensions.
3. "The Coming Pension Meltdown:...." The second part of the title tells what the article is about, namely the 10 most troubled city systems. So there may or may not be a "coming pension meltdown" in those 10 cities, depending on what measures are taken and how soon they are taken. Indeed, those 10 cities have a serious problem, but there are thousands upon thousands of cities in the U.S.
NJ has a troubled pension system. This year the required pension contribution for the State for every teacher and State worker amounts to 2% of the State budget. Hardly a huge driver of the high taxes in NJ. The pension problem is that for 20 years the State did not make their required 2% payment.
No matter what the fix is those payments will need to be made up. IMHO it should be done over a 30 year time frame. According to recent data NJ's pension is funded fine for the next 30 years so there is time to make up the shortfall.
The cities and states are not dealing with the reality that the private sector did years ago. We are not a wealthy nation anymore and the tax base is not there to support lavish pensions or in some cases a basic pension.
The most drastic reforms also leave jurisdictions at a marked disadvantage when they go to recruit the next generation of police, firefighters and teachers. Because cuts to public pension plans haven't been offset with wage increases, they leave public workers making about 20 percent less than their counterparts in the private sector, according to a Center for Retirement Research study.
"So you now have two people with the same human capital—and the one in the private sector makes 20 percent more than the one in the public sector," said Boston College's Aubry. "The question is how are you going to attract and retain quality public sector employees with that disparity?"
So before you question that public workers make 20% less than their counterparts remember it is YOUR link and you quoted it for what we assume was its accuracy in making a point.
So name your poison or reason for the collapse of local government services.
One of the biggest reasons pensions are in trouble is the growing number of people needing a social net and social services and in many cities and states a proportional decreasing number of people to provide the tax base for those services. Cutting back on employee benefits will only decrease the pool and quality of people to deliver those services. More money for education at the expense of teacher salaries and benefits can reduce the size and quality of the teacher pool to deliver those services. North Carolina is finding that out biggggggggggggggggggggggggggggggggg time. It is a problem and part of the reason why wealth so often tries to find other wealth and be able to enjoy a high level of non social net quality services which benefits those who work for that government be it local or state. Or those states that just don't spend a lot of money on. North Carolina while being slammed for its social net spending does have a close to fully funded pension system. It is salary that is now crushing the employee hiring pool.
Pensions for the two of us (one each) total between $65-70K including an annuity(too lazy to look up our gross right now). SS we do not receive yet, but will total around $17K in 2 years for the DH, and I can't file for at LEAST 7 years, but when I do it will be another $20K. Unfortunately we will be losing that $10K annual temporary annuity before that. We have covered PPO med/dental for about $1500/year (20% deductible). We have investments we don't touch right now, some minor savings, and a rental property that is, at the moment, a break even but in 2 years will be paid off and will be about $8k annual cash flow. So we figure our retirement income total to be around $90-100K for life. We have a $300k mortgage at a low rate and the usual monthly bills, but no debt. It took a little figuring to structure all of this to obtain a levelized income for the next 30 years. We could have stayed longer and made our pensions larger, but we wanted our freedom while young enough to enjoy it. Besides, this is plenty for any NORMAL retirement needs and most of the curveballs we may encounter are covered.
Pensions for the two of us (one each) total between $65-70K including an annuity(too lazy to look up our gross right now). SS we do not receive yet, but will total around $17K in 2 years for the DH, and I can't file for at LEAST 7 years, but when I do it will be another $20K. Unfortunately we will be losing that $10K annual temporary annuity before that. We have covered PPO med/dental for about $1500/year (20% deductible). We have investments we don't touch right now, some minor savings, and a rental property that is, at the moment, a break even but in 2 years will be paid off and will be about $8k annual cash flow. So we figure our retirement income total to be around $90-100K for life. We have a $300k mortgage at a low rate and the usual monthly bills, but no debt. It took a little figuring to structure all of this to obtain a levelized income for the next 30 years. We could have stayed longer and made our pensions larger, but we wanted our freedom while young enough to enjoy it. Besides, this is plenty for any NORMAL retirement needs and most of the curveballs we may encounter are covered.
Great thinking and a great plan and best of luck in realizing it all.
From CalPERS:
As of June 30, 2013:
Retirees/beneficiaries/survivors receiving a monthly allowance 574,759
Average monthly service retirement for state members $2,918 ($35,016 annual)
Average monthly service retirement for school members $1,675 ($20,100 annual)
Employee contributions $3.9 billion
Employer contributions $8.1 billion
None of the above includes teachers – that’s a different system all together.
None of the above includes police – that’s a different system all together.
None of the above includes firefighters – that’s a different system all together.
These numbers are averages that include short-service employees. Long-service employees do much better. Police and firefighters do much better (they tend to retire as chiefs). Teachers vary because of widely differing pay scales and length of service. Where do you think your 12% California state income tax is going?
It sounds like your enjoying significantly higher gross income, than what I have. It is not surprising that you would be paying income taxes.
You are still working. What about when you retire?
Our income is quite a bit more than my pension, as I said we have other sources of income. I'm not surprised, on the contrary I've paid income taxes my entire working life, and expected to have to pay them on our retirement income. As I said, I am not complaining about having to do that.
I'm full retirement age plus one year ( I just turned 67) and retired from my last full time job three years ago. I began collecting the state pension when I retired from that job, and began collecting social security when I turned 65 and got into Medicare. I had been doing the contract work ( at home, via the internet) for about 15 years now- I did it at night in my pj's after my full time day job, but with more free time after I retired I took on more work, although it's still part time as I can generally pick and choose when I want to work on projects, and put them aside when something else comes up. I think now and then of giving it up too, and when I do I guess that is when I will be really retired. But it's a niche type of work and apparently there aren't many other people who are willing, or able to put the effort and brains into the work, or who do it well ( scientific writing), so frankly the company would be hard-pressed to replace me- not that they couldn't, but they have had a lot of folks try who haven't worked out in the past. I've done it so long I guess it's in my blood, so I guess I will continue with it till I get dementia or go blind or something- actually this HAS happened with a couple of their other writers, so they're down to me for this aspect of their business.
The other advantage we have is that we don't have a lot of expenses and very little debt these days.
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