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If a non-government employee were to create "the average" $22,000 a year pension for themselves they would need to have over $500,000 invested with a 5% per year guaranteed return. That's a pretty generous pension I'd say.
Using your assumptions of 5% a year return and needing to withdraw $22,000 I backed into the amount you would need saved by using data from the NJ pension of average retirement age 62 and average length of retirement 19 years.
You do not need $500,000 you need $270,000.
Big difference.
NJ does not have a COLA at this time.
The pension fund also has always earned an average of greater than 5% for any 19 year period.
Next I will tell you how much has to be invested over 25 years to have $270,000. I will use 5% even though NJ has earned 8.85% over the last 40 years.
All of you complaining and griping about "government employees", feel free to go to USAJOBS and apply! Just be sure you can pass a background check, a drug test, have good credit, and the proper education and experience. Or apply with your local and state openings. Or join the military. Or just shut up!
No guilt trip here just pointing out that you didn't pay for your pension to the degree that you originally claimed. Govt pensioners seem to overestimate their contributions to their pensions.
You can have your pension, just don't complain when it gets cut from budget cuts. Living off the govt teat you are subject to the whims of the govt and fed up taxpayers.
Wow ,sorry to hear your job sucks but the Lady is right and her "pension" is part of her jobs packet,the state should be mandated to pay her and her husband .If you were not smart enough to get the jobs she and her husband got that is on you .They are not living off of anyone's teat. They worked hard for that money and it's ignorant people like you that are to stupid to understand that!
All of you complaining and griping about "government employees", feel free to go to USAJOBS and apply! Just be sure you can pass a background check, a drug test, have good credit, and the proper education and experience. Or apply with your local and state openings. Or join the military. Or just shut up!
Yeah that's the lie they want you to believe. For 36 years 11% of my salary has been paid to the state to fund my pension from my pockets and my employer. Just like in industry they match your 401k. The state has invested that money and in many down years have used that money to plug into the general state budget. I am also a tax payer and my money has gone into paying the state.
So that's BS that my pension is coming entirely from the backs of taxpayers.
When I retired from the state I was told that my contributions would cover the first three or four years of my retirement. Any returns on my contributions are going to be minimal. At some point, my retirement income will be at taxpayer expense. That's why almost all state pension plans are underfunded. If worker contributions and any investment returns were sufficient to fund government pension plans, these plans would not be underfunded. As for my military retirement, that's totally taxpayer funded, as I made no monetary contributions.
Your math is a little off. Based on your assumptions, your $500,000 is never spent down. That's not how pensions are calculated.
An average $22k per year pension assumes a certain average lifespan after retirement. Let's say a 62 year old retiree lives an average of 20 years after retirement. With a 2.5% cost of living adjustment per year (it has not been that high the last few years), the total amount to cover this cost is $562k. So a non-government employee would need to save $562k.
Let's take the math a little further. If I work 30 years at a government job, it means I would need to make $562k divided by 30 years or about $19k per year more at a non-government job to cover the pension cost. If I average $50k over 30 years would have to average $69k outside. If I average $75k in government would have to average $94k outside. Is that possible? Given the fact that non-government employees may be offered bonuses and even stock options, I'd say yes. I'm not even considering the investment potential of the $19k per year in a 401k. If one invests wisely, that lowers the $19k per year difference substantially.
I'm not saying one is better than the other. I'm just trying to offer a more complete picture.
Great Post, Vic! Thanks for the thorough answer. My number example was just a rough estimate----your reply really put meat on the bones of my idea and provides a compelling picture of what those without a government pension need to consider.
When I retired from the state I was told that my contributions would cover the first three or four years of my retirement. Any returns on my contributions are going to be minimal. At some point, my retirement income will be at taxpayer expense. That's why almost all state pension plans are underfunded. If worker contributions and any investment returns were sufficient to fund government pension plans, these plans would not be underfunded. As for my military retirement, that's totally taxpayer funded, as I made no monetary contributions.
You are forgetting the earnings that your contributions earned.
Depending on the average return that covers a significant number of years.
Many of my public safety friends had no idea it would turn out this good...
Lifetime medical, 3% per year with retirement starting at age 50 and yes there are a lot that retired in their early 50's... with pension spiking they are just about equal wages and pension...
The beauty is it was all 100% taxpayer funded... not a penny employee contribution as the city of Oakland paid the full freight...
For those that retired earlier is is even sweeter... their pensions are forever tied to the pay today of the position you retired at... some really are nearly 3 times more than the earned 30-35 years ago...
As with most things... the truth is somewhere in the middle... and all it takes is actual numbers from the city of Oakland to see why it gives pause...
My uncle missed all the good things... he died as a deputy sheriff in the line of duty before they had things like survivor benefits, etc... and paid the ultimate price.
Maybe one of the pension wizzards can back into a number to equal what my friend recieves from the city of Oakland.
Retired at 52 making 30 years with sick and vacation and pension spike... pension is 180k per year plus lifetime medical...
Any idea what an individual would need to sock away to get this for life at age 52?
Are you paying for the full amount of your pension? I haven't heard of any govt employee who has to date. Everyone I know pays a portion of it with the rest funded via tax payers most of whom do not get a govt pension.
My local taxes most certainly pay for pensions for local govt employees. Do you have no local govt employees where you live?
In many areas, pensions for state and local employees were free for a number of years. When the teachers in our state were told that they would have to start contributing to their pension and then their health insurance (another item they got for free), the unions went nuts. The unions lost.
If you have a pension now and are receiving payments, start saving now! I wouldn't count on receiving that check until death. Many municipalities simply don't have the funds and never will. The government can only force them to do so much especially when there are tax caps already in place. Those won't go away because taxpayers will vote your butt out of office faster than you can blink. So if they want their taxpayer paid job, then they're going to have to give taxpayers what they want - lower taxes.
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