Paying for your neighbors retirement.

[jazkiljok]

i've long had pension envy-- my taxes go up to cover millions of other folks while i struggle to figure out how i will ever not have to work. nor do i understand why they get the best benefits in the world while the rest of us have to continue to work until 90 to pay for them. the private sector can't afford them now-- so why is the public sector deserving?

it's just not fair.

or is it? opinions?

http://www.latimes.com/news/nationw...t02,0,558006.story?page=2&coll=la-home-nation

 

[Ping898]

While I am not entirely sure exactly as to my thoughts on the topic as a whole, and I am not advocating that the system is right, I can say from experience that your public employees usually make less for the same work than those in the private sector. And the difference can be considerable, especially if you are not management. Kind of like the different between working for a non-profit versus a for-profit company, again non-mangement. I have no basis to comment on the management pay levels. Now the article says this isn't true, but just for me, I added close to 40% of my salary jumping from a government job to a private sector job doing similar work at a non-profit company. I could have added even more if I had jumped to a for profit company.
Plus my health benefits, retirement benefits (403b account), sick leave and general work conditions improved greatly as well.

Now I don't think we should keep the old system for new workers, but I also don't think the workers in the current system should be kicked out.

 

[Flatlander]

i've long had pension envy-- my taxes go up to cover millions of other folks while i struggle to figure out how i will ever not have to work. nor do i understand why they get the best benefits in the world while the rest of us have to continue to work until 90 to pay for them. the private sector can't afford them now-- so why is the public sector deserving?

it's just not fair.

or is it? opinions?

I think that it's fair insofar as it's a benefit that was contractually promised to the government workers. So, rolling back benefits for people who are expecting them would be damning.

I don't buy the argument that people in the private sector "can't afford" to fund their retirement - that's simply an unrealistic generalization. A comfortable retirement is the result of planning. The sooner a person begins to plan, the more likely they are to achieve their objectives.

A retirement plan has to take into consideration the time horizon, the tolerance for risk of the individual, and certain reasonable assumptions need be made, such as level of income required, retirement date, and life expectancy. There are people out there who do this for a living, talk to one.

In any public employee defined benefit pension plan that I've seen, the employee makes a periodic contribution, which is usually matched by the employer, in this case the government. Because it is a defined benefit plan (the retirement income is based on a formula, and guaranteed), the investment risk is taken on by the employer. If the pension manager and actuaries make errors in their assumptions, or their investments don't perform as they had hoped, there will be an unfunded pension liability.

When this happens in the private sector, the company will have 2 options - cough up the extra dough (out of profits, or borrow), or break their committment to the employees, sometimes filing for bankruptcy or creditor protection. When it happens to the government, the money has to come from somewhere, generally that's the taxpayer, which is their only source of revenue.

Defined benefit pension plans are being phased out for exactly that reason. Most governments and companies are moving to the defined contribution pension plan, wherein the pension funds are invested on the employee's behalf. At retirement, the employee then has the choice to purchase an annuity (this is an insurance product which provides a specific payment for either a defined period, or for life. The payment amount depends on prevailing interest rates and, in the case of a life annuity, the age of the annuitant). This choice puts the investment risk on the insurance company. The other alternative is to manage the investment, and draw income according to some pre-defined parameters, and have direction over the management of the invested funds. As such, the investment risk would then lie with the retiree.

Having said that, rolling back retirement benefits to pensioners is a breach of contract, and disallows them the opportunity to plan, as they cannot go back in time and plan for it.

Changing pension benefits going forward is fine, as it affords people the opportunity to plan. At any rate, I would wager that the majority of people working in the private sector have adequate opportunity to save some money. Alternatively, they can seek employers that provide better benefits, change their spending habits, or find another source of income. The end result is, given a reasonable amount of time to plan, any reasonable financial goal can be achieved.

 

[Phoenix44]

Ping898 makes a good point. I have two jobs in the same field, one public, one private. The private sector job pays me MORE THAN TWICE per hour what the public sector job pays, but there are no benefits. The lower paying public sector job offers benefits and a modest retirement plan.

Personally, I think everyone should have benefits and a retirement plan.