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Is There A Pension Crisis?


what bs. how exactly does a second grade teacher, on the job 8 months a year, retiring at age 55, SAVE 3 million dollars to buy an annuity of no risk government inflation protected treasuries to yield $60,000 no risk, inflation protected---for life who pays your salary, the government workers union??

You missed the part about putting all of these workers into a pool which makes the financing of it all much more efficient. These are not individual annuities.

efficient ha!!!- you have bought into an efficient lie. it is you who have missed the economic truth those of us who have to pay our own way , during our working lives and in retirement know this is total government welfare -at taxpayer expense- bs.

Defined benefit plans are extremely risky because you CANNOT trust others, whether corporations or the government, to manage and invest in those plans to your sole benefit. There will always be other considerations (funding for the poor, recessions, wars, pet political projects like green power, payoffs to unions to get labor agreements, or higher dividends to placate stockholders) that the government or corporations will use to justify deferring payments to a pension plan. This leads to them assuming higher rates of returns to make the deficit go away and riskier investments to try and achieve those unrealistic concerns.) Government plans have additional risk since the politicians today will be long gone by the time the consequences of their decisions are felt. They get re-elected by promising higher benefits, but spend money for additional votes instead of funding those pension promises. If there is no money, the benefits can't be paid. With a defined contribution plan, you know what you have and it can't be taken away by a company or government bankruptcy. Do you really think all those Illinois pensions are going to get paid once the funding runs out? By whom?

Why are you suggesting private employers are being held to a different standard than public sector officials who should be paying into the fund before hiring new employees et al. Public sector employer units have a .great lie in the assumed rate of return which is in the 7-8% range whereas the private sector employer has had to disclose their liabilities both retirement and healthcare since early nineties. THe public sector not only has no place to disclose .at least annually in a public balance sheet the liabilities the taxpayers are already committed. The beef is that the government has imposed thru the accounting conventions 2 different standards, let's make them equal full disclosure by the public sectors and its mutations and since the private sector is in a full withdrawal from both pension and retiree health liabilities This article and writer should be focused on getting the full public sector required to make full disclosures which will have an impact on their interest borrowing costs and make the tax paying community realize what a high cost the public sector employee community has become and whether we need to disrupt this cozy arrangement. Th Withdrawal Th, retirement No

Very good opinion piece David. A cogent argument for defined contribution pensions that has given me a new insight on this politicized issue. However I must take issue with one assertion: "They are wages that could have been taken today". Here in Canada we tend to be more unionized. And the government unions have been extremely effective, on behalf of their members, to increase benefits over time. However, the average garbage collector (to choose a typical unionized government-paid worker) averages $55k/year (see web link below). If we are to assume that people should be putting 15% of their incomes into a retirement program (ignoring gross versus net taxation implications), then what you're saying is that garbage collectors would (should) be earning $63k/year if they didn't have the DBP. For a completely unskilled position that requires minimal education, you cannot with all honesty try to convince anyone that this position is worthy of $55k per year, never mind $63k. This means that for an indexed $40k/yr pension from age 65 to 90 (average life expectancy of Canadians) the institution is on the hook for $1.35 million, not including benefits.... per garbage worker. This is where the private sector has had enough. I personally have had (and continue to have) difficulty building my own pension, without being forced to contribute to someone else's. Why is it my responsibility to fund a garbage worker's or teachers or any other person's retirement? I'd rather put that money towards my own. And I have been a professional my whole career. Real wages are flat or actually decreasing. And even though marginal tax rates (MTR) haven't changed much in a long time, real taxation has increased due to the normal inflation of wages. A $22k income in 1982 with an average of 4% inflation per year, is now $83k (20% MTR versus 35% MTR). This makes it far more difficult for the average wage earner to actually save anything because now they only have $0.65 net dollars to put away versus $0.80. Perhaps the DBP is the best and most efficient way of going about assisting people in making sure they have a reasonable retirement that's good for the general economy, but then a rationalization has to happen to both current wages and the benefit of pensions themselves (particularly for government workers) to ensure that they remain affordable and sustainable given changing demographics and life expectancies. This is where we've been caught with our pants down.

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