May 11, 2008
– Comments (7)
Read the whole story at the Washington Post. Then get ready to pay more taxes.
Hey, this does not surprise me anything.
Here in NJ we had a governor who promised a tax cut, got elected, delivered the tax cut, and then "paid" for that tax cut by: - increasing the state debt - stopping pension funds contributions - reducing the amount of money local governments received from the state government for such things as education and police, and then allowing the local governments to suspend their pension plan payments!
And everyone here is wondering why our debt is so high, our property taxes are going through the roof, and our pension plans are underfunded! Duh...
With the number of retirements coming it won't be good. Problem is pensions start too early in terms of life expectancy.
Life expectancy went up years upon years since these programs were introduced.
The article says that... I did look at the history of pensions in Canada and I was fairly suprised at what I found. It used to be that pensions had a means test attached to them, so not everyone was eligible to collect and they were only for people truly in need. That is probably affordable. The exuberance of politicians to download economic responsibility of seniors to the working population was beyond reasonable.
It might be a good opportunity to start a war? Wait we already did that? I am out of ideas? Can people die earlier?
And by how much will retirees be shortchanged? I suspect a 3-5% benefit cut is all it will take to balance the books.
Except for the few cases where the states played tricks to reduce its contribution below the recommended fair share, the short fall is due mostly to the lower-than-expected return on investment.
In that case, it should work just like any other retirement plans from individuals. If you get less from your investment than expected then you will have less money when you retire.
Anyway, the 41.5% number (for funds in serious shortfall) was for 2006, before the housing bubble CDOs busted. It's probably much higher by now.
Anyway, I don't believe that the public should be responsible for this shortfall. Government employee pension is way too high to start with so a little cut won't hurt. That's what everybody else has to live wih if his retirement investment does not do well anyway. Just by being a government employee does not give them the ability to walk on water.
Many public pension managers say their projections are based on past experience. Moreover, they say they can take more risks than private companies because there's no chance of going out of business.
And maybe some money can be saved by firing these public pension managers as well.
This is absolutely impossible. We all know that lowering taxes creates more revenues for government programs. In fact it is painfully clear how lower taxes has benefited the size and ability of Government in the USA.
In fact our taxes are so low that we have stood by and watched our buddys waste our tax money away, so it could not have meant that much to us if we did not care to get involved.
Please note that public pension management costs .02%. Private pension management costs .06% for index fund management, up to an average of 1.6% for actively mangled funds.
Also before you go cutting their benefits please keep in mind that with assets of 185,900. per public worker if each worker survives 20 years that gets them less than 10,000/ year to live on unless you have your taxes raised. I guess if they are 20% underfunded they are actually getting an average of 12,000 each year. And their income is taxed too.
And also if the stock market takes off, their benefits are defined and do not increase. Your 401k, a defined contribution with potentially unlimited benefits will make their pension look pitiful and sorry by comparison. You should be happy for the opportunity they did not have as 401k's did not even exist for the first 15 years that todays retirees were working.
The 401k was negotiated for opportunity, the pension was negotiated for security. They both have to produce losses. Don't whine if they look smarter right now. They had to strike and fight for their pensions and now they have to keep fighting to keep them. They probably won't. Soon they will rest in peace.
Anyways, click the link for more pension information.