Saturday, August 7, 2010

Your Money - The Coming Class War Over Public Pensions - NYTimes.com


I've actually been surprised we haven't seen more stories about this.

Here's an excerpt:

Taxpayers, whose payments are also helping to restock Colorado’s pension fund, may not be as sympathetic, though. The average retiree in the fund stopped working at the sprightly age of 58 and deposits a check for $2,883 each month. Many of them also got a 3.5 percent annual raise, no matter what inflation was, until the rules changed this year.

Private sector retirees who want their own monthly $2,883 check for life, complete with inflation adjustments, would need an immediate fixed annuity if they don’t have a pension. A 58-year-old male shopping for one from an A-rated insurance company would have to hand over a minimum of $860,000, according to Craig Hemke of Buyapension.com. A woman would need at least $928,000, because of her longer life expectancy.

Who among aspiring retirees has a nest egg that size, let alone people with the same moderate earning history as many state employees? And who wants to pay to top off someone else’s pile of money via increased income taxes or a radical decline in state services?

This obviously is a difficult question. Public employees in many cases worked for less money than they might have earned in the private sector with the knowledge that they would receive a generous pension and health care benefits at retirement. Yet it is becoming increasingly clear that these promises are bankrupting many municipalities, not to mention the cutbacks in municipal services.

What a mess.

Your Money - The Coming Class War Over Public Pensions - NYTimes.com