Amer­ica’s Govern­ment Pen­sion Pain

Escalon Times - - PERSPECTIVE - By DR. GLENN MOLLETTE Guest Columnist Glenn Mollette is a syn­di­cated columnist and au­thor of 11 books. He is read in all 50 states. Visit www.glen­n­mol­lette.com. The opin­ions ex­pressed are those of the au­thor and not nec­es­sar­ily those of this pa­per or its

Sto­ries of strug­gling govern­ment pen­sion fund­ing have abounded the last few months. Re­ports of chang­ing the re­tire­ment sce­nario for state em­ploy­ees are dom­i­nat­ing the con­ver­sa­tion in states like New Jersey, Illi­nois, Cal­i­for­nia and Ken­tucky.

Seventy-five year old re­tired Amer­i­cans aren’t in­ter­ested in go­ing back to work. How­ever, if state govern­ment pen­sions are cut some may feel like they have to.

Al­ready, Wal-Mart, McDon­alds, Tar­get, Star­bucks and scores of other re­tail­ers are filled with Amer­ica’s se­niors try­ing to at least make gro­cery money to sur­vive dur­ing their se­nior years. The pic­ture of an 80-yearold who has to work just to make pay­ment on his govern­ment sub­si­dized hous­ing and to af­ford a few gro­ceries is not a pretty pic­ture of Amer­ica.

Amer­i­cans grew up in the ‘60s and ‘70s be­liev­ing that some­day most of us would be mil­lion­aires. Dur­ing Jimmy Carter’s Pres­i­dency and run­away in­fla­tion era all the pro­jec­tions con­cern­ing 401k pen­sions were that they would yield at least a mil­lion dol­lars in sav­ings. A friend of mine who re­cently re­tired and paid into a 401k an­nu­ity plan pre­scribed by his com­pany for 35 years had ap­prox­i­mately $350,000 saved to live on the rest of his life. That sounds like a nice chunk of money but it won’t go far.

Take for ex­am­ple a state govern­ment pen­sioner whose re­tire­ment is $4,000 a month. Some are a bit less and many are a lot more. How­ever, this is $48,000 a year plus med­i­cal in­sur­ance ben­e­fits. A state govern­ment em­ployee who re­tires at 52 and lives for 30 years will col­lect $1,440,000 plus oc­ca­sional cost of liv­ing in­creases, plus health in­sur­ance.

It doesn’t take a ge­nius to fig­ure out that a de­fined ben­e­fit re­tire­ment will pro­duce a lot more yield over a life­time than a 401k pen­sion. A 401k re­quires a very gru­el­ing dis­ci­plined life­style of sav­ing lots of money and do­ing with­out to­day in hopes of hav­ing money for the golden years. Most of Amer­ica’s cur­rent work­ers can­not fathom of try­ing to save $10,000 to $18,000 a year into a re­tire­ment plan be­cause they need ev­ery penny to­day to live on. Col­lege loan debt, house pay­ments and of­ten one or two small chil­dren con­sume ev­ery penny. By the time peo­ple start se­ri­ously pay­ing into a 401k pen­sion the race is on. You can’t build much in 20 years un­less you are pay­ing $15,000 or more a year into a fund. Thus, most peo­ple need 30 to 35 years to­day to ac­cu­mu­late much money. A govern­ment pen­sion that promises you $4,000 to $5,000 of money ev­ery month the rest of your life af­ter work­ing 28 years is a deal that is hard to beat.

Govern­ment re­tire­ments and other in­dus­tries for years have af­forded their re­tirees de­fined ben­e­fit re­tire­ments se­cured on the backs of what other peo­ple will pay into the fund. So­cial Se­cu­rity to­day is in trou­ble be­cause the money peo­ple paid into it was not kept in re­serve for the re­tirees. In­stead we have spent it on Viet­nam, Afghanistan and any­thing the govern­ment wanted to spend it on. Thus, we are al­ready be­ing warned that in 15 or so years there will not be enough peo­ple pay­ing enough money into So­cial Se­cu­rity to fully pay Amer­ica’s fu­ture re­tirees what was promised.

Sav­ing Amer­i­can’s pen­sions will take an all-out ef­fort. We can’t just kick the can down the road. Even­tu­ally there will be no more money to bor­row be­cause the abil­ity to pay it back will be im­pos­si­ble which is where we are through­out our coun­try.

I do be­lieve Amer­i­cans will do their part if govern­ment will do its part. Most pen­sion­ers would re­luc­tantly take a painful 10 per­cent cut if it meant sav­ing the sys­tem. Re­tirees would prob­a­bly be will­ing to work to 59, but when you start at 25 that is still 34 years of work. A com­bi­na­tion of state pen­sion and So­cial Se­cu­rity would be a work­able so­lu­tion as well.

One ma­jor plus of a 401k pen­sion fund is that at least it is your money. If you have saved $200,000 or $300,000 then you can count on it. You can spend it or leave it to your chil­dren. One thing about your govern­ment pen­sion in this new mod­ern era is – you prob­a­bly can count on it – just prob­a­bly not all of it.

Newspapers in English

Newspapers from USA

© PressReader. All rights reserved.