America is getting old fast. Too fast. The most recent estimate puts the 65 and older crowd at 44.7 million.1 That number is on track to more than double to 98.2 million by 2060.2 Too many planning to hang up the working life have to ask a question that will decide whether the rest of their years will be spent in happy relaxation or greeting customers at the local discount store: how do I retire with no money?
If you work for government that question is a lot easier to answer than if you have to be responsible for your future. Don’t believe anything you hear about the inadequacy of government pensions or government workers not getting Social Security, especially if it comes from unions.
If you want to retire well, work for government. That is a truism you can hang your hat on.
Retire with no money? Sure you can, but …
Retirement is a pretty uncomplicated thing. It means not working. You don’t need money to not work. You need money to survive, which can be a problem if you retire with no money.
The GAO just reported some grim statistics on the state of America’s retirement savings. 39% of households don’t have jobs with defined contribution (e.g., 401(k)) retirement plans.3 Not surprisingly, those with lower incomes were the least likely to have these plans.4 For those lower earners who did, their retirement incomes will average about $560.00 each month.5 Add that to an average Social Security payment of $1,345.00 per month6 and you get an income of less than $23,000 per year before the IRS skims the government’s take.
That’s not a lot of money for people who will also be facing some of the biggest medical bills of their lives, even with Medicare.
Another federal report issued last year found:
About half of households age 55 and older have no retirement savings (such as in a 401(k) plan or an IRA).7
It gets worse:
… among households age 55 and older, about 29 percent have neither retirement savings nor a DB [defined benefit] plan, which typically provides a monthly payment for life.8
Unless the lottery intervenes these people are not destined for happy retirements. The good news is that they still pay taxes while they are working. That means they can help fund the pensions of those lucky enough to work for government, many of whom have much brighter golden years to look forward to.
If you want to retire, work for government
Illinois breathed a sigh of relief when a proposal to slap a new tax on residents by charging them for the miles they drive failed to pick up traction. Fearful that low fuel prices and the push to cleaner cars was cutting too deeply into his state’s take, State Senate President Cullerton thought he had found a new revenue source. Perhaps he never noticed that putting by-the-mile taxation devices on cars smacks of desperation.
Illinois needs that cash. Our state’s debt load includes the crushing weight of funding pensions for government workers, a daunting task that takes precedence over spending on education for our kids. State Democrats have been eagerly pointing fingers at the governor for his stance on the budget and spending. Few have publicly questioned why government worker retirements are more important than schools.
Despite the whining from public employee unions that their members only have government pensions and no Social Security to fall back on, Illinois funds some of the highest average pensions in the nation. Payouts average $30,000 to $37,613 annually,9 hardly a windfall but a lot better than $560.00/month plus Social Security.
Those at the top of the scale pull down retirement incomes that are much, much higher. An Illinois Policy Institute article shows just how generous state taxpayers are forced to be. Not surprisingly, legislators are near the top of the heap.10
Joined by other financially desperate states like California and New York who are also on the roster of government retirement generosity, the Land of Lincoln is the best excuse Congress has to pass a law for states to go bankrupt. That hasn’t happened yet, but we did get a bipartisan bill to stop handing pensions to members of Congress.
Don’t hold your breath. That one hasn’t gone anywhere.
H.R. 584: no more federal lawmaker pensions?
I usually smirk when I hear about a bipartisan bill that is decidedly partisan in intent. For that reason I was surprised to find that Nevada Congressman Brad Ashford was a Democrat and the only non-Republican cosponsor of H.R. 584, the “End Pensions in Congress “EPIC” Act.”
Ashford stated the simple truth:
Private business and nonprofit sectors don’t pay out full pensions to employees who are employed for only five years and neither should Congress, especially when taxpayers are forced to foot the bill,” Ashford said. “Our retirement system should be similar to Nebraskans who work in the private sector.11
Kudos for pointing out the obvious about who pays for government pensions. As we have seen in Illinois, like any other handout once public retirement benefits are entrenched they are almost impossible to cut back. Elderly taxpayers may have a hard time choosing between food and their prescriptions, but they will always have to afford helping public servants stock their shelves.
Government pensions: the election issue we seldom hear about
We’ve heard a lot of bad things lately about Illinois Governor Bruce Rauner. Rauner’s intransigence on the budget deserves high praise, something he’s not likely to hear anytime soon. The governor has shown he isn’t afraid to be the bad guy. He understands that no money means no money.
We put him in office to stop the same kind of fiscal foolishness that has led to government worker retirements so large that they can literally tip the balance between state solvency and budgetary destruction.
There is nothing very glamorous or hot buttonish about public pensions. They certainly can’t compete with Benghazi or Hillary’s server for campaign trail fodder and besides, what candidate in their right mind would lambast benefits being doled out to lawmakers they have to work with?
Democrats vigorously defend the “Social Security means retiring with dignity” party line. This is an easy thing to promote when you know you don’t have to worry about living on $16,140 every year in federal benefits, which is a lot less than the $15.00 per hour wage they believe Americans are entitled to.
Republicans should be all over this one. There is nothing ethical about forcing people barely able to scrape by to finance retirement security for those who work for government, especially in states like Illinois so desperate for revenue that few things in life escape a government levy.
More and more Americans are reaching retirement age. The disparity between those with sustainable incomes and those without will drive home the fact that if you want to retire without a stockpile of savings, you need to work for government.