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I'm not sure I see what the problem is with these pensions. Standard retirement advice is that one should save enough money to live in retirement at a similar l

by notJim 6y ago

I'm not sure I see what the problem is with these pensions. Standard retirement advice is that one should save enough money to live in retirement at a similar lifestyle that they lived while working. If the idea of these pensions is that your salary is lower, but you need to set aside less for retirement, what is the issue? As far as the $2 million figure, if you go to any retirement calculator and try to figure out how much you need to save to have a similar lifestyle in retirement as to working, you will indeed find they advise you to save $2-4m. In the private sector, you're expected to do this on your own, but you get a higher salary to compensate. Looking at my own career, a comparable government job seems to pay about $40k less than a private sector job. If your argument comes down to the public pensions being too generous relative to private ones, shouldn't we instead make private pensions more generous? Why do we want old people who work their whole lives to have a massive step down in lifestyle when they retire? Is that what you want for yourself or your parents?

lotsofpulp 6y ago
That's not the argument. The argument is the state and city government remuneration model of defined benefit pensions and other post employment benefits such as retiree healthcare results in a situation where voters of today, politicians, and higher ranking government employees especially in positions of power with the unions are all incentivized to dump the cost of today's labor onto taxpayers decades into the future. I'm sure everyone is in agreement for giving everyone an awesome life. The problem is no one wants to pay for it. The proof is that voters won't vote for a politician who would compensate government employees a cash amount in their 401k equivalent to the defined benefit pension, because that would require increased taxes compared to a politician that pushes those costs into the future via defined benefit pensions. And taxpayer funded defined benefit pensions and retiree healthcare are a proven vehicle for corruption where costs are shifted from today to tomorrow. And unless the government has the power to print money, they should not be in the business of promising people money decades in the future. That's the only way I see to prevent a repeat of IL/Chicago/Detroit/NJ/CT/RI/KY/CA/San Diego, and the list goes on and on.
- notJim 6y ago
  I understand now. The issue basically comes down to pensions not being pre-funded, right? Although one could argue that by paying a substantially lower salary than the private sector, they are sort of funding the plan by saving money now. It seems the real answer to this would be to have a more generous version of social security at the federal level. And the interim answer is to switch to defined contribution pension plans at the local level, I suppose. Though one thing I don't understand is how governments plan to attract workers when they pay substandard salaries and don't even offer very generous benefits anymore. I was looking at government jobs with the city here (which has a defined contribution pension pretty similar to a 401k), and across the board it was so much worse than any private sector job I've worked.
  - lotsofpulp 6y ago
    Sort of. I would say the issue comes down to it being humans being limited in how much of their wealth they want to share with others, and so will jump on many opportunities to hoard for themselves, especially if the victim is faceless and nameless such as future taxpayers. All blessed with plausible deniability from actuarial calculations. I don't see how it could have played out any other way. Politician A offering low taxes and high services by skimping on saving for future benefits is 100% going to win versus politician B offering high taxes and a fiscally responsible government. And it still plays out that way, until the system reaches a nadir, and it is forced to change, such as Puerto Rico or some of the other aforementioned cities and states. Government should offer people competitive pay, and the idea of it being okay for government jobs to offer less pay in exchange for more stability and retirement benefits should go the way of the dodo, as we can see it just results in long term pain.
    - _RPL5_ 6y ago
      > I don't see how it could have played out any other way. I suppose we are getting technical here, but at some point someone working for these governments (an actual person with a calculator) has had to sit down and do the math to figure out how much money needs to be set aside in order to achieve the advertised pension payout. Who is that "person" in most cases, and why was their math so off? The math must have been very optimistic on the ability of the pension funds to compound wealth. And so the facetious answer to your remark would be "things would have played out much better for these governments if the person doing the math was more realistic about expected returns." Not sure how realistic that goal is in itself.

by notJim 6y ago

lotsofpulp 6y ago

That's not the argument. The argument is the state and city government remuneration model of defined benefit pensions and other post employment benefits such as retiree healthcare results in a situation where voters of today, politicians, and higher ranking government employees especially in positions of power with the unions are all incentivized to dump the cost of today's labor onto taxpayers decades into the future. I'm sure everyone is in agreement for giving everyone an awesome life. The problem is no one wants to pay for it. The proof is that voters won't vote for a politician who would compensate government employees a cash amount in their 401k equivalent to the defined benefit pension, because that would require increased taxes compared to a politician that pushes those costs into the future via defined benefit pensions. And taxpayer funded defined benefit pensions and retiree healthcare are a proven vehicle for corruption where costs are shifted from today to tomorrow. And unless the government has the power to print money, they should not be in the business of promising people money decades in the future. That's the only way I see to prevent a repeat of IL/Chicago/Detroit/NJ/CT/RI/KY/CA/San Diego, and the list goes on and on.

notJim 6y ago
I understand now. The issue basically comes down to pensions not being pre-funded, right? Although one could argue that by paying a substantially lower salary than the private sector, they are sort of funding the plan by saving money now. It seems the real answer to this would be to have a more generous version of social security at the federal level. And the interim answer is to switch to defined contribution pension plans at the local level, I suppose. Though one thing I don't understand is how governments plan to attract workers when they pay substandard salaries and don't even offer very generous benefits anymore. I was looking at government jobs with the city here (which has a defined contribution pension pretty similar to a 401k), and across the board it was so much worse than any private sector job I've worked.
- lotsofpulp 6y ago
  Sort of. I would say the issue comes down to it being humans being limited in how much of their wealth they want to share with others, and so will jump on many opportunities to hoard for themselves, especially if the victim is faceless and nameless such as future taxpayers. All blessed with plausible deniability from actuarial calculations. I don't see how it could have played out any other way. Politician A offering low taxes and high services by skimping on saving for future benefits is 100% going to win versus politician B offering high taxes and a fiscally responsible government. And it still plays out that way, until the system reaches a nadir, and it is forced to change, such as Puerto Rico or some of the other aforementioned cities and states. Government should offer people competitive pay, and the idea of it being okay for government jobs to offer less pay in exchange for more stability and retirement benefits should go the way of the dodo, as we can see it just results in long term pain.
  - _RPL5_ 6y ago
    > I don't see how it could have played out any other way. I suppose we are getting technical here, but at some point someone working for these governments (an actual person with a calculator) has had to sit down and do the math to figure out how much money needs to be set aside in order to achieve the advertised pension payout. Who is that "person" in most cases, and why was their math so off? The math must have been very optimistic on the ability of the pension funds to compound wealth. And so the facetious answer to your remark would be "things would have played out much better for these governments if the person doing the math was more realistic about expected returns." Not sure how realistic that goal is in itself.