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Where can I get a deal like that? Part 2

Aug 6th, 2007 by Ken Johnson

Thanks to all those who commented on posts related to our Pension Tidal Wave series. Here are some responses to those who raised questions in a previous post…

Scott questions the fairness of denying Social Security to those who worked in the private sector before taking a public job. It seems to me this is based on the fallacy that the money you pay into SS is “your money.” It is not and never was. My current payments pay the benefits of today’s retirees. My benefits will be paid by tomorrow’s workers… or so I hope. My annual SS update just warned me that by 2041, when I will be 80, there will only be enough money in SS to pay 75 percent of promised benefits.

Rich notes that when he retires at 60, his pension will be 80 percent of a $38,000 salary — adjusted for the raises he might get between now and then. When I and other private sector workers my age reach 60, we will have seven more years of work required of us to qualify for full Social Security benefits. Rich’s benefit now works out to $30,400 a year, or $2,533 a month. The maximum Social Security benefit as of 2007 is $2,116 or $25,392 a year. This benefit is achieved by earning the maximum income subject to the Social Security tax from age 21 until retirement. For someone retiring in 2007, that means starting by earning $4,800 in 1963 and ending with a salary of $97,500 in 2007.

This is why we hear no public sector workers clamoring to trade their pensions for Social Security.

Note: I also posted this in the comments section of the previous post.

Posted in Ken Johnson, Pension Tidal Wave | Comments

  • Rich
    Ken,
    You need to put a subtext in you remarks about how I also pay 11% of my pay towards that retirement. Every year I contribute $4180.00 to my own retirement. Take that times the 39 yrs and and that is $163,020 that I have contributed to my retirement. What do city's and towns do with the money contributed by employees??? Are they investing it?
    Using your own formula, I have paid for the first five years of my retirement. That is not counting any interest ect. that may be incurred on the dollars I am contributing. I really think you need to present the whole issue, it is easy to slant the facts in your own way. I enjoy working for the public. I am compensated well, and enjoy the benefits. However with my degree and experience, I will find equal if not greater benefits in the private sector. The one difference being, I enjoy working with and for the public. That also being said, you can only kick your employees so many times before they have enough and leave. Then when you have trouble getting or finding help...
  • Shawn
    Ken,
    While it seems that a lot of time and effort went into the pension series, you guys missed a few very important points. Key to this whole discussion should be the fact that public employees, hired after July 1994, are funding their entire pension themselves. They contribute 11% into the system, which is nearly double the 6.2% private sector employees contribute toward Social Security.
    The large contributions that the taxpayers are making to the public retirement systems go towards paying off the unfunded liability that remains from a time, prior to 1988, when the government was making little to no contribution toward pensions. Back then, employee contributions were the only money coming into the system. That debt has nothing to do with current pension benefits.
    In fact, the real story should be that our current system is actually saving Massachusetts taxpayers hundreds of millions each year. The taxpayer obligation to current public employees ranges from 3-4% of payroll, while the normal contribution under Social Security would be 6.2% from both the employee and the employer. If Massachusetts were to switch from a defined benefit program to a defined contribution plan the taxpayers would be required, by federal law, to contribute 6.2% toward the DC plan, or join Social Security.
    Finally, the real story should be just how unjust it is in modern America that many hardworking employees no longer have a dependable retirement program. The battle should not be between those who have pensions and those who do not. Rather the focus should be how, as a society, we can work together to unsure that everyone receives a pension that they have paid for and earned after a lifetime of work.
    Shawn D.
    Quincy, MA
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