The New York Times featured an editorial (Our Ridiculous Approach to Retirement) on July 21, 2012 by retirement policy specialist Teresa Ghilarducci that details how difficult it is for all but the most dedicated savers to amass an adequate nest egg, in addition to Social Security, that will support them in retirement.
Ms. Ghilarducci writes that human nature conspires against us to limit our savings, particularly in our early working years. Denial and unreal expectations cause many to live in a alternate reality that will disappear once they actually retire. She mentions her own plan that would require a radical rethinking of current personal retirement accounts like 401k's, 403b's, and 457b's. So what does this have to do with Arizona state Public Safety Personnel Retirement System (PSPRS)? Several things:
1. PSPRS is not a supplement to Social Security like most employees' retirement accounts. For firefighting and law enforcement personnel PSPRS is their Social Security. The ironclad protection that most assume for Social Security is assumed for PSPRS as well, but how secure is PSPRS, or any other defined benefit pension, for that matter? Is it realistic to rely solely on a PSPRS pension for your retirement income?
2. Pension accounting and actuarial science is extremely complicated and the realm of a specialized experts, and if it is difficult for individuals to manage a personal retirement account, how can the average PSPRS member understand how the pension is being managed?
3. Finally, we get to the most delicate question for PSPRS member. Are the ones who lobby our state legislators about pension legislation really looking out for what is best for the long-term financial health of PSPRS (and its ability to pay both current and future retirees)? Or are they maximizing current benefits and passing a huge financial burden on to PSPRS member not yet hired, as well as taxpayers?
Honest information and discussion is the only way to answer these questions, and if PSPRS members do not look out for themselves via vigilance and education, who will?
Thursday, August 9, 2012
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During the past 7 years, courtesy of the DROP program, fire fighters are retiring with more money than most middle class Americans are able to save during their working life. Fire fighters have used overtime and sick leave sellback to earn well above their normal wages and subsequently increase their pension. Current retirees receive full medical benefits that would cost other Americans $500+/month. And all of this when the PSPRS is underfunded by 40% and unemployment is over 8%. And yet the Union blames state and local governements, Wall Street greed, and extremists like the tea party. It's time for us to take a hard look in the mirror.
ReplyDeleteAmericans have been warned about SS, and now FF's should be concerned that the pension may not be there when we need it. Just like what happened to the private sector, Union greed is starting to take its toll on the public sector. Better start maxing out our deferred comp boys.
ReplyDelete