Summary
- For years, public labor union leaders lobbied for and sycophant politicians granted ever richer public pension programs.
- Unfortunately, many of those pension programs have gone many years without adequate funding.
- Today, many large public pensions are seriously underfunded and, without major changes, will not pay out future promised benefits.
- There are only three possible options to address the underfunding, none of which are palatable.
- If you rely on a public pension for the majority of your retirement expenses, you might do well to develop a plan B.
What's Wrong With Public Pension Programs?
There are a number of problems with public pensions.
- The tactic of "spiking" pension benefits by racking up significant overtime pay in the last couple of years of employment causes many individual pensions to balloon to very lofty levels.
- Generous retirement terms that allow workers to retire as early as 50 years old puts additional drain on pension assets.
- Generous pension formulas based on age and the last 3-5 years of earnings which are usually the highest career earnings inflate the pension liabilities. All of these issues serve to put additional strain on public pension funds.
- But the single largest problem that public pension funds face has been and continues to be years of underfunding by local, county, and state governments.
- And to obfuscate the extent of underfunding, public pensions continue to use unrealistic expected market based returns to claim that plans are sufficiently or near sufficiently funded..."
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