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April 12, 2013 at 6:09 AM
I am 20 years older than you, and I read your column with interest. I agree with much of it. My generation did benefit from rising real estate, at least, the ones of us who bought real estate. We did benefit from low-cost public colleges, at least, those of us who went to class. Our arrival at the gates of Social Security does strain that system, and the trust fund’s projected exhaustion in 2033 bodes ill for you. But there are other considerations.
Social Security’s problems start now. It went cash-negative in 2010, as this NPR report says. The “trust fund” is a list of political promises, not a pile of assets the government can cash in. Anyway, the politicians will fix Social Security. Probably they will adopt the chained CPI (which Obama is in favor of), raise the cap on taxable pay and maybe raise the tax rate. They will do this because they will lose their jobs if they don’t. Don’t worry about it too much.
There is a lot of professional hand-waving about retirement, much of it by people who are trying to get something out of the government. You have to discount it. It is true that the defined-benefit pension plan is slowly dying out in the private sector. It’s a shame; such plans are wonderful. But they turn out to cost a lot more money than was advertised, and employers are shedding them. According to the Employee Benefit Research Institute, only 14 percent of private employees have such a plan.
The employees who have lost defined-benefit coverage have typically augmented or replaced it with defined-contribution coverage, generally a 401(k). It’s not as reliable as a pension; the investment risk is on you, not your employer or the government. But if you participate—enough—and you avoid too many bad investment decisions, your risk of old-age poverty goes down.
EBRI has some interesting pie charts on the source of income for Americans over 65. Between 1974 and 2010, Social Security’s share (OASDI) fell from 42 percent to 39 percent, but was still the largest. The other fat slices of the pie are pensions and annuities, asset income (dividends, interest, rent); and earnings (work). Over the 36 years, work became more important and asset income less, but the remarkable thing is how similar those pie charts are a generation apart.
Those are statistics. We’re individuals, and in my Boomer generation, we’re all over the lot. I know Boomers who are loaded and Boomers who are broke. Throughout our working life there have always been differences in how much we earned, how much we saved, how much we borrowed, how smartly we invested, the kind of person we married, how many kids we had, and in what manner we were visited by Lady Luck. All that now means that in our 60s, we’re in really, really different positions.
You write, “The American compact used to be one of shared gain and shared sacrifice.” That was rhetoric. Don’t take it too seriously. It never was wholly true; most Americans are not egalitarians. It is still partly true, but less so. Maybe by the time you’re where I am, American culture could shift back toward egalitarian values, but I wouldn’t bet on it.
The real rule has always been to look out for yourself and your family because nobody else will. You can complain about the world around you—and if I were in your shoes, I’d be saying some of the same things as you. What good they will do, I don’t know. Good luck.
April 8, 2013 at 9:28 AM
Judging by the readership stats lots of people took notice of The Seattle Times Sunday story about medical benefits for retired public employees.
The heart of the matter is laid out in the fourth graph of the story:
“While local governments around the country have dealt with debilitating budget problems in recent years, a Washington state retirement system created decades ago for now-veteran public servants has added particularly daunting burdens for some jurisdictions.”
February 28, 2013 at 6:00 AM
While proposals are floated in the Washington State Senate to create defined-contribution retirement plans for public employees–proposals endorsed by The Times– lobbying was also going on in the House of Representatives to move certain groups of public employees into traditional pension plans with higher benefits.
You can listen to the testimony here, which was given Feb. 26 at the House Appropriations Committee. Most of it is from people whose benefits stand to go up, or whose clients’ benefits stand to go up. They like the proposals. Probably they originated them. And they make the usual argument: Some other group has a benefit; I am similar to that other group; therefore I should have the benefit. Some of them make a compelling case. An employee of Western State Hospital talks about being attacked without warning, and suffering a crushed foot. What makes him so different from a prison guard in terms of the retirement he should have?
The prison guards’ pension plan is PSERS, the Public Safety Employees Retirement System. It’s a small plan, created in 2004 for employees who didn’t qualify for the most generous plan, the Law Enforcement Officers and Fire Fighters (LEOFF) plan. But PSERS is richer than the big state defined-benefit plan, Public Employees Retirement System 2 (PERS-2). In PERS, normal retirement is at 65; in PSERS it’s at 60. PSERS has higher disability benefits than PERS and allows early retirement at 53 instead of 55.
“Jobs like mine should be given an early retirement age,” says a 29-year-old worker at Western State Hospital. Well, maybe—but there isn’t enough information at this hearing to really judge.
Two bills have been offered, both of them by Rep. Timm Ormsby, D-Spokane. Ormsby is a union man, the immediate past president of Local 72 of the Operative Plasterers and Cement Masons. He is helping other union brothers.
Ormsby’s House Bill 1923 would open PSERS to employees of the Department of Social and Health Services involved in direct care, custody or safety work. Ormsby’s H.B. 1929 would open PSERS to public utility district line crews. The PUD association testified against it, as did the state’s biggest PUD, Snohomish County PUD, because it would cost ratepayers more money.
Are these upgrades justified? I don’t know. Maybe some of them are. But they come at a time when state budgets are tight, when pensions have been a troublesome budget item, and when serious proposals are floated to transition away from defined benefit plans, ultimately to get rid of them altogether. These bills build up such plans. They entice the public agencies to promise employees greater future benefits. And as we keep being reminded, once any public employer makes a pension promise to an employee, taxpayers are stuck with it.
Ormsby has yet another pension bill, H.B. 1913. It would raise retirement benefits of custodians, food service workers and others covered by the School Employees Retirement System (SERS). Someone earning a benefit of $30,000 a year under the current system would get about $31,500 a year.
And so it goes.