Monday, March 24, 2014

The Great Pension Lie

Public pensions eating taxpayers alive

Jeff Jacoby in the Boston Globe published an article Sunday about how the mean pensioners are devastating not only the poor of this country...

the “startling injustice” of poor and working-class taxpayers forced to make do with less and less so that the gold-plated pensions of public-sector retirees, which already gobble an outsize share of government budgets, can keep devouring more and more. 
But also the progressive agenda...

Dismay at that injustice is increasingly bipartisan, as it becomes clear that liberal priorities will die on the vine without pension reform. 

He goes on to describe the horrors and burden of public sector pensions.

And how much is a full-career public employee pension worth in dollars and cents? In the average state, those lifetime retirement benefits — again, not including health coverage — have a present value worth $768,940. In many states, they’re worth even more — $848,735 in Massachusetts, for example, and more than $1.3 million in Nevada.  

The Great Lie

I call this a lie not because the public pension burden is fictitious, but because Jacoby makes it out like it the pensioners are getting something for nothing, or something that all of us public or private can't get. He makes it out like the pensioners are at fault, are guilty of some 'startling' crime.

A Simple IRA invested in over a lifetime at the maximum $5500 contribution rate will be worth roughly $375,000 after a lifetime of work and investment at today's 5-yr rate of 1.45%

A 401K investing 10% of a 40,000/yr annual salary without employer matching would be worth $1,250,504

A 401K investing 10% of a 40,000/yr annual salary with employer matching would be worth $1,625,555

Both those 401K investments are calculated at a mere 7% rate of return. Boost that to the historical 9.6% and those two accounts inflate to $2,684,446 and $3,489,780 respectively, far outstripping Nevada's horrifying 1.3 million dollar burden.

The Greatest Robbery of All Time

The biggest lie of all time is transferring the blame and responsibility for the crisis onto the pensioners.  As illustrated  above, the problem isn't that some great financial crisis that wiped out all the wealth, it is the greatest robbery of all time... Uncle Sam has been raiding the piggy bank for the last fifty years and is now left empty handed with a sheepish look on his face.

The reason "poor and working-class taxpayers forced to make do with less and less" has nothing to do with the "gold-plated pensions of public-sector retirees" and everything to do with politicians robbing us blind for the money to buy our votes.

You didn't think they were spending their own money, did you?

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