Wednesday, March 04, 2009

Pension Time Bomb

This is an interesting article detailing the looming failure of many state pension plans, including showing how government guarantees make much of their irresponsibility possible. The question, as I asked in my recent LTE, is why should they be able to enter into a "contract" with people, who by virtue of youth or not even having been born, have no way to consent? I know I never would have agreed to pay someone 75% of his average salary for having worked 30 years (which means he could retire at 50 and then live on taxpayer's work for the rest of his life). But of course the trick is not to ask the victim...

1 Comments:

Blogger Realist Theorist said...

It's a huge problem. In Oct 2008, some estimates showed a $350 billion deficit in pension shortfall and an equivalent shortfall in retiree health-care. Since then, the market has gone lower, likely making things worse.

But wait, there's more... ! Even if the market goes back up, if the longer term trend is below the old expectations (and why not, with all the damage being done to the economy) things could get worse.

Inflation might ride to the "rescue" of state governments that do not have plans pegged to inflation.

I hope people working for the government are taking this into their calculations in a way that sensible people are viewing social-security today.

8:15 AM  

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