The Chicago Tribune recently made available a chart showing the unfunded pension liabilities of all the states. That number alone is almost one trillion dollars.
States like California, Illinois, Ohio, Pennsylvania and New Jersey have $50 billion or more shortfalls with California topping out at over $131 billion.
This kind of information has been floating around for several years. It seems like back in 2008 that the pundits were saying that if the market comes back there would not be a problem. (Wait, I thought the markets were in record territory.)
Why will this only get worse and NEVER get better? Because states can’t print money. They can only raise taxes or lower benefits or do a combination of both. Even if you get your entire pension, if they raise taxes and maybe even specifically raise taxes on the pension itself, you receive less benefit. Yes, you read that correctly, a writer for the Chicago Tribune has proposed the solution to Illinois’ $94.6 billion shortfall is to tax the pension itself. (See May 14th issue. I would give you a link but the Tribune is in desperate need of subscriber money and makes it hard to view the article.)
So you tell me; should employees who work for government entities completely depend on their promised pensions? Probably not! The follow up question every government employee should be asking is; “Should I build some additional retirement income on my own to replace income that probably will not be paid as promised?”
I can only help people if they want help and ask for it ahead of time. If you wait until the promise is broken it will have a devastating effect on your quality of life.