Tags: pension | 401k | benefit | tax

Public Pensions Almost 7 Times More Valuable Than 401(k)s Are

Wednesday, 20 Nov 2013 07:38 AM

By Michael Carr

Share:
  Comment  |
   Contact Us  |
  Print  
|  A   A  
  Copy Shortlink
Fidelity recently noted that the average 401(k) account balance is now more than $84,000, a record high. Using standard financial planning advice, this amount would provide $210 a month in income.

Financial planners generally advise retirees to withdraw 3 percent of their account balance each year.

Public employees, on the other hand, receive benefits that average $1,500 a month or more. That much income would require a 401(k) balance of $600,000, more than seven times what the average person in the private sector has.

Publicly funded defined benefit plans relieve employees of the need to save and allow government employees to spend more now since they are freed from the burden of saving for tomorrow.

Many public pensions are underfunded and will require higher taxes on the citizens who are struggling to save for their own retirement. Higher taxes will force them to pay for the retirements of public workers, while forcing them to spend less on their own families.

This problem has existed for many years, but is now reaching a crisis level. The solution seems to depend on one's perspective. Unions demand that pension promises be honored, and taxpayers would prefer a lower burden so that they can save for their own retirements.

The solution will most likely require sacrifice on the part of everyone. Government workers tend to have higher-than-average salaries and benefits as compared with employees in the private sector. Solving the public pension problem should require them to accept slightly less so that current taxpayers can maintain their own standard of living.

© 2014 Moneynews. All rights reserved.

Share:
  Comment  |
   Contact Us  |
  Print  
  Copy Shortlink
Around the Web
Join the Newsmax Community
>> Register to share your comments with the community.
>> Login if you are already a member.
blog comments powered by Disqus
 
Email:
Retype Email:
Country
Zip Code:
 
You May Also Like
Around the Web
Most Commented

Newsmax, Moneynews, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, NewsmaxWorld, NewsmaxHealth, are trademarks of Newsmax Media, Inc.

MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved