Many government public pensions are way more generous than private pensions. They are designed in a manner that truly rips off the taxpayer. The situation is so bad, that the unfunded pension liabilities are going to bankrupt cities and states. This is not only bad for those cities and states, but bad for the government employees who may collect much less pension than they were expecting. There is a need to correct these problems in a manner that is fair to both the government employees and the taxpayers.
How did this happen in the first place? There is a very serious, obvious conflict of interest between public unions ( a legal labor monopoly that should not exist at all because it has all the adverse impacts of banned business monopolies) and the politicians, who get elected with union support (time, money, and votes), that negotiate wages, pensions, and benefits with the people who got them their jobs.
Here are my recommendations:
Fund all public pension liabilities that exist and new ones that are created. You can't use government bonds to fund them; you must use taxes that are invested by qualified, non-interested commissions subject to rules and review. However, if that funding requires a tax increase greater than inflation or a tax increase two contracts in a row, then publicly state how much in total and by average taxpayer, and hold an election in which voters can accept or reject the contract.
Eliminate the conflict of interest between public unions and politicians. The simplest, most effective way would be to ban public unions. Other less effective solutions may work such as point 1. Arbitration of union contracts by non-politicians who are not interested parties could be another solution.
3. Overtime pay may not be utilized to calculate income in pension determinations. Furthermore, management and professions, just as in private industry, can not be paid overtime, but are expected to work overtime as required to fulfill the duties of their jobs.
4. To avoid the spiking of pensions through either massive overtime or phony promotions in the years just before retirement, annual income for pension calculations will be the highest consecutive 5 year average of the last ten years and again can not use overtime pay. No pension amount can exceed 55% of this five year average annual pay. You get 1.5% credit for each full time year worked, not to exceed 55% in total. Part time years get partial credits in proportion to a 40 hour week.
5. Full pensions cannot begin until age 65 and partial pensions until age 55. For each year of retirement before age 65, the pension amount will be reduced 4% from the full pension amount.
6. Government workers must also contribute to and receive Social Security. Calculated pension amounts will be further reduced by half the projected Social Security benefit.
7. Government workers who are married at the time of retirement may choose to allow their spouses to collect their pension after they die. However, the amount of pension collected will be further reduced based on life expectancy tables of the husband and wife.
8. No cost of living raises will be allowed on government pensions.
9. Should there ever be a default of a government pension so that only partial benefits can be paid, those collecting pensions that were calculated utilizing overtime pay, would have their pensions reduced first to what their pensions would have been without overtime pay. Then all pensions, if still needing to be reduced, will be reduced by the same percentage.
10. In the future, eliminate government pensions and just contribute to 401K plans (no more than 5% a year). 80% of taxpayers have no pensions and should not be on the hook to fund extravagant government pensions.
What I have proposed is essentially the way private pensions work. Federal pensions should not exceed the private pensions of those taxpayers who get them.
Getting it Right - Welcome
The goal of this blog is to publish my thoughts on a variety of economic and political topics in the hopes that people who find them educational or beneficial will utilize them and/or forward to others who might find them interesting and/or worthwhile to promote to others, possibly including politicians who can push some of these ideas to fruition. The topics in my blog are meant to be of value on a long term basis, not a daily diary or political issue of the day log. If the information posted is useful to you, by all means utilize it and/or forward it as you see fit. If not useful, then merely ignore it. There are no universally agreed upon truisms and too little tolerance between some of those with opposing viewpoints to successfully convince the people with hardened opinions to move away from them. I am an analytical type person who will try to be as factual as I am able.
I disdain the current popularity of name calling and condemnation of viewpoints with no factual alternatives or logical solutions given that I see so often. If you don't have a solution based on fact and logic, then opt out of the discussion because you have nothing to contribute. My background is a degree in Economics from the University of Michigan and 39 years working in middle management jobs for a major retailer. My opinions are forged on the personal experence of life, family, friends, and work as well as triumphs and mistakes that I have made and hopefully learned from. My hope is that this blog helps you.
My first topic will be about personal finance. I chose that one first because most of us work long and hard just to survive but not all of us realize our dreams of becoming financially independent from the labors of our work. Much of our political votes/thinking also focus on the economy and in particular how well we are personally doing financially.
It is relatively simple, without sacrificing the enjoyment of living for 'today' and even at moderate incomes, to retire as a millionaire or multi-millionaire, if you focus on that goal consistently from a young age. It is also simple to ensure that your child or grandchild retires rich. It merely requires a one time gift of just $2,000 invested wisely and the passage of time. Please read my first post on this blog to learn more.
An index/schedule of past and future posts and their dates will always be updated so that it becomes the first post that you see below. If the date of a post that you wish to read is preceded by the word "Posted", then find it below or click on the title in the Blog archive to review.
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