Helping others retire comfortably

I actually found this statement funny. It comes from a list of ways to take control of your financial life.

Work in the Public Sector

“I stuck with my state jobs through thick and thin: lay offs, administration changes, terrible bosses, long hours and more.” The pay off? “Retirement at 52 with a pension and healthcare for life.”

Jobs with pensions are few and far between, but the retirement benefits can be astounding. However, it is also important to note that pensions are also highly controversial in that many state and federal programs are extremely underfunded. Many pension administrators have over promised.

New Retirement blog

Retire at 52, health care for life? Only in government‼️ Such generosity is paid for by taxpayers or as noted above not paid for at all.

8 comments

  1. It’s why I asked if you might have made more in the private sector.

    Pay compression…

    The leading “human capital” studies, comparing equivalent workers agree:

    1. Less educated, non skilled public workers earn about the same salaries as equivalent private sector workers, but when benefits are added (pensions/healthcare) they earn much more than the private sector.

    3. Doctors, professionals, degreed public workers, have lower salaries on average than equivalent private workers, and their higher pensions and benefits are not enough to compensate for lower pay.

    2. On the continuum between these extremes, logically and empirically verified, is a middle group who earn slightly lower salaries, which are roughly offset by higher benefits. “Just right”, the Goldilocks effect.
    ——————–
    The two most prominent human capital studies circa 2008-2012:
    More liberal study, nationwide, public worker total compensation averaged 7-10 less than private workers.
    More conservative study, state workers averaged 12 percent more.

    The primary difference, hinted by Quinn and others, is the underfunded benefits. Biggs calculated the value of pensions using the risk free rate. The “correct” method according to financial economists. Ask me why I disagree.

    Like

  2. I retired from the USAF in 1995 @39. I retired from the workforce @ 50 in 2006. I lived on my small military pension and credit cards, from 2007 to 2018. In 2018. I started SS benefits @62 for myself and wife (spousal benefits). Both checks added to $100 above my FRA amount. I paid off $28,000 in credit card debt in just 18 months. Now @ 67 I am able to save $10,000 per year from my income of $43,220. I have no out of pocket medical expense, after Medicare pays, my USAF Tricare for Life insurance pays the 20%. I am able to live great in Montana, no state sales tax, zero federal income tax and $23 MT income tax for 2021. MT exempts $4,400 of my military pension, and MT has a bill in the works that might exempt up to 50%.

    Like

  3. George Santos:

    “He was a very interesting person. We hit it off right away. He told me once ‘if I can get elected to Congress, for just one term, I will be set with a pension and healthcare for the rest of my life.'”

    And other alternative facts.

    Like

  4. If only. Retire at 52 is way below average, except for law enforcement, which often has mandatory retirement at 55.

    Most of the people I knew retired between age 62 and 65, same as the private sector.

    I just looked up the average retirement age for California public retirees… 58.5. However… Most retirees are not career employees. Anyone who vested (5 years) earlier in their career, then returned to the private sector can begin to draw a pension at minimum retirement age.

    Typical formula …2%@60…

    2% of Final Average Salary times number of years worked.

    If one worked from 1970 to 1980, then went to a private sector job, leaving his pension vested, he could begin to draw his pension at age 60 in 2010.

    Average annual salary in 1980 = $14,000
    Times 20 percent (2% x 10years) =$2,800/yr
    $233/month, with no health care.

    Since only about 20 percent of retirees are “full career” employees, the average pension in 2022 is about $40,000/yr.
    Average pension for “full career” employees is about $70,000. Roughly 20-35 percent of that is principle and returns from employee deductions.

    Bottom line, the taxpayers are getting a fair bang for their buck.

    Like

    1. https://www.latimes.com/archives/la-xpm-1995-11-23-mn-6413-story.html

      Over 1000 retired state employees making over $100K per year. This probably doesn’t include UC and state schools as I believe they’re paid by the schools, not the state.

      https://www.hoover.org/research/140000-year-why-are-government-workers-california-paid-twice-much-private-sector-workers

      At $140,000 Per Year, Why Are Government Workers In California Paid Twice As Much As Private Sector Workers?

      Like

      1. “…Twice As Much As Private Sector Workers” ?

        Should hopefully raise some red flags.

        I had a post or two in that article, as did one or two of my detractors.

        I may be whistling up a rope (again), but according to the BLS:

        private industry workers averaged $36.23 per hour worked in December 2020. Wage and salary costs averaged $25.48 and accounted for 70.3 percent of employer
        costs, while benefit costs were $10.74 and accounted for 29.7 percent.

        State and local government employer costs averaged $53.47 per hour worked. Wages and salaries averaged $33.08 per hour worked and represented 61.9 percent of total compensation costs, while
        benefit costs averaged $20.39 and accounted for the remaining 38.1 percent.

        However,
        Employer costs for private sector establishments with 500 or more workers averaged $53.83 per hour worked Wages and salaries averaged $34.94 per hour worked and represent 64.9 percent of total compensation costs, while benefit costs averaged $18.88 per hour, for 35.1 percent.

        In other words, it appears the dichotomy is not so much between public and private workers, but between workers in small establishments and large ones.
        Government establishments usually have over 500 workers, and a little over half of U.S. workers are in establishments over 500.

        Fact: state and local workers on average have nearly equal compensation, but have lower salaries, with a higher benefit costs than private sector workers.

        Bonus fact: employees of large corporations also have more paid leave (9.1% of compensation) than state and local government workers (7.6 percent)

        Like

  5. I retired at 55 from thee federal Govt. The pension is nice but I have to pay for my Medicare and BCBS. And the premiums go up each year!

    Like

    1. It’s why I asked if you might have made more in the private sector.

      Pay compression…

      The leading “human capital” studies, comparing equivalent workers agree:

      1. Less educated, non skilled public workers earn about the same salaries as equivalent private sector workers, but when benefits are added (pensions/healthcare) they earn much more than the private sector.

      3. Doctors, professionals, degreed public workers, have lower salaries on average than equivalent private workers, and their higher pensions and benefits are not enough to compensate for lower pay.

      2. On the continuum between these extremes, logically and empirically verified, is a middle group who earn slightly lower salaries, which are roughly offset by higher benefits. “Just right”, the Goldilocks effect.
      ——————–
      The two most prominent human capital studies circa 2008-2012:
      More liberal study, nationwide, public worker total compensation averaged 7-10 less than private workers.
      More conservative study, state workers averaged 12 percent more.

      The primary difference, hinted by Quinn and others, is the underfunded benefits. Biggs calculated the value of pensions using the risk free rate, the “correct” method according to financial economists. Ask me why I disagree.

      Like

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