Quote:
Originally Posted by CliffFletcher
I don't see a lot of people advocating removing public sector pensions altogether. But they have to be sustainable. It's all well and good to promise a comfortable pension from age 56 to 90. But what happens if payouts continue to rise faster than contributions? If pensions bankrupt the municipality?
If I were a member of a public sector union, I'd prefer a modest rollback of the plan to finding out at 63 that the system is not sustainable and I'll have to accept 25 cents on the dollar or take nothing. The Boomers are going to leave a smouldering wreck of a many pensions and other entitlements.
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Isn’t this just an actuarial problem. Pick inflation, rate or return and lifespan conservatively and there shouldn’t be issues. The historical problem of DB pensions was they relied on an ever expanding workforce to pay for the pensions rather than relying on savings today to pay for pensions of the future.
Defined contribution plans do shift risk from the public to individuals but someone planning their own retirement makes a much less informed set of assumptions than actuaries do. If you look at the city council pension it’s 30% of base pay with 1/3 paid by employees. That amount is crazy high.