Two recent op ed page articles in the Sentinel dealt with the future challenges for pension plans. They were “Problems with CalPERS”, July 26, and “As Democrats Pander” July 26. The first projects gloom and doom for the future of CalPERS, the second does the same for Social Security. They focused on the long term costs of sustaining the pension funds and proposed cutting benefits to lower those costs.
But the articles did not say what the benefit levels for retirees are now or what they would become after the cuts. Since pension funds exist to provide a decent income to retirees, one cannot analyze a pension plan without looking at the benefits retirees are receiving. I found the average annual benefits paid to retirees by CalPERS, Social Security, and private sector pensions to be:
Social Security: $16,020
Private Sector: $22,248
While there is a significant difference between the plans, none of them is excessive. Equalizing benefits by cutting the top level would leave everybody with a retirement income too low to maintain a decent standard of living. Indeed, we are told that most Americans are not saving enough for retirement. The goal then should be to raise the benefit levels of the lower plans, especially Social Security.
And how do we pay for these raises? Well, like it or not, pensions are money we receive, and pension plans can only be sustained by putting enough money into them. If we do not provide the money necessary to sustain our retirement plans, through payroll deductions, Social Security taxes, etc, we will reach retirement only to discover to our chagrin that we do not have enough to sustain a decent standard of living.
If we do not pay now, we will pay later.