A Show of Pension Reform
As you read the article, your mind is just beginning to recover from this:
In a theoretical case of a 20-year-old firefighter hired today, retiring in 2030 on a base pay of $100,000, and collecting a pension for 30 years, the difference between compounded and simple is $41,129. At age 70, in the year 2060, the firefighter’s pension would be $181,000 on a simple 3-percent COLA and $222,129 on a compounded COLA.
When reporter Donita Naylor hits you with this:
[Providence Councilman John] Igliozzi, who also serves on the boards that oversee retirements and pension investments, said that with 30 firefighter positions going unfilled and 250 firefighters becoming eligible for retirement in the next two or three years, “almost half the Fire Department is going to be new” hires.
One reels. The first paragraph presumes a person retiring at forty years old and doubling his annual income — while doing nothing — by the time most of his contemporaries will actually begin considering retirement. On the compounded scale, the firefighter will have received $4.49 million dollars in pension payments by his seventy-first birthday. On the simple scale, he’ll have received $4.13 million. And this is presented as pension reform?
Sure, the numbers add up. On the compounded scale, those 250 folks soon to replace proximate reitrees would cost $1.12 billion by 2060, while on the simple scale, they’d cost $1.03 billion, savings of $90 million ($3 million per year), but that’s still $1.03 billion for 250 people for 30 years of no work, after only 20 years of work. And who’s to say what life expectancy will actually be by that point.
It appears that, after decades of politicians’ making pension promises with which they wouldn’t have to deal, the current crop is promising reforms that won’t take effect until most of them are dead, and still won’t amount to much by way of savings.
Want more? As far as I can tell, these numbers don’t include benefits like healthcare.
As soon as possible, pensions should be shifted to 401(k)s. At the very least, they shouldn’t begin to pay out until a certain age, no matter when the person opts to retire.