Skip to comments.Federal retirement plans almost as costly as Social Security
Posted on 10/24/2011 5:34:32 PM PDT by dragnet2
Retirement programs for former federal workers civilian and military are growing so fast they now face a multitrillion-dollar shortfall nearly as big as Social Security.
The federal government hasn't set aside money or created a revenue source similar to Social Security's payroll tax to help pay for the benefits, so the retirement costs must be paid every year through taxes and borrowing.
The government paid a record $268 billion in pension and health benefits last year to 10 million former civil servants, military personnel and their dependents, about $100 billion more than was paid a decade earlier after adjusting for inflation. And $7 billion more was deposited into tax-deferred accounts of current workers.
In addition, the federal government last year made more than a half-trillion dollars in future commitments, valued in 2010 dollars that will cost far more to pay in coming decades. Added last year:
$107 billion in retirement benefits accumulated by current workers.
$106 billion in new benefits granted to veterans. Retirement
More than $300 billion in the snowballing expense of previous retirement promises that have no source of funding.
The government committed more money to the 10 million former public servants last year than the $690 billion it paid to 54 million Social Security beneficiaries.
The retirement programs now have a $5.7 trillion unfunded liability, compared with a $6.5 trillion shortfall for Social Security.
Outgoing Defense Secretary Robert Gates told Congress in June in his final budget testimony that health care costs "are eating us alive."
Rep. Jim Cooper, D-Tenn., a member of the Armed Services Committee, says retirement benefits are an extremely sensitive issue. "We have a disconnect between all these sacred promises we've made and how they are not backed up by anything," he says.
(Excerpt) Read more at abcnews.go.com ...
Those in government are going to eventually find out, what they have done to this country. This will end in a very ugly, complete total collapse.
Remember, not only did you contribute to Social Security but your employer did too. It totaled 15% of your income before taxes. If you averaged only $30K over your working life, that’s close to $220,500.
If you calculate the future value of $4,500 per year (yours & your employer’s contribution) at a simple 5% (less than what the govt. pays on the money that it borrows), after 49 years of working you’d have $892,919.98.
If you took out only 3% per year, you’d receive $26,787.60 per year and it would last better than 30 years (until you’re 95 if you retire at age 65) and that’s with no interest paid on that final amount on deposit! If you bought an annuity and it paid 4% per year, you’d have a lifetime income of $2,976.40 per month.
The folks in Washington have pulled off a bigger Ponzi scheme than Bernie Madhoff ever had.
Entitlement my ___, I paid cash for my social security insurance!!!! Just because they borrowed the money, doesn’t make my benefits some kind of charity or handout!!
Congressional benefits —— free healthcare, outrageous retirement packages, 67 paid holidays, three weeks paid vacation, unlimited paid sick days, now that’s welfare, and they have the nerve to call my social security retirement entitlements?
I understand most federal government retirements benefits, are now nearly double private sector incomes.
ANY PERSON OUT THERE THINKING OF A MILITARY CAREER, THINK AGAIN! Just do your four years, LEARN a skill that can get you employment on the outside and WALK. You CANNOT TRUST the government to keep any promises to you what you might have in 20 years. Oh, wait, they are wanting to do away with the 20 year retirement. You have to set up a 401k plan now.
I'm sorry you had to learn that the hard way. I thank God for career military folks. You're the backbone of our Armed Services and it makes me sick to see what's being done.
Entitlement madness, S.S. broke, state & federal government pension commitments under water - The US economy makes Greece look as solvent as Switzerland. We are so in trouble. Time to stock your bunker some place off in the woods.
There is no reason for extremely well paid civil servants to have anything near the retirement and health plans of the military, whose pay is regularly among the lowest and whose after-service payments have been referred to a deferred pay.
The defense provided by the military is the single most important function of the government. Everything else is less important. Everything.
That a so-called “Education” Department civil servant should make more than a troop risking his life on the line is an abomination. That their benefits should in any way compare with the deferred pay of the military....and sometimes exceed it...is a crime.
The same for the a host of other departments and agencies that Ron Paul, candidate for president, has seriously target for closure because of no value returned.
On the other hand, the threats from China, Iran, Russia, Al Qaeda, etc., are very real.
The wealth is all located in and around DC. time to cut out some cushy jobs.
Privatize, Privatize, Privatize, everything that can be out sourced, starting with the Post Office, and go from there to maybe the dept of Energy.
They plan on taxing 401K if the Democrats have their way. You might as well bury your money in the back yard or put it in the freezer.
Agree...The government and their well connected insider co-conspirators, have just about left America dead on the floor.
If you take the amount they paid and simply attribute interest to it ~ that pretty much covers anything they're ever going to pay back as a retirement annuity.
Congress is covered by the same system.
BTW, Postal employees are also covered by the same systems BUT their agency pays an additional sum into the government retirement system that other agencies are required to pay ~ but they don't. Currently USPS is about $98 billion AHEAD of any possible need ~
It should be possible to do that seamlessly as an ESOP ~ however the federal government would lose about 50% of the value added per year to the federal retirement annuity "funds" and would run an even higher deficit.
Right on, Muawiyah.
Federal retirement is not a huge issue, even though military retirement does need reform in order to be sustainable. Senators McCain et al have called for transitioning military retirement for new service members to a hybrid pension-401(k) system, similar to the FERS system that covers almost all federal civilian employees.
I had a cushy job later on that put me on the streets of downtown America at 2 AM on many occasions. I certainly risked my life there.
I don't think you ever risked your life.
I have no doubt you're the kind of person we wouldn't have let near the trash compactors.
There is one small bright spot in this mess, and you can thank Reagan for it. In 1986, they reformed the Federal pension system and had all incoming employees enroll in a much cheaper system that used mostly a 401(k) type plan. The problem is that everyone who started before 1987 stayed in the old system.
Over time, the percentage of retirees will shift from the old system to the new system, so things should actually be significantly better in 20 years than they are now, from a financial point of view.
Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis.
What we have is a bunch of batardes who weren’t satisfied with short changing us on our pay ~ and in my case my Veterans Re-employment Rights on my return from service ~ they now want to steal our retirements that have already been paid for through enormous interest free loans we made to their government.
Except, congress spent that money too. USPS has got the same thing as everyone else, empty promises from congress.
BTW, they also deleted USPS clerk/carrier pay levels. They're 30% of the federal government employees and they don't make anything near $120,000 per year.
Citing wholly discredited statistical propaganda is beneath you. Don't do it again. We are here waiting on these threads for people to try that trick.
Proverbs 26:4 KJV
Answer not a fool according to his folly, lest thou also be like unto him.
You really don’t want to think that way.
What we have are people who believe the federal retirement system is like the one they give their local school superintendent.
BTW, CSRS had a cap ~ you could never get more than 80% of your high 3, and for a long time there was a maximum working age of 70 ~ FERS has no cap. We will soon be seeing FERS employees sticking it out until they're over 90 years of age.
Here comes the pro-big government hacks...What a desperate comment.
Ya got one CEO and to how many normal private sector workers in a typical fatcorp?
Dance around this.
What, do you think congress put that 98 billion in an account somewhere? The USPS employees are in the same boat as SS retirees. The money has been spent. It was spent before it was even paid in and replaced with IOU’s.
You can go ahead and set an 80% cap on FERS, but it wouldn't matter. There is no way you could ever get there.
Even on the law enforcement pay scale you get 34% for the first 20 years and then 1% for every year after that. Even if you got hired at 22 (not very realistic) that would be 34% plus 15% to get you to the mandatory retirement age for law enforcement of 49% of the high 3. A non-law enforcement retiree would have to work 70+ years to get there.
If necessary just sign over a destroyer to a crew of federal retirees, along with maybe 500 cruise missiles, and they'll visit some foreign ports to COLLECT whatever tribute is needed to make them whole and get the government off the hook.
I think your problem is a lack of imagination!
I make a lot less money than Warren Buffett. So do you. They didn’t add Warren Buffett into the private sector side of the statistical analysis.
Whatever you thought doesn’t matter ~ there are over 7 million CEOs.
Lets see....the feds have mishandled our money...want more money so they can mishandle that...and YES, civillians have cushy jobs in many cases but the military does not have it so easy. Janitors working at the federal buildings make more than a young recruit and have excellent benefits too. BTW....when did all the Einsteins in DC figure out that as the baby boomers retired..soc sec would take a hit? handwriting has been on the wall for eons. Do NOT trust the feds.
It appears that federal retirement looks very different from opposite ends of the money.
Didn’t the taxpayers just bail out a slew of businesses in the private sector? housing, autos, greenies, banks...LOOK we need to elect more tea party candidates. I am fed up with rinos...my senator just voted to give freddie mac and fannie mae MORE money. I am no longer a republican but a Constitutionalist and Tea Party supporter.
I understand your anger at cuts in military pay as my father is retired USMC and my mother is retired civil service. They served and retired in the era of low pay. Past Congresses made promises the current Congresses are willing to ignore.
Much the same has occurred in private industry. I went to work for a corporation in 1978. When I enrolled in the benefits program I was told about the defined benefit pension plan, the employer match to the employee savings program, retiree medical program, low deductible medical insurance, and annual cost of living adjustments in that era of high inflation. I was a non-union employee in a company based in the south so my starting salary was about 30% below what my peers who went to work in Chicago, New York and LA received, not to mention my benefits were lower.
I spent almost 20 years with that employer, demonstrating loyalty and rising in the organization. During that time the benefits package i was “promised” when I joined the company was trimmed dramatically. The retiree medical plan, the cost of living adjustments all went away. All of the domestic manufacturing operations were sent offshore and waves of downsizings in the home office resulted in individuals taking on what used to be the job of 3 or 4 people. Pay increases for the rank and file were non-existant while senior management pay increased double digits every year. By the time I reached my early 50’s my employer was aggressively downsizing management employees aged 50 to 65. I actually sat in senior management meetings where the “cost” of carrying employees over age 50 was openly discussed. Six weeks prior to my 20th anniversary with the company I too was downsized. It turns out that had I made it to 20 years of service, my defined benefit pension plan payout would have been 25% higher than it was with my termination date being at 19 years and 10 months. My next full time job came with a 35% base pay reduction, and dramatically reduced benefits as well as a relocation.
My point is that government employees, military and civilian, are now beginning to experience what private sector employees have been living through for three decades. A rising standard of living for both private sector and government employees requires resources only possible in a high growth economy. For two decades our government has pursued regulatory, trade, foreign policy, environmental, and immigration policies which have brought growth in the US economy to a standstill and a declining standard of living for all but the most wealthy citizens for over a decade. Now that impending economic collapse requires cuts in spending must be made, our leaders have decided we cannot cut medical care for illegal immigrants, welfare, foreign aid, never ending invasions of other countries, public housing, countless worthless academic studies, bloated bureaucracies, and other wasteful discretionary programs. Congress is choosing to cut military pay and benefits in the same way corporate executives chose to send American private sector jobs overseas while giving themselves huge pay increases and bonuses.
Quite frankly, Congress and the President care more about making sure the executives at Goldman Sachs and Citicorp receive huge bonuses than they do about providing promised health care for military retirees. If this were not true, Goldman Sachs would have gone through a bankruptcy after the financial crash of 2008 and the current executives would have been fired for taking the risks that brought down the company.
One of the downsides to a low manpower all volunteer army supplied with 21st century technology is there aren’t enough retirees for their votes or campaign contributions to matter. Congress responds to two things — money and votes in that order. No doubt the combined campaign contributions of the Wall Street banks far exceed the combined contributions of active and retired military. The Democrats in Congress know most current and ex-military will not vote for them so they have no issue with making cuts to military benefits as they aren’t relying on the votes. On the flip side, the Republicans take the military vote for granted so they can “compromise” on military benefits knowing they’ll get the votes anyway.
When I was graduating from high school and considering a military career, my father who was then serving at the Pentagon, could even then see how events would unfold over time. He strongly urged both his sons to look to the private sector for a career as he didn’t believe the politicians could be trusted. As it turns out our nation has evolved to where the elites running government, the media, corporations, and academia cannot be trusted. We are rapidly evolving into a third world feudal society where the elites control wealth and the citizens enjoy the equality of poverty. In any organization or society where the growth rate becomes negative, the elites will take first from the masses before turning on each other.
OMFG! We are so screwed.
government worker pensions need to go along with the privatization.
As I recall, ESOPs were a precursor to 401Ks, is that what you are talking about? I forget how they worked, but I don’t remember them being particularly beneficial.
All that I remember about them is that you couldn’t roll over dividends in them and when they were changed to a 401K, they never allowed us to roll over the dividends.
That is because the Baby Boomers are starting to retire and many are holding on but once they retire it is going to be even more. The next generation don't have the same type of retirement....they have Thrift Savings which is similar to 401K. So you really don't have much to complain about. The federal government has already changed so the pensions will not be as good.
Employee buy out plan ~ that’s all an ESOP is. They are probably less popular now than earlier and that may well be a result of extension of the 401(k) plans.
Federal civil servants earned average pay and benefits of $123,049 in 2009 while private workers made $61,051 in total compensation, according to the Bureau of Economic Analysis.
I find that hard to believe but if you include the Congress and then to the private you add the McDonald’s workers, I guess that could be true. I just wonder why people who complain about the federal government ever decide to work there if it is so great. I was in the military 24 years and I saw what the civilians did and it is not all candy and cake. I think they get a bum rap.
Unless we start telling the da,n truth that EVERYONE is going to take a hit, a total and ending collapse is inevitable.
Many on this site are as self deluding as the far left on DU in this regard.
irresponsible promises were made that could never be kept and young people simply don’t have enough numbers or income to pay for this ponzi scheme.
BTW, some agencies pay additional contributions to the retirement system. Those too are forced loans to the government.
Still wonder what the death panels are about? Thanks dragnet2.
.amazing how may support a govt sponsored ponzi scheme when they are the beneficiaries of it.
Govt workers are mostly mini-madoffs with their pay, benes, and expectations.
We are so upside down, it will collapse, no question.
Well, I still think it’s overly generous. But continuing CSRS would have been worse. Muahwiyah, if people do work to 90, no problem if they are productive until then. We won’t have to spend much on their retirement. Dragnet2, the Heritage Foundation has done some good work on Federal-private comparisons. It’s not as bad as 2-1 if you take into account the nature of Federal work and locality, but Federal workers still do very well.
A question for conservatives if we stripped government down to its Constitutional limitations, how then should we compensate Federal employees? You’d still need some people working for the Feds.
All non-military public pension plans should be defined contribution ones, not defined benefit ones.
I have no doubt that many government workers are honorable and work very hard. That, however, does not mean their jobs are necessary.
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