‘There are folks that are saying you know what, I don’t care, I’m going to lock in my retirement now and get out while I can and fight it as a retiree if they go and change the retiree benefits,’ he said. – Executive Director for the Kentucky Association of State Employees, Proposed Pension Changes Bring Fears Of State Worker Exodus
The public awareness of the degree to which State pension funds are underfunded has risen considerably over the past year. It’s a problem that’s easy to hide as long as the economy is growing and State tax receipts grow. It’s a catastrophe when the economic conditions deteriorate and tax revenue flattens or declines, as is occurring now.
The quote above references a report of a 20% jump in Kentucky State worker retirements in August after it was reported that a consulting group recommended that the State restructure its State pension system. I personally know a teacher who left her job in order to cash completely out of her State employee pension account in Colorado (Colorado PERA). She knows the truth.
But the problem with under-funding is significantly worse than reported. Pensions are run like Ponzi schemes. As long as the amount of cash coming in to the fund is equal to or exceeds beneficiary payouts, the scheme can continue. But for years, due to poor investment decisions and Fed monetary policies, beneficiary payouts have been swamping investment returns and fund contributions.
This post was published at Investment Research Dynamics on September 6, 2017.