In June I will celebrate 50 years since I was in high school. Anne and I are thinking of taking a trip late Spring to visit high school friends in L.A. for my high school reunion (the unofficial one).
We did the same thing ten years ago. I recall a great afternoon with a group of old friends having a picnic and playing music at the La Brea Tar Pits near the Los Angeles County Museum of Art.
My friend, Danny, played a sweet version of Bob Dylan’s Dream.
Now the bad news.
For those retiring in the next five years, things may be more of a nightmare than a dream.
Then, in ten years things will turn really bad.
The numbers of retired poor people in the United States continue to grow as the retired population reaches 56 million by 2020.
Nobody running for President it talking about this.
In Illinois, Bruce Rauner, Republicans and even some Democrats, talk about replacing current defined benefit public employee pensions with defined contribution plans like a 401k.
By removing future public employees from the current retirement system, the current unfunded liability will only get worse.
Beyond public employees, over half of workers don’t have access to a workplace retirement plan.
Americans between the ages of 40 and 55 have retirement savings of $14,500. You know too many folks who take their money out before they retire.
Of course, the rich tend to pay lower fees and get higher subsidies for their savings.
I have concerns about TRS’ recent move towards what are called alternative investment plans. Yet, Teacher Retirement System defined benefit plans have consistently performed well with good returns.
In less than ten years, teachers and others in TRS hired after January 1, 2011 and who were placed in Tier II, will find themselves in a mess. So will the state and taxpayers of Illinois.
Those TRS members now make a smaller contribution into the system, will receive a lower benefit than Tier I members and will need to work longer until they reach the maximum benefit.
It is likely that the legislature’s rush to establish a Tier II without considering the long-term results will mean that those employees will receive benefits less than the federal requirement.
The federal tax provision, referred to as Safe Harbor, requires public pension plans to offer retirement benefits at least as good as the minimum workers would get if they were covered by Social Security.
The catch: Since they will not meet Safe Harbor, the federal law will require Illinois public employees to join Social Security and pay a 6.2 percent additional tax to the national retirement system. The state will have to kick in another 6.2 percent, costing taxpayers more money.
Most public employees and employers in Illinois currently do not pay Social Security taxes.
Experts say that this will happen by 2027.
Happy new year.