If you’re a future public pensioner, I have bad news. Demographics and economics point to you getting less than current pensioners.
Sorry today’s teachers, police officers, firefighters, civil service workers, and so on. You’ll receive less benefits than those who now enjoy public pension benefits.
It’s one of many issues stemming from the world’s aging population.
Birth rates are near or below “replacement level,”
Plus, the average lifespan is longer than in the past, stretching to 80 years in the U.S.
That leaves us where are today – a shrinking group of working age people struggling to support a growing number of retirees.
And that negatively impacts pensions (Social Security too). There simply aren’t enough people putting in compared to the number of people taking out.
In 1940, we had 160 workers for every retiree. In 1950, it dropped to 16.5. In 1960, it was 5. And in 2030, it will be 2.3 workers for every retiree.
The math simply doesn’t work.
We’re asking young workers, who are saddled with debt and rising costs, to pay more to support retirees. The results are clear in public pensions – some are so underfunded they could be insolvent in 12 years, according to a recent Pew study.
The problems are three-fold:
Employers, governments and workers haven’t contributed enough
Investment returns trail overly-optimistic estimates
Expenses are higher than expected
New Jersey and Kentucky’s systems are the worst off. While both were fully-funded in 2000, today they’re at 31 percent of where they need to be.
Look out – bankruptcy could be coming to a city or state near you. If you’re in Detroit, you already know.