Retirement confidence has hit a wall. It's bad enough when workers in private employer plans are fumbling for a revolutionary turnaround with their accounts, but when lawmakers can't pay up on pension promises, the need for a better alternative becomes evident.
Late last year, The Business Insider revealed 11 states at risk of running short on pension funding. Hardest hit is Middle America. In Kansas, lawmakers are debating just this week whether to shift public employees to smaller retirement checks under the state's current benefits formula (with some workers getting no pension, but lump-sum account balances) or kick up retirement benefits but have employees add to the pot by chipping in up to 8 percent of their paychecks.
Many argue there's an entitlement excuse for giving pubilc workers lifetime pensions and richer benefits, and that it doesn't justify the damage to state budgets. Republican Senate Finance Committee member Orrin Hatch of Utah took the floor recently to address dangerously underfunded public employee pensions:
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"There are two primary causes. First, governments have promised too much money in lifetime pensions. And second, governments have not set aside enough money to pay for those pensions. The shortfall between the money that has been promised and the money set aside is called underfunding. But that's just a sterile accounting term that means we don't have enough money to pay the bills. And where I come from, that's called being broke. It is bad enough when you go broke because you have been irresponsible with your own money. Yet it is a tragedy when governments go broke being irresponsible with taxpayer money."
Between union deals and election commitments, there's a lot to debate among voters who can either believe public workers deserve guaranteed income or that the accountability should be lifted from the backs of taxpayers. One encouragement, a recent MassMutual survey, shows plan participants are at least admitting the need to shoulder their retirement responsibility: Almost 75 percent of participants who responded to the survey say they "agree they have more responsibility for achieving retirement income objectives than their employer."
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