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Unfunded Pension Liability Illustrates a Strange Reality

A recent paper published by Maria Fitzpatrick of Stanford University uncovered an odd reality of public servant retirement plans. To quote an excerpt: “Schools and other public sector employers contribute nearly three times as much per hour worked to the pension benefits of their employees as their counterparts in the private sector.” To put this into layman’s terms, police, fire, and other first responders are getting too much of their money at retirement and not enough while they’re working.

But even with this uneven reality, many cities and states are still looking at a massive unfunded pension liability. How big is the problem? The city of Atlanta by itself is $1.5 billion in arrears with its public pension. Nationwide the number is estimated at $2.4 trillion. That’s not a typo. Trillion with a “t.” One way state and local municipalities are choosing to deal with the shortage is to increase current workers’ rate of contribution. Florida has already done just that and Georgia isn’t far behind.

This particular solution means that public service employees, who we’ve established are already receiving too little money now and too much at retirement, will soon be receiving even less of a paycheck as more is diverted to try and short circuit an eventual pension implosion from unfunded liability. One question we have to ask. Does any of this make you feel safe and secure, warm and fuzzy inside, assured that the powers that be are watching over your pending retirement account with something even remotely approaching competence?

Competence and public administration of pension funds seem to be mutually exclusive ideas these days. But let it not be said we’re a bunch of negative Nellie types who spend all our time casting blame on others without offering a solution to the problem. Here’s what we suggest. Keep paying into your pension fund and hope for the best. Maybe the fund managers will get the fiasco turned around, but in the mean time start paying attention to income property investing opportunities like this one in Atlanta for $65,900. For a total upfront cash investment of less than $16,000, you can count on a positive cash flow of around $200 ($194 to be exact) monthly. How’s that for a retirement plan? And don’t stop at one property because there are plenty more where that came from.

The Heroic Investing Team







(Flickr / danielmoyle)


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