With most states looking for ways to pay for government employee pension obligation, how much money government employees earn in retirement vs. the rest of us is a hot topic in many retirement planning circles.
The Center of Retirement Research at Boston College examined whether government employees get a better retirement deal, ending up richer than the average person who works elsewhere. After calculating various factors, including how long people worked for the government, the center concluded that -- it depends.
One group of government employees was decidedly better off in retirement. That was the one-third of state-local employees who spent more than half of their working lives in government jobs. At the end of the road -- when they hit 65 -- their household wealth was 11 percent to 18 percent greater than the wealth of people who either didn't stay in government service as long or weren't employed in the government at all.
The clear and obvious reason that household wealth was greater among long-term government employees is uninterrupted defined-benefit -- old-fashioned -- pensions. But the study also found that government workers who stayed on the job for less than 20 years weren't able to claim these pensions -- or could only claim a small amount -- and their wealth was less than that of people who had never worked for the government.
Alicia Munnell, director of the Center for Retirement Research, says she thinks the anger and resentment some people feel about this issue reflects a lack of understanding -- and maybe a little unjustified jealousy. The center did earlier research on whether government employees earn more than nongovernment employees and found that playing field fairly level. And the retirement income -- under the best of circumstances -- gives long-tenured government employees only a few thousand more, she says.