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Don’t envy government retirees

By Jennie L. Phipps · Bankrate.com
Thursday, October 20, 2011
Posted: 4 pm ET

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.

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9 Comments
Zach
December 07, 2011 at 11:50 am

I understand that taxpayers fund all government jobs, but we should also recognize that government funds many private sector jobs. It's called an economy because we are interdependant on each other and we don't exist in a vacuum.

I am highly skeptical about any assumption that government jobs are a net loss to the private sector. It is time we stopped believing in the fairy tale of corporate "job creators" because the role of corporations is not to create jobs. They do create jobs because they need workers, but if they could make profits without creating any jobs, they would. The role of corporations is to make profits - have no illusion.

Also, many government employees were attracted to their jobs because of the expectation of benefits and pension plans. If we reduce those benefits it won't hurt government agencies now, but later when the economy gets stronger there will be an exodus from government jobs and our country will be weaker. This means less firefighters, teachers, postal workers, DMV workers, trash and recycling workers, police, public transportation workers, etc. It also probably means workers of a lower quality, if we are honest.

K. Jeffus
December 07, 2011 at 10:08 am

I don't suppose any of you bozos want to consider that you get services for taxes paid. Government employees pay comparable rates to Social Security to the pension funds-not their fault you let the politicians raid SS. Pay the worker for the value of his work-and no, private sector workers are not any better or more productive than your basic worker bee civil servant. Humbug.

Dejordy
November 10, 2011 at 9:44 am

Well, duh, if you don't for government very long, you don't get a big pension. Presumably you have retirement assets from your other years of work. And in government "very long" isn't very long. There are people who have worked for government as little as 25 or 30 years who are getting salarylike pensions for life. Teachers in Illinois retire at 58 and get 75 percent of their salaries plus 3 percent raises. This organization has to be partisan. If not, it is staffed by incompetent. As EDOG note, in Ohio they are complaining about having to contribute to what is still a fantastic deal--several times better than Social Security.

K
October 21, 2011 at 2:52 pm

I meant to say I have NOT gotten a raise . . .

K
October 21, 2011 at 2:18 pm

I wish they would do a state-by-state study of these so-called well payed gov't employees. I work for the State of Indiana. I put money into my retirement plan with no match. I have gotten a raise in three years, and I pay a hefty deductible for my health insurance. As far as pay, I easily make half of those in similar jobs in the private sector. Regarding my pension, it's not much. I think I'll be able to pay my cable bill with it and that's about it. Yes, there are benefits. I work fewer hours than my peers in the same field. And while I do have a large health-insurance deductible, I count myself lucky to have health insurance. And, not this job does not mean a loss to the private sector. Some jobs cannot or should not be privatized. Besides, even if it were a private sector job, who do you think would pay the company that would pay me? That's right, the taxpayers. So, I don't see where anyone would come out better privatizing my job.

Wolverine
October 21, 2011 at 8:42 am

Why shouldn't I get to envy government retirees?

At least they'll be able to retire or have already done so.
I don't think I'll ever be able to reap that benefit, hell, the Social Security I've been paying into for at least 10 - 15 years might not even exist by the time I can "retire".

And on a second point, I really have to agree with John Q Taxpayer. Jason, you're expecting too much from this blogger.

EDOG
October 21, 2011 at 7:31 am

Additionally, how about the amounts the government employee contributes toward his/her retirement? My company matches first 3% of my 401k which is about standard. I live in Ohio and a ballot issue here, being hotly contested, asks only that govt employees pay 15% toward THEIR OWN RETIREMENT! The defined benefit plan for govt workers needs to go the way of the DODO bird and sooner rather than later. (Beyond the fact that they can retire after 30 years say at 55 and collect benefits, from private taxpayers til death) Sound fair?

John Q Taxpayer
October 21, 2011 at 7:25 am

Jason, you're expecting something unreasonable - you are expecting a financial advice article to be written by someone who understands the financial world and to actually be an article worth reading. This looks like a report a 5th grader might come up with. There's a reason Jennie is my least favorite writer on this site, this is just another shining example.

Jason
October 21, 2011 at 6:53 am

So this article says government employees don't have it better, but then goes on to say that they do have it better. Government jobs are paid for by the private sector. There is not a single government job that should be higher paying or have better benefits than the comparable private sector job.

Another thing to remember is that every government job is a net loss to the private sector. It is a job that could have been a private sector job, and it is a net drain on the tax payers.

If a public employee makes $50,000 a year and pays $15,000 in taxes, it is still a deficit of $35,000 that the private sector tax payers need to make up.