The defined benefit pensions that our tax dollars fund for public sector workers are unsustainable. Recently, a handful of courageous politicians - such as the Manhattan Institute's 2011 Urban Innovator Award recipient, Rhode Island General Treasurer Gina Raimondo - have tackled this issue head-on, and for the long-term, by shifting away some risk from the taxpayer and linking future benefit increases to the health of the state's pension fund. However, far more often, politicians simply put a band-aide on the problem and hope that the economy will recover so that the problem appears to go away. What will not go away is the reality of math. The financial assumptions that underpin our current public pension systems are flawed. So today, in an effort to better educate the American taxpayer and illustrate in unbiased terms the difference between public sector pensions and private sector retirement savings, we are unveiling CalculateYourPublicPension.com.
This easy to use web-based tool will allow American taxpayers to calculate how much they would receive in retirement benefits if they were public employees in a given state. Most interestingly, the tool will also allow users to see how much money they would need to have on-hand at the same retirement age to replicate a public worker's pension benefit in the private sector. Calculators for Florida, Illinois, Maine, New Jersey and New York can all be accessed on the site and comparative statistics can be drawn between states to help Americans better understand how local policies impact the bottom line.
The findings are startling. For example, given a teacher who began employment in January 1972, retiring at age 65, after 40 years of service, with a final salary of $100,000, a private sector worker would need to have an annuity worth as much as $1.64 million in Illinois, $1.34 million in New Jersey, $1.32 million in Maine, $1.28 million in New York and $1 million in Florida. No matter how you slice it, these figures are alarming. Learn more about what groups in these states are doing to reform public pension systems - and test run the calculators yourself - by visiting CalculateYourPublicPension.com. In the coming months, more states will be added to the site.