The Pension Funding Gap
With states and local governments still making painful financial cuts, it is becoming more and more clear that robust pensions are a thing of the past. 5.7% of state and local taxes and fees are allocated to pensions, and that could rise drastically if governments are to keep up with current pension commitments. In fact, a University of Rochester study states that covering current pension promises to government employees would cost taxpayers $5 trillion over 30 years. That’s a $1,400 yearly increase in state and local taxes for every American household.
Of course, if investments perform well in the future, the increased reliance on the taxpayer could be mitigated; in fact, the study was completed in 2010, one of the worst years of recession. However, given the performance of the market in the past 10 years, a continuation of the status quo seems likely, so the results may well reflect the future.
Many alternatives are being suggested, including pension cutbacks and the complete defunding of pension programs.
Do you have an alternative plan to your pension if things don’t pan out?
Call us at 1-855-60-iPLAN (1-855-604-7526) to see how we can help you take control of your retirement.