Retirement will be painful for most

Retirement will be painful for most

Pension reform shredded, Cagle, Wolverton, Aug. 25, 2014In an excellent column in the U-T San Diego, Dan McSwain paints a grim retirement picture for almost everybody:

For most Americans, it’s tempting to live in denial or outright fantasyland when it comes to paying for retirement.

That’s because doing the math evokes less-pleasant emotions like fear, anger or hopelessness.

Social Security, which replaces just 40 percent of the average earner’s paycheck upon retirement, is running out of money. The median household savings rate is zero. And half of workers have no pension or 401(k) account.

There’s just no way around the math. As a group, Americans have three choices: Spend less, work longer, or accept being poorer in retirement.

He’s not talking, yet, of government pensions, but what the rest of us will have to put up with. Years of slow or no economic growth, combined with the retirement of the massive Baby Boom generation — which didn’t have enough kids to replace itself — make all the actuarial tables look bad.

Combine that with the Federal Reserve Board keeping interest rates at zero percent (so federal debt is cheap; and money is forced into stocks), meaning it’s pointless to save in a bank passbook account as most people used to — and you have the makings of retirement disaster.

Public pensions

Then there are the government-worker pensions:

Yet this dire tableau is worse than it looks, because most public pensions are in the same shape as the average worker — under-saved and overcommitted.

The difference is that pensions are guaranteed by taxpayers under California’s constitution (and those of 11 other states).

Thus a poverty spiral looms: As workers fail to stash enough cash for their own retirements, they face growing claims on income from local governments.

To see how this works, consider the plight of a San Diego household.

Officially, the pension system for city workers and retirees was underfunded by $1.54 billion as of June 30, while the county’s unfunded liability was $2.32 billion.

When you carve out city residents’ share of the county total, this combined shortfall equates to $5,400 per household.

Paycheck deductions from public workers will help, but the bulk of this responsibility falls on taxpayers.

Right. As outgoing San Jose Mayor Chuck Reed has quipped, eventually the pension payments will loom so large that all current city employees will be cut in his city but one: a person who sends out the pension checks.


I think, eventually, this situation will reach a boiling point. The services will be cut so much, and taxes raised so high, people just won’t take it.

So far bankrupt cities have worked out pension deals with CalPERS to keep the contributions going — with the cuts coming to city services. But that can’t last forever. Indeed, Vallejo, which went BK in 2008, already is at risk again for another BK because of its “pricey pensions.”

Whether the state constitution says the pensions must be paid, or not, eventually there will be no money to pay them in full.


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  1. SkippingDog
    SkippingDog 2 January, 2015, 11:08

    How does that $5,400 per household work out over a 30-year amortization period, John?

    Reply this comment
    • SeeSaw
      SeeSaw 2 January, 2015, 22:06

      He gets hundreds of time that amount in public services that he uses everyday!

      Reply this comment
  2. bob
    bob 2 January, 2015, 12:03

    Dan McSwain paints a grim retirement picture for almost everybody.

    The key there is “almost.” Certainly not for the trough feeders who infest this blog.

    Reply this comment
    • NTHEOC
      NTHEOC 2 January, 2015, 12:47

      Ahh bobo, with the good ol’ Pension envy!! It’s been around for years for those who made the wrong decisions in life then regret it later. So up yours Bob!

      Reply this comment
      • bob
        bob 2 January, 2015, 12:53

        Made the wrong decisicions? Really? Not everyone can be a trough feeder, you know.

        Reply this comment
        • Ted
          Ted "Patriot" Steele 4 January, 2015, 16:26

          Well Bo Bo– That’s true.

          Some just can’t pass the tests required for civil service.

          Others try their luck in the private sector and make millions.

          Still some founder around from job to job charging the card to the max and in time are just broke.

          Others end up somewhere in the middle. But the envy out here of ANYone’s success is just astounding little buddy!

          Reply this comment
      • Bill Gore
        Bill Gore 2 January, 2015, 14:30

        Yes-rotting at a desk at the DMV is a ‘right decision’……

        Reply this comment
        • NTHEOC
          NTHEOC 2 January, 2015, 18:48

          Looks like that PENSION ENVY is a little contagious huh billy boy!!!

          Reply this comment
        • SeeSaw
          SeeSaw 2 January, 2015, 22:12

          You two were evidently not acceptable for public work–your words indicate that you have such low self-esteem, you would not be able to function in a public place.

          Reply this comment
          • Tough Love
            Tough Love 4 January, 2015, 21:14

            Lets bounce back some of your insults …..

            And exactly how “successful” were you …. retiring (but a few years back) after a 35-40 year career with a final pay of only about $50K annually ?

            Hard to fathom doing so poorly in high-paid CA.

          • Ted
            Ted "Patriot" Steele 6 January, 2015, 20:42

            Wow T Lovey–

            I KNOW you’re no math wiz but the calculations you just made about SeeSaw’s success and I guess happiness, like your infamous dull-normal actuarial sharts, missed reality by a country-mile ™. I’d say her public service, decent salary and now decent retirement that she seems to be having into old age, makes her and her family very happy. I’d call her a winner little buddy….

            Quality Control

        • Ted
          Ted "Patriot" Steele 6 January, 2015, 20:46

          Billy boy–

          I guess the DMV employees are far below your caste. You’re amazing, mmmmmm. I have always found that arrogance is it’s own reward. You are a legend in your own mind I expect.

          Reply this comment
          • Ted
            Ted "Patriot" Steele 6 January, 2015, 20:51

            Billy Boy–

            It must kill you that the lowly DMV employee who you look down on has a marvelous pension— my guess is that on top of that– your tiny 401k is, well…..kind of puny?

  3. bob
    bob 2 January, 2015, 12:05

    “…but the bulk of this responsibility falls on taxpayers.”

    Exactly. Just ask Doglass, he’ll tell ya all about it. The taxpayer must pay up. And if he/she doesn’t men with guns will come to put him or her in a cage with violent inmates. And if he or she resists he or she will be killed.

    Reply this comment
  4. Sean
    Sean 2 January, 2015, 14:00

    The retirement benefits for CA state workers or for private sector workers cannot be looked at as a static picture in time nor can it be looked at in isolation without the cost of health insurance premiums.
    Most private sector workers will depend primarily upon Medicare for health insurance. The rates for the supplemental Medicare policies rise with healthcare inflation AND with age so the price curve is steep. Age alone is about 5% annually and I would not be surprise if the inflationary parts in nearly identical. Social security payments also have inflation built into them but the rate over the last 5 years has been only ~1.8%. The average social security payment is slightly less than $2000 monthly but someone at the low end of the income scale ($40K annually when employed) will only get $1250 per month. (Typically SSA payments are ~40% of pre-retirement earnings) If we look at the low end of the scale, where most older workers will not be able to save for retirement, most increases in SSA income will immediately be consumed by Medicare supplemental insurance increases. In essence, SSA and Medicare is fixed income at 40% of pre-retirement earnings and as people get older, healthcare will consume a greater and greater share of any money people get from the SSA.
    Now compare that to a California state employee retiree with more than 30 years of service. They will likely be getting at least $5K per month to start and are guaranteed a 3% COLA on that amount plus the the state covers all the health insurance premiums. 10 years after retirement starts, these people will get 35% more than when they start and 10 years after than 80% more. It’s gets worse with public safety personnel, Chuck Reed said in San Jose, public safety retirees are currently average $100K when they start retirement and since they can retire in their mid 50’s, their pensions are likely to more than double before they pass away. So these folks will likely be getting more than 4x their private sector contemporaries when they retire and will likely have 10x more income 25 years later. Talk about income inequality.

    Reply this comment
    • bob
      bob 2 January, 2015, 14:41

      Tell this to Doglass or Skippy. They will tell you that you are completely wrong or “you just can’t compare the private and public sector workers” (one reason being public sector workers are better than the rest of us (education, etc.). But in the end they will tell you the law is the law and the law says YOU must pay for the pensions and healthcare of these ex-gummit employees.

      Reply this comment
      • bob
        bob 2 January, 2015, 14:42

        Of course, it makes no never mind how unfair or unsustainable all this is, in the world of Doglass you MUST pay.

        Reply this comment
        • Ted
          Ted "Patriot" Steele 5 January, 2015, 06:51

          Well– YES BO-Bo

          IF you contracted for this work to be performed, and then agreed to a certain compensation and THEN accepted the work–


          You have to pay, sorry, welcome to the real world.

          Reply this comment
          • Tough Love
            Tough Love 5 January, 2015, 19:29

            Well Ted, we’ll see just how well that’s going to work out for Vallejo’s Safety workers WHEN (not IF) it re-enters CH-9 bankruptcy in the next year or two.

            Paid … no. Materially reduced ….yes.

          • Ted
            Ted "Patriot" Steele 6 January, 2015, 20:36

            T Lovey

            I have watched your ilk out here on these boards for a decade? Maybe a decade, not too sure when your nonsense started, but you slaves are always on about something that is about to happen that never quite does. You serially lose your ill advised lawsuits. The funds keep increasing. New tiers get added. Reforms continue. And you NEVER win—– but you DO continue with the samba of doom that never comes……Yaaaaaaaaaaaaaaaaaaaaaaaawn.

    • S Moderation Douglas
      S Moderation Douglas 2 January, 2015, 16:14

      Some are more unequal than others. There are a lot of different formulas out there for local governments and safety workers. Not all the same.

      For state workers (non-safety) the COLA is CPI with 2% max. Not guaranteed 2%. The last few years state retiree COLAs have been same as SS.

      $5,000 a month is not the minimum, not even the average. I retired at 62 with 37 years and am still under $4k.

      Even so, here is data from an AEI nationwide study comparing public and private jobs at the Bachelor’s degree level. There is a range, but these are “average”.
      Public sector wages…$51,578
      Private sector wages..$62,823. Private sector makes 22% more ” take home”. ($11,245)

      Public sector health…$12,802. This includes the value of prefunding retiree healthcare.
      Private sector health..$7,573

      Public sector pension costs…..$14,207
      Private sector pension costs….$ (6%, SS)

      Public total benefits………………$24,149
      Private total benefits……………..$25,163.

      Public total compensation…….. $89,934
      Private total compensation…….. $87,987. In total compensation, the private worker makes 2%less

      What AEI calls “about equal”

      If they both work 40 years and retire at 62, the state worker will get about $40,000 pension plus Social Security. The private sector worker will get……Social Security.

      All other things being equal, the state worker will have 8% of his earnings withheld for retirement, leaving him a take home pay of $47,452.

      The private sector worker will have NO pension, but for forty years, he will have $15,400 more annually than the public sector, to spend or invest as he wishes.

      That’s why we call it deferred compensation. If the private sector worker invests most or all of that $15,000 in a tax deferred account, he will be having too much fun in his golden years to even think about pension envy.

      And the glass is at least half full.
      Happy New Year.

      Reply this comment
      • bob
        bob 2 January, 2015, 19:09

        “If the private sector worker invests most or all of that $15,000 in a tax deferred account, he will be having too much fun in his golden years…”

        What a laugh. That’s right put $15,400 every year in that giant corrupt casino known as Wall Street run by criminals like the Goldman Suchs white shoe boys and see just how well you do. Remeber 2008? Or you can put your money in CDs and bonds and watch the government steal it through inflation. In case you hadn’t noticed the whole financial system is a corrupt ponzi scheme. Of course you couldn’t care less because you have a guaranteed annual income thanks to the tax suckers.

        Reply this comment
        • S Moderation Douglas
          S Moderation Douglas 2 January, 2015, 19:21

          So, your alternative is sex, drugs, and rock and roll.

          15 grand a year.

          Reply this comment
          • bob
            bob 2 January, 2015, 20:28

            Maybe so. Live for today and then tomorrow…well what’s the old Klingon saying? “Today is a good day to die.”

          • Ted
            Ted "Patriot" Steele 3 January, 2015, 20:28


            Don’t forget the “prime directive” ™

            of course I assume you remember it?

      • Robert Fellner
        Robert Fellner 2 January, 2015, 22:25


        As I am sure you know, California state (non-safety) workers are the most modestly paid of all California public employees. Having said that, Biggs finds they receive a 33% compensation differential increase over comparable private employees, using all the metrics you appear to wholeheartedly endorse. That is staggering.

        Non-state employees (workers for cities, counties, special districts) are all substantially higher paid and receiving better benefits than state employees.

        Safety employees are on another level altogether.

        There are nearly ten times the amount of non-State California public employees than State employees. While it is extremely useful to note that state employees enjoy a 33% compensation bump above their comparable private sector counterpart, they are the smallest (both in degree and total volume) part of the problem.

        As you are starting to see, or hopefully will see in the coming days ahead, the non-State public employees in California do not make “22% less in take home pay” than comparable private sector counterparts.

        I’ve actually done a comprehensive study on this data to that effect and it confirms with the thousands (or tens of thousands possibly) individual anecdotes I’ve discovered. The way I did it was analyzing what CalPERS considers pensionable pay to the employee’s final base pay.

        State employees NEVER have “pensionable pay” in excess of their base pay. Municipal employees, across the spectrum and over thousands of cases analyzed, enjoy a significant premium. (This study is not yet published.)

        It’s starting to click why you focus on the pay ranges which I find so misleading. For STATE employees they are very close to accurate – ie State employees (non-safety) very rarely have significant OT/OTher pay.

        In addition to having larger base pays than their State employee counterpart, non-State employees enjoy significant pay premiums from Other and OT. Its not even possible to compare them to State, because State employees basically have none of the routine types of Other Pay that non-State employees do.

        Reply this comment
        • S Moderation Douglas
          S Moderation Douglas 3 January, 2015, 00:30


          You stated this correctly:
          “Having said that, Biggs finds they receive a 33% compensation differential increase over comparable private employees, using all the metrics you appear to wholeheartedly endorse.”

          “Appear” being the key word. I wholeheartedly recommend reading this study, the methodology, and the data. Doesn’t mean I agree with or endorse the methods or conclusions. Beginning with the job security, which is a substantial part of that 33%, (which, to make a point, I prefer to characterize as a private sector worker earning 25% less than the public.) I can quibble somewhat about the risk free rate, and probably will before the year is out. And about some of the assumptions in the methodology. At least Biggs described his methods and assumptions better than most.

          But my biggest interest is the compression of the range of wages in the public sector. The floor that keeps compensation higher than the private sector in the low skill jobs, and lower at the high end. But it is late, save some for another day.

          Reply this comment
          • Robert Fellner
            Robert Fellner 5 January, 2015, 11:00

            The main point of my comment is that you are focusing on the smallest (10%) number of public workers in the state of California (non-safety State employees) who make substantially less in both pay and benefits (2.5 vs 2.0) than the vast majority (90%) of non-State public employees.

            Kinda misleading…

          • Tough Love
            Tough Love 5 January, 2015, 18:38

            Robert, S Moderation Douglas is the MASTER of “misleading”, as well as distortion, and omission of material facts.

            And he, being a Public Sector retiree (trying desperately to keep his overstuffed pension/benefit gravy train chugging right along), I’d guess that all of the “misleading”, the “distortion”, and the “omission”, is intentional.

      • Tough Love
        Tough Love 4 January, 2015, 21:26

        Quoting S Moderation Douglas … “Public sector health…$12,802. This includes the value of prefunding retiree healthcare.”

        Hogwash. Where do you come up with this crap?

        At most the $12,802 includes the miniscule amount gov’ts have actually CONTRIBUTED in the year towards the VERY high full cost of retiree healthcare accruals associated with that year.

        We both know that almost NOTHING is actually contributed annually towards fully funding the accruing “VALUE” of annual retiree healthcare promises.

        Your not so smart. In fact based on your own words …”I retired at 62 with 37 years and am still under $4k” …. you were on the low end of mediocre, at best.

        Reply this comment
      • Tough Love
        Tough Love 4 January, 2015, 21:41

        What interesting fiction.

        Reply this comment
  5. Bill Gore
    Bill Gore 2 January, 2015, 14:27

    OR, you save yourself hassles and headaches and simply BLOW IT OFF. Don’t sign up for Medicare, screw it. Be like an ‘undocumented immigrant’ and just show up at the ER when your sick, get all treatment free. Blow off Obamacare and dont pay the fine either. Maximize all the benefits you can for yourself and sleep easy. The system and all these earnest little people bankrupting themselves to ‘comply’ and then they just get horrendously sick anyway and die young and bankrupt. Eat healthy food you grow yourself, get LOTS of rest, LOTS of outdoors exercise.

    Reply this comment
  6. desmond
    desmond 2 January, 2015, 17:59

    The feeders sound like Marie Antoinette. She went through attitude adjustment and lost her head during it. My generation will fix. We have no morals, no standards. We fix things, whatever it takes. Consider it a form of population control. Parasites will be exterminated like vermin.

    Reply this comment
  7. Ulysses Uhaul
    Ulysses Uhaul 2 January, 2015, 22:52

    We have free boxes for doomer moves to Redneck Utopia.

    We call it our PALEO SPECIAL!

    Reply this comment
  8. Howard
    Howard 3 January, 2015, 11:59

    It still amazes me that we hear all the time about Social Security, which we paid in to, will run out of money. But we never hear that welfare is running out of money, regardless of how fast it grows.
    Yeah, wonder why that is?

    Reply this comment
  9. Ted
    Ted "Patriot" Steele 3 January, 2015, 16:51


    I am having a GREAT retirement. In fact, I have been enjoying it doe well over a decade.
    The secret?

    PAY OFF YOUR HOUSE as soon as you can— It’s your biggest bill and the biggest money eater— loiving well in retirement is easy– you don’t need much– dial back the frills and– viola!

    It’s good for the Ted anyway!

    God Bless all of you little buddies!!!

    Reply this comment
  10. Queeg
    Queeg 4 January, 2015, 00:27


    Desi is mean and surly…..poor lad……as a child his Profile suggest involuntary corner sitting and being deprived of toy boats and stuffed Puffins! Pity.

    Reply this comment
  11. Wolfman
    Wolfman 4 January, 2015, 01:45

    over the top city public city pensions are also at fault. I know a retired city manager that gets over $$$$150,000 a year for the rest of his life and he is only 42 years old ?

    Reply this comment
    • SeeSaw
      SeeSaw 4 January, 2015, 20:18

      That can’t be in CA–a public worker on most plans, CalPERS, et al, must be at least 50 to retire. A retired City Manager at the age of 50, must have been a wunderkind!

      Reply this comment
  12. SkippingDog
    SkippingDog 4 January, 2015, 12:24

    There’s only one word that applies to your claim, Wolfie: Nonsense.

    Reply this comment
  13. Tough Love
    Tough Love 4 January, 2015, 21:08

    Quoting … “Whether the state constitution says the pensions must be paid, or not, eventually there will be no money to pay them in full.”

    THAT is the key takeaway, and rightfully for the beleaguered and betrayed Private Sector Taxpayers, those (now) grossly excessive Public Sector pensions will be reduced by the 50%-75% share that undoubtedly would NOT have been granted in the absence of the Public Sector Union/politician collusion … specifically, the trading of campaign contributions and election support for favorable votes on Public Sector pay, pensions, and benefits.

    Reply this comment
    • Donkey
      Donkey 5 January, 2015, 08:35

      Nice post TL, keep it up, the RAGWUS feeders hate facts!! 🙂

      Reply this comment
      • Ted Patriot steele
        Ted Patriot steele 5 January, 2015, 13:56

        300 BILLION

        now there’s a fun fact!

        Reply this comment
        • Tough Love
          Tough Love 5 January, 2015, 18:45

          Ted, That $300 Billion of CalPERS ASSETS is just about correct. But too bad for you that the latest (appropriately calculated, with Moody’s-type methodology) estimate of CalPERS LIABILITIES (for ALREADY-accrued service) peg them at $750 Billion.

          Reply this comment
          • Ted
            Ted "Patriot" Steele 6 January, 2015, 20:23

            LOL Lovey–

            My small pension is due in very small amounts for many years in the future while contributions and returns backfill the fund and adjustments are made in the tiers to insure fidelity….300 billion baby– I’m good with it.

          • Tough Love
            Tough Love 7 January, 2015, 08:48

            Well Ted, given your age, I’m sure you have nothing to worry about.

          • T Ted E-- Mind of your Godhead Ted
            T Ted E-- Mind of your Godhead Ted 11 January, 2015, 07:43

            Thanks TL— My Dad and Grandpa lived to be 100 and 103—–I am fit and healthy– take no meds except a daily aspirin… I still surf—I am enjoying retirement! Thanks for keeping your obligation/promise little buddy!

  14. Ted Patriot steele
    Ted Patriot steele 5 January, 2015, 13:55

    LMAO so T Lovey–

    are you saying “screw” the Constitution when it’s inconvenient for you? LOL

    And Calpers is 300 Billion baby– aint running out any time soon little buddy!

    Reply this comment
    • Tough Love
      Tough Love 5 January, 2015, 18:47

      Nope, But I AM saying … screw the Constitution to the extend it “protects” fraudulently obtained Public Sector pension/benefit promises via Public Sector Union/politician collusion.

      Reply this comment
    • Donkey
      Donkey 5 January, 2015, 20:13

      TCS, the pension collusion has nothing to do with the Constitution and everything to do with dirty politics, backroom deals, smoke and mirrors, dogs and ponies, lack of morals, and sociopathic narcissist members of the feral RAGWUS feeding cabal. 🙂

      Reply this comment

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