Pension Funds Bound to Collapse

Pension funds are imploding on a daily basis now. This page tracks this meltdown meticulously. If you think the banking crisis was the end of it, think again. This implosion will render millions of aspiring retirees unable to retire. They will need to enter the workforce at an old age in order to make ends meet. The implications on the job market are obvious.

This interesting article pretty much sums up the source of the problem.

Land a State Job and Become an Instant Millionaire

By Ken Mandler

It’s a tough job saving for retirement. Most of us have difficulty even putting away $500-1000 a year in our retirement accounts. And when the car breaks down — that money goes as well!

Others have access to 401(k) programs at work and employers sometimes match the contributions with up to $4-5,000/year. Then again, during bad profit or no profit years, the employers utilize that ubiquitous phrase “subject to change” and provide no match. Or they merge and change the “plan”.

But California state government employees have an employer who regularly and by law provides a $40-50,000 contribution to each employee’s pension account — year in and year out — good budget times and bad. (And in bad years they borrow the money!)

The California state government provides a “defined benefit” pension plan to each of its employees. Such “defined benefit” pension plans are far more generous than any 401(k) or defined contribution pension plan available from any other employer in the state! In fact, the plan is so generous that it makes the average state employee a millionaire after only 22 years of work!

Here’s how it works. Say you start working for the state at age 41 and retire at 63. The average state employee makes $55,625/year in salary — and that’s before benefits! At the age of 63, you’d be able to retire on 55% of your pay rate — 67.5% if you purchase 5 additional service years at a pretty nominal cost.

That’s 67.5% of your final pay. Let’s say you retire at the average state employee pay rate of $55,625/year — your annual pension for life would be $37,546/year. Currently state employees are saving $1.8 billion of their money in the State’s Pooled Money account which pays only 2% per year in interest. However, Let’s say you were able to earn an interest rate of 3% on your retirement account — how much would you have to have in that account to yield an annual benefit for life of $37,546?

Here’s how you calculate that amount — you divide $37,546 by 3% ($37,546/0.03= $1,251,562). To provide this level of annual pension on your own would require you to save $1,251,562 during your 22 year working career between the ages of 41 and 63. Could you do that on your own?

It would require putting $56,889 ($1,251,562/22 years = $56,889) into your 401(k)/IRA or other retirement account every single year during those 22 years! When you work for the state, the state does this for you!

Is the state’s pension plan overly generous? The Sacramento Bee and Governor Arnold Schwarzenegger have been whining about it lately — are they jealous? The state’s own Legislative Analyst has determined that California’s pension plan provides nearly twice the benefit of the next highest state.

Other comparisons are in order. The vast majority of American corporations have now eliminated “defined benefit” pension plans — only 6% of Americans in the private sector have access to such plans. American companies have terminated over 17,000 such plans in the last 20 years. IBM, one of the bluest of the blue chip companies, terminated its “defined benefit” pension plan in 2005. Hewlett Packard, a major California employer, followed by terminating its plan later that same year.

You’ve seen the headlines this year about possible changes in the state’s pension plan. However, that shouldn’t stop you from signing up today as your pension is guaranteed the moment you land a state job. They can change the benefit for future employees — but not you!

Landing a California state government job is not an easy process as everyone wants to be a millionaire! And you are a millionaire the moment you land a state government job. Capitol Weekly’s How to Get a State Job Workshop provides valuable insights into landing a California state government job. Sign up for the August 28th class today!

Ken Mandler teaches a monthly workshop on How to Land a State Job. The workshop focuses on a variety of tactics and strategies designed to make the state job process an effective one for you. The workshops are 3 hours and include over 400 pages of information for your review. The cost is $84. You can sign up at or by calling Ken Mandler at (916) 443-6788 today. You can e-mail Ken Mandler at ken.mandler(at)
Jack Dean is president of the Fullerton Association of Concerned Taxpayers and editor of

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