Quote:
Originally Posted by moorhosj
I see this mentioned a lot by arm chair economists, but I've never seen a credible plan to actually achieve it. The pension system works much like Social Security in that it relies on current workers paying into the fund in order to pay out liabilities to retired workers.
If current workers move to individualized accounts (401k), how would we pay out the existing liabilities and keep the promises our Supreme Court has already ruled on?
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This is generally correct - newer employees (Tier IIs) have lower benefit accruals than older employees in most of the pension plans, but have the same payroll deductions, so newer employees are actually paying more into the system than they'll ever get out as part of the inter-generational theft scam to boost fund contributions.
Most local pension funds will have a growing unfunded liability if you cut off new employees, though you're actually doing those new employees a favor if they're under ~35-40, because they'd be better off taking the same payroll contributions and investing them in an IRA themselves rather than subsidize the 60 year olds who paid nothing back in the day but whose pension benefit is untouchable because the state constitution is apparently a suicide pact.