Public Pension Millionaires
March 27, 2014 - National Center for Policy Analysis
Some state pension plans are creating retirement millionaires, says Andrew
Biggs, a resident scholar at the American Enterprise Institute.
Public pension plan advocates routinely refer to public pensions as "modest."
This is entirely false. The American Federation of State, County and Municipal
Employees (AFSCME) claims that the average AFSCME member receives only $19,000
per year after a public service career, but that is simply not true. It is only
by including short-term government employees that AFSCME can make such a
claim.
Full-career public employees, on the other hand, receive incredibly generous
pensions.
- In Nevada, an average career retiree receives annual pension benefits up
to $64,008. In Colorado that figure is $60,420 and in California, $61,560.
Connecticut retirees receive $50,388. With the exception of Nevada and
Colorado, these employees also receive Social Security benefits.
- Some states are less generous -- Maine employees receive just $25,000 per
year and Mississippi pensioners only $15,000.
- The average state provides annual pension benefits for full-career
retirees of $36,131.
But these figures only show so much, as states also have very different costs
of living and some state employees do not receive Social Security benefits. To
make a true comparison, Biggs took total retirement income (pension benefits as
well as Social Security) for full-career state employees and compared it with
the earnings of full-time employees in each state.
- In the average state, the typical full-career government employee has a
retirement income higher than 72 percent of full-time employees working in
that state.
- Oregon retirees topped the list, with the average retiree receiving
benefits greater than the earnings of 90 percent of full-time employees in
Oregon. West Virginia followed at 89 percent, and California and Nevada were
both above 87 percent.
- These figures may actually be conservative, as retirees may also be
receiving interest or dividend income from personal savings. Additionally,
most public retirees also receive health coverage.
- Lastly, the cost of living for retirees tends to be lower than the cost
of living for working age Americans.
Looking at the total benefits paid out to retirees over their retirement,
many states actually create "pension millionaires" who earn over $1 million in
retirement benefits. Alaska, California, Colorado, Connecticut, Nevada, Oregon,
Pennsylvania and West Virginia do just that, and Rhode Island and Texas come
close. The average career retiree receives a lifetime retirement benefit worth
$768,940.
Source: Andrew G. Biggs, "Not
So Modest: Pension Benefits for Full-Career State Government Employees,"
American Enterprise Institute, March 2014.
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