Retiring at 55, Maybe Not

In a postscript to my commentary the other day regarding the decline in government retiree pension payouts due to the slide in the financial markets, me and a friend pondered how long these funds could exist if the markets fell by another 50%. Our thought process contained some loose assumptions centered not only what the effect of further stock market declines would be on pension funds, but how an accelerating exodus of government workers (baby boomers) would deplete resources at an increasing rate.

If the stock market did indeed take another 50% haircut over the next few years, we estimated that the state of Wisconsin retirement fund could run dry in roughly five years. The ramifications of such an event would severely restrict the state’s ability to pay current retirees. Confident of the state’s promise to pay retirement benefits, I speculate that many government workers have fell woefully short in any type of personal savings program.

For current state workers, especially those not near retirement age, or future employees retirement benefits may be eliminated altogether.

Though somewhat sinister, states have another option besides curtailing pensions. In order to make up the financial shortfall in pension funds, states could resort to raising taxes or cutting services. One would hope that such a proposal would lead to a mass revolt by the citizenry.

Today, I ran across the following article that closely coincides with my past thoughts on the coming financial apocalypse for government retirement funds.

Retiring at 55

Whether talking about Social Security or government employee pensions, the one point missing from such debates is the morality of taxing one person’s wealth for the leisurely benefit of another. Retirement is earned by sacrificing current wants for the future. It is the only financial plan that stands on solid footing.

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