Retirement Haves and Have-Nots
I thought my friend was going to punch me in the face.
Remember the government shutdown earlier this year that lasted 35 days? I told my friend that I didn’t feel the least bit sorry for him and other federal employees because:
- He’d end up getting all his back pay, in what essentially amounted to a 35-day paid vacation, and
- Because most federal government workers are paid very, very well, with much better benefits than I can get!
The Cato Institute reported federal government workers are getting an average of $123,160 a year, including fringe benefits. That’s almost 76% more than comparable private-sector workers, who average $69,901 a year.
Any government workers who screamed during the government shutdown that they couldn’t pay their mortgage or buy food are simply bad at managing their spending.
I could see the steam coming out of my friend’s ears when I told him that. Fortunately, we didn’t come to blows and remain very good friends.
Retirement Haves and Retirement Have-Nots
The biggest reason I don’t feel sorry for government workers is because they have one of the most generous pension plans on the planet.
The Federal Employees Retirement System pension starts at age 62 and pays 1.1% per year for the average of the three highest-earning years.
In other words, someone retiring after 30 years of service would get 33% of their highest three years of pay.
It’s quite common for retired government workers to receive an annual pension of $40,000, $50,000, $60,000 a year… or more.
Of course, the most generous pension plans of all are reserved for the fools we elect to Congress. After five years in Congress, each politician will receive a pension that pays them 80% of their (current) $174,000 salary.
That’s $140,000 a year for the rest of their lives after contributing to the Beltway swamp for just five years of work.
Of course, you and I pay for those pensions with our taxes.
What about the rest of us hard-working Americans?
Do you expect to receive a pension when you retire? I sure don’t and neither do the vast majority of Americans today.
Forty years ago, 84% of people working in the private sector worked for a company that provided a traditional monthly retirement pension check.
That number dropped to 40% by 2000, shrunk to only 27% in 2014 and is down to a measly 13% today.
Look, if you want a pension, you better look for a government job, like my friend, or run for office. Otherwise, you’re on your own.
And sadly most Americans are not doing anything to secure their future. A study from Northwestern Mutual found one in three Americans has less than $5,000 saved up for retirement and 21% of Americans have no retirement savings at all.
A Transamerica retirement survey found that the median retirement savings is an inadequate $50,000. This could mean many people — hopefully not you, however — are NOT contributing to a 401(k) plan and are missing out on the free “match” of 50 cents on the dollar.
According to researcher Financial Engines, $24 billion of 401(k) matches in the U.S. go unclaimed every year.
That works out to $1,336 of FREE cash each year folks are missing out on. Add this up over time and this easily amounts to $43,000 with compounding over 20 years.
Anyone who’s not putting enough in their 401(k) to collect the free employer match ought to have their head examined.
It’s free cash! Take the money and run!
Of course, you do need to invest those 401(k) dollars wisely. That’s where I can help you in these articles.
But without stashing away every dollar you can, the best investment advice in the world won’t help you retire on your terms.
Here’s to growing your wealth,
Chief Income Expert, Mike Burnick’s Wealth Watch