* Scott Reeder’s latest column is on pension reform…
But perhaps the biggest problem with the pension system is that it forces government to predict the future and taxpayers to underwrite those predictions. What will the stock market’s performance be over the next 30 years? How much longer will people be living in 2045? What will the annual rate of inflation?
All of these items are factored in when calculating pension payments. And yet they are pretty hard to calculate with much certainty. And taxpayers are on the hook for these predictions.
To be blunt, the best solution is to walk away from the system. Eighty percent of private sector employers have embraced 401(k)-type plans. In these plans, employees actually own their retirement savings and they can make decisions on how it is invested.
It’s time for Illinois to consider switching public school teachers, state workers and state university employees over to such plans. The state would still be responsible for the pensions of those who have already retired. But it’s time to move current and future employees into a more sustainable plan.
* The Question: Do you think private sector workers with 401(k) retirement plans are better off than public sector workers with defined benefit plans because they “actually own their retirement savings and they can make decisions on how it is invested”? Take the poll and then explain your answer in comments, please.