Pensions and Retirements in CA

I know I’m only 25 and just graduating with my masters but is it too soon to start thinking of pensions and retirement? I mean, come on, before I know it the time will be here when I can step back and spend the rest of my days in leisure. Oh wait, what do you mean there might not be any more pension systems? What do you mean I shouldn’t rely on the market? It worked out well for so many others before me. Oh wait, that’s right…I forgot the markets went south really fast in the past couple of years.

I came across two troubling articles last week on the City of Los Angeles and state of California in general. In Los Angeles’ case former Mayor Richard Riordan is warning that the city will need to file for bankruptcy “unless major policy decisions are made”. LA bankrupt…what!! I found it hard to imagine but according to an LA Times article the city’s pension burden is a big reason for its financial woes. Would you like to retire with a pension worth 90% of your current salary? Apparently all you have to do is become a City of Los Angeles firefighter or police officer. Regular employees receive pretty good pensions too. Riordan favors transitioning from employee pensions to 401Ks. Wait, the same 401ks that tanked with the market meltdown?

The state in general is not any better either. According to Girard Miller’s article in Governing, the real-time deficit for both state and local government retirement plans — including both pensions and retiree medical plans — is roughly $325 billion. “That's almost equal to the total bonded indebtedness of the state and all public agencies in California.” There are a wide range of reasons as to why California and many of its local governments got into this mess. Least among them is poor planning and future foresightedness. I wonder what Governor Arnold Schwarzenegger will say now in his commercials to attract business and people to California.