Mon, 23 November 2009
Much has been written in recent years about the health of Social Security. As the population ages two things are happening. Fewer people are paying into the system, while at the same time more people are receiving benefits, raising concern that the program will run out of money. But there is another, perhaps, more serious crisis developing within state employee pension programs that hasn’t, until now, received as much attention. We are seeing it here in New Jersey, as are other states across the country. And it may hit some folks harder than the Social Security problem because so much more of their retirement income may be derived from a state pension than from Social Security.
As the economy remains in a funk and financial markets still struggle to recover from huge losses over the past couple of years, many pension systems have seen their investments take a big hit. Since the beginning of 2009, for example, New Jersey ‘s pension fund has lost almost 13% in value, $10 billion to be exact. It hasn’t helped that the government has taken money from the pension system to plug budget gaps in other areas in past years.
Now, our new governor, Chris Christie, is assessing the situation. Will he be the one to make some hard decisions? Our outgoing governor already has signed legislation raising the retirement age and barring retirement payouts for part time employees paid less than $7500 per year. You can be sure other changes are coming from the new governor. There have to be. There isn’t enough money to pay everyone who will be entering the pension system in the next 30 years. The state has to close the gap somehow.
Now, ask yourself what you would do if the State cut your pension by 10%, 20% or more. What would you do to replace that income? And what would you do if you were then faced with rising long term care costs? The government is dealing with a fiscal crisis. It is doing the same things we all do when we are faced with a financial crisis – tighten our belts and cut costs.
The signs are there. You just have to pay attention – and take the opportunity to protect yourself and our families. Don’t assume the government will be there to protect you. It’s busy trying to fix it’s own problems. You’ve got to take care of your own. And the time to do it is now.
Category:Long term care planning -- posted at: 6:00am EDT