Jack Dean reports:
It’s a tough job saving for retirement. Most of us have difficulty even putting away $500-1000 a year in our retirement accounts. And when the car breaks down — that money goes as well!
Others have access to 401(k) programs at work and employers sometimes match the contributions with up to $4-5,000/year. Then again, during bad profit or no profit years, the employers utilize that ubiquitous phrase subject to change” and provide no match. Or they merge and change the “plan”.
But California state government employees have an employer who regularly and by law provides a $40-50,000 contribution to each employee’s pension account — year in and year out — good budget times and bad. (And in bad years they borrow the money!)
The California state government provides a “defined benefit” pension plan to each of its employees. Such “defined benefit” pension plans are far more generous than any 401(k) or defined contribution pension plan available from any other employer in the state! In fact, the plan is so generous that it makes the average state employee a millionaire after only 22 years of work!
Here’s how it works. Say you start working for the state at age 41 and retire at 63. The average state employee makes $55,625/year in salary — and that’s before benefits! At the age of 63, you’d be able to retire on 55% of your pay rate — 67.5% if you purchase 5 additional service years at a pretty nominal cost.
That’s 67.5% of your final pay. Let’s say you retire at the average state employee pay rate of $55,625/year — your annual pension for life would be $37,546/year. Currently state employees are saving $1.8 billion of their money in the State’s Pooled Money account which pays only 2% per year in interest. However, Let’s say you were able to earn an interest rate of 3% on your retirement account — how much would you have to have in that account to yield an annual benefit for life of $37,546?
Here’s how you calculate that amount — you divide $37,546 by 3% ($37,546/0.03= $1,251,562). To provide this level of annual pension on your own would require you to save $1,251,562 during your 22 year working career between the ages of 41 and 63. Could you do that on your own?
It would require putting $56,889 ($1,251,562/22 years = $56,889) into your 401(k)/IRA or other retirement account every single year during those 22 years! When you work for the state, the state does this for you!
Yes,everyone wants to be a government worker:
Landing a California state government job is not an easy process as everyone wants to be a millionaire! And you are a millionaire the moment you land a state government job. Capitol Weekly’s How to Get a State Job Workshop provides valuable insights into landing a California state government job. Sign up for the August 28th class today!
Ken Mandler teaches a monthly workshop on How to Land a State Job.
The workshop focuses on a variety of tactics and strategies designed to make the state job process an effective one for you. The workshops are 3 hours and include over 400 pages of information for your review. The cost is $84.
Most people working in the government sector make more money than the private sector.
