In an effort to compare the retirement benefits between public and private sector employees more accurately, the PublicSectorInc.org project of the Manhattan Institute has launched an expanded version of its public pension calculator tool. The previous version of the calculator only showed information from 13 states. The new calculator features pension systems in all 50 states making the comparisons all the more interesting.
While a large majority of private sector employees in America participate in a defined contribution pension system, most likely a 401(k), the opposite is true for public sector employees who participate in a defined benefit pension system. Defined pension systems guarantee a level of compensation for the rest of the retiree’s life, paid for by taxpayers. Making an apt comparison of the difference between the two systems in potential benefits upon retiring can be very difficult. This new calculator simplifies the comparison.
The calculator also allows the user to determine the amount of money one would have to save to purchase an annuity for a comparable public sector job which has a defined benefit plan. For instance, when considering a median public school teacher retiree from last year, a private sector teacher would have to save the following amounts to get the same benefit:
- $868,000-$950,000 in the California State Teacher Retirement System.
- $1.1-1.2 million in Illinois.
- $1-1.1 million in Connecticut.
One of the architects of the pension calculator, Stephen Eide, commented, “Pension reform has several justifications, such as the excessive costs of the current defined benefit system, and its lack of inter-generational equity. The pension calculator is intended to contribute to the debate by helping the public understand just what a great deal the typical state and local employee gets.”
For those taxpayers interested in how their pensions compare to the government workers whose salaries they’re paying through their taxes, visit the calculator here.