Often when we talk about public pensions, we focus on the individual teacher, firefighter, or other public employee who earns a secure retirement through their pension. That is certainly one of the best features of defined benefit pensions: workers know they can retire with a reliable benefit that will cover them for the rest of their life. Public pensions also benefit local communities though. They do this through providing economic stimulus to local economies. They also enable retirees to give back to their communities.
Public pension systems generate a significant amount of economic activity each year. This is because the money invested in public pension funds is circulated through the local economy by the direct spending of retirees. Both public workers and their employers contribute to public pension funds. The majority of the money in the pension fund, however, comes from investment returns on the combined contributions. On average, two-thirds of public pension funds comes from investment earnings. In a state like Oklahoma, each dollar contributed by taxpayers (through the employer contribution to the pension fund) ultimately creates $4.47 in economic output. This is a significant return on investment!
The security of a defined benefit pension also gives retirees the ability to give back to their communities. People like retired firefighter Steve M. from Oklahoma earned his pension during his working years and is now able to help out during retirement:
“I was proud to serve with the Lawton Fire Department for 27 years. When I was commissioned in 1971 this was a job, something I needed to support my wife and small son. I quickly found it was more than just a job, this was my life calling, not just being a firefighter but being a public servant. We were taught about fighting fire but also the importance of service to the citizens.
My retirement allows me to continue to serve people now through my church, which has been just recently in the process of building a house to give to a single mother with 3 small kids. I work with other church members to see this project completed, and the plan is to build another one.
We support the school, civic projects and organizations here working to help make this community the best it can be. I never would have realized the impact the fire service would have had on my life in 1971. Now my retirement allows me to continue to carry out the role of servant to my community. To be able to impact citizens of this great state, one that has been such a blessing to myself and family.”
The impact of public pensions goes far beyond the individual workers who earn their pension through their careers. Not just the economic activity created in local communities, but also the ability of retirees to give back indicate the positive, far-reaching effects of public pensions.