Anti-pension ideologues will often use the same false attacks on pensions and retirement security for public employees.
Today we’ve compiled three common misconceptions about pensions and explained why they are false.
1. Retired public employees automatically receive cost-of-living adjustments (COLAs) that tremendously boost their incomes.
One recurring pension misconception is the falsehood that retired public employees automatically receive COLAs which give them a leg-up on other retirees.
As we’ve previously covered, a COLA “is an occasional increase in the amount of a retiree’s or beneficiary’s pension payment in order to account for inflation.” Over time, as inflation increases, the cost of living also goes up. This causes many retirees to see spikes in how much they pay for everyday necessities like groceries, health care, and transportation.
State and local governments have offered a COLA in many pension plans to ensure retirees are able to keep pace with the cost of living, not as a means to substantially increase their income.
2. Retirees walk away with huge pension payments.
The Illinois Policy Institute, a notorious anti-pension think tank, recently shared an article titled “The 1%: Illinois’ pension millionaires” that perpetuated this myth. The organization argued in the article that Illinois’ public pension system supposedly makes millionaires out of a select number of retired public employees. However, this calculation is based on the idea that retirees never spend any of their money throughout retirement, and most Americans estimate that they will need at least $1.7 million to live comfortably in retirement.
It also failed to mention that the average public employee in Illinois annually receives $36,490 in retirement, according to the National Institute on Retirement Security (NIRS).
Nationally, that annual number is even lower with an average benefit of $27,481 per year, according to NIRS. The notion that retirees are cashing in giant pension checks and booking flights to the Bahamas is just not true.
3. Taxpayers are solely on the hook for pensions and it’s not worth it.
Pension opponents peddle this bogus claim before lawmakers to try and gut retirement security, but the facts don’t add up on this one either.
On average, $0.75 of each dollar in a pension fund comes from employee contributions and investment earnings – not from taxpayers. And pensions, if anything, are a boon for taxpayers: according to NIRS, pensions collectively supported $202.6 billion in federal, state, and local tax revenue in 2016.
Finally, cutting pension benefits would make it more difficult for state and local governments to effectively retain employees – 94 percent of state and local employees say offering a pension is an effective tool for retaining employees. It saves taxpayers money to have employee longevity instead of constantly re-hiring and re-training new employees.
Don’t buy into these common misconceptions about pensions; they are a cost-effective and reliable way to guarantee retirement security for public employees. When anti-pension advocates fall back on these debunked myths, the facts are not on their side. Share this post with someone who should know these misconceptions.
