Hello Terry,

I’m 36, and In my 10th year as a public school teacher. My school district and state combine to automatically invest 7.5% of my earnings into my pension. What I have read and heard over the past several years has left me with little confidence that I will ever actually get any of my own pension contributions because the baby boomers will claim both their share and mine. That prediction has me saving 15% on my own, which I’m proud to say I am doing — but often at the expense of fun, mortgage savings, and hopefully ring shopping at some point in the near future.

Do you think I should maintain such limited faith in my pension (continue to scrape along with my 15% (from my 457, IRA, and savings account)), or have more faith and loosen my savings belt?

Thank you,
John K.
Silver Spring, MD

Terry Says:   That is a profound and yet reasonable question.  I live in Illinois — in Chicago, Illinois — where both the city and state are technically bankrupt!  (But states can’t go bankrupt, and it will be about ten years before the city “runs out” of money in its pension funds.  And the politicians are at a standoff, although everyone knows the D-day is coming closer!  Either there will have to be a huge tax increase, or benefit cuts — no fault of the public empoyees, but because the politicians underfunded their side of the pensions!  And the state constitution doesn’t allow “changes” to future benefits — and it takes a lot of votes to amend the constitution.

So I guess it all depends on the city/state you live in as to how much confidence you have in  your future pension benefits.  Unlike the Federal government, a city or state or school district can’t actually “print” the money to make good on its pension promises.  You are wise to have your own savings in addition to this promise.   Continue along this path — and make sure that when you do marry it is to a person who shares your outlook about money and savings and investments.  I think you’ll have the last laugh — if anyone is laughing at that time!

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