Retirement, Pensions, and Politics

In retirement planning, the fundamental things apply

In a time with international financial markets rumbling, American retirees depend even more on sensible, nonpolitical investing.

Of course, basing pension and retirement decisions on fiduciary principles is the idea – whether the markets are smooth or choppy. Pension managers and their investment advisors should always be focused on maximizing financial returns, increasing investment choices, and providing retirees with generally secure finances for the future.

It’s important to keep politics out of the way — to reduce distractions and to concentrate on sound investing.

Investment professionals have said America is facing an impending retirement crisis. Americans aren’t feeling confident about their golden years and many people haven’t saved enough money or invested enough in 401(k) and other plans. Our own survey earlier this year found that 80 percent of voters felt they were not prepared for retirement and an even greater number, 87 percent agreed that the country as a whole was facing a retirement crisis. On top of that, most people don’t have pensions where they work and Social Security, for those who have access to it, is in persistent financial peril and might not be reliable for everyone. Worse yet for public employees, Social Security isn’t always available for them since they have pensions.

U.S. County Officials want legislators to keep politics out of public finance

It’s not just past and present public employees worried about this.

The National Association of Counties (NACo) isn’t happy with investment orders from state and federal lawmakers, and they’re seeking some respect for local control.

“Special interest groups are actively collaborating on a nationwide campaign to restrict and eliminate local authority regarding pensions, municipal bonds, and government funds by passing legislation and resolutions at both the national and state levels that oppose local control and free-market principles,” the association wrote in its 2024-25 American County Platform and Resolutions. “These policies threaten county governments’ ability to deliver services to meet their own community’s needs by restricting access to essential data and regulating local government.

“… The National Association of Counties (NACo) urges Congress and the Administration to support policies that provide for local governments’ ability to invest and borrow as they self-determine, which must include continued access to free capital and credit markets,” the group wrote.

Americans aren’t saving enough for retirement

Business Insider, citing a 2023 Vanguard report called “How America Saves”  reports the average 401(k) balance is $112,573; the median balance was much lower, at $27,376. The average balances were lower for younger Americans than older ones. But even the retirement-age balances were lower than one might hope. For people aged 65 and up, the average balance was $272,588. and the median balance was $88,488.

The advice to fix these numbers isn’t exotic: Start early, contribute often; take advantage of employer-match options; diversify investments; mind the fees; rebalance regularly.

And worth noting, the report doesn’t mention politics or government intervention anywhere in the whole report.

Report: Pensions attract and retain public safety workers

Pensions play a big role in recruiting and retaining public safety workers, according to the National Institute on Retirement Safety, a member of APSR.

NIRS looked at data from a sampling of police and fire pension plans, finding:

• Most of the plans expect at least 75% of current employees to stay around long enough to retire.
• 52% of new hires are expected to stay until retirement.
• On average, police officers have an average tenure of 18 years, firefighters stay an average of 20 years, and all public safety workers combined stick around for an average of 17.6 years. In the private sector, the study said, the median tenure in 2022 was 4.1 years. “This data indicates that pension plans are working as intended by retaining workers during their career and helping employees transition to retirement when appropriate,” NIRS concludes.

Pensions are better than 401(k) plans for workers and the economy

Shifting from pensions to 401(k) and similar plans has increased income inequality in America, according to the National Conference on Public Employee Retirement Systems (NCPERS), another member of APSR.

The finding is detailed in the group’s sobering report, “The Hidden Costs of Pension Reforms: Rising Income Inequality, Lagging Economic Growth.”

“At the national level, the main trend for many years has been a shift from defined benefit (DB) to defined contribution (DC) plans, especially in the private sector,” the report’s authors write. “At the state level, reforms typically consist of cutting benefits, increasing employee contributions, and closing pensions to new hires.”

Their primary conclusion is that those shifts are expensive in both the short and long terms.

“Policy makers should think twice before they make changes that undermine public sector pensions or support policies that encourage elimination of pensions in the private sector,” the report concludes. “They should be aware of the negative consequences of such actions, including higher income inequality and slower economic growth. They need to remember that plan changes that are made to save money could potentially end up costing the state and local governments more than the anticipated savings.”