State Pensions: Wishful Thinking Plus Bad Math Equals Disaster

When I was reading an article about state pension troubles, and I come across a passage like this:

"A retired teacher paid $62,000 toward her pension and nothing, yes nothing, for full family medical, dental and vision coverage over her entire career. What will we pay her? $1.4 million in pension benefits and another $215,000 in health care benefit premiums over her lifetime."

And it makes me wonder, how much of the pension trouble was self-inflicted? We're talking about, assuming these numbers are correct, a rate of return measuring in the thousands of percents. And every single public employee that's on the state pension plan is hooked into this. The state is paying out, literally, thousand-plus percent return on investment to thousands of employees.

Sure, this wasn't such a problem when there were a handful of employees with plenty of taxpayers to back them up, but as the number of employees grew--which in turn lessened the number of private-sector taxpayers who weren't getting paid by the same system they paid into--it made the equation downright unsustainable.

So if you're not getting your own savings in order, folks, chances are you'll be completely out of luck in just a couple years.