As a retiree with a defined-benefit pension; a former public employee who defended public workers’ pension benefits for decades; and an advocate who, after leaving the Service Employees International Union, chose to spend several years trying to create a national effort to build a new all-American retirement system, I want to offer my perspective on some of the recent pension issues in Rhode Island.
First, it is critical that we try to focus this discussion on facts. Well-intentioned unions or elected officials should avoid fueling the non-fact based, ideologically-driven attacks and political finger pointing that often surround the arguments of opponents of public workers’ pension. Pensions are what many of us have worked hard for in order to enjoy a secure retirement, and we should expect everyone responsible for maintaining and protecting them to put politics and manipulating the facts aside.
I have met and talked with Rhode Island General Treasurer Gina Raimondo, and although we can debate some of her recent restructuring decisions (which did preserve a defined-benefit plan), it is not helpful to attack her integrity and motives. Like many public pension plans around the country, Rhode Island’s has a significant funding shortfall because politicians were not honest about the true costs of the program, which created long-simmering deficits, and a math problem that needed to be dealt with.
Second, we need to acknowledge that the real tragedy of fees for retirement investments is what most Americans who don’t have defined benefits pay for their 401Ks and IRAs. “Demos has calculated that an ‘ordinary’ American household ... will pay, on average, nearly $155,000 over the course of their lifetime in effective total fees. To put this in perspective, this household could have bought a house with the amount they paid in fees,” writes Robert Hiltonsmith of that public policy organization.
The future of retirement security demands that workers have pooled, professionally-managed assets that let them avoid the high fees required of most workers investing their own money, rather than the lower fees that most pension funds can manage toward.