Where does that money go while they are still working? I posed the question today about having the Town change the way they do Future retirement payouts for Town Employees when they retire. What I proposed, what that instead of having the retiree got a Monthly Retirement check for the rest of their life, I proposed the idea of a Lump Sum payout , Principle and Interest included for all the years that money was taken out for the employee's retirement. Give then a Lump Sun Pension check and tell the retiree that their money is their's to spend and invest.
Guess what I was told ???
"We could not do that even if we wanted to. We don't have the money to do that! "
I was shocked at that answer. It makes me wonder what they are doing with the money they ARE taking out of the employees paychecks each Month !!
Yes, it is a serious question. Take these numbers for a rough example.Say a Employee makes $1,000 a week and has $200 taken out each week and put into a retirement fund. Works 50 weeks a year. $10,000 per year placed into the fund. He works for 30 years. That is $300,000 . Not including interest earned. It's their money. Why should their money be used to meet the payout obligations for other retirees?
What I meant to say, is that the retiree should be allowed to invest their own lump sum pension money the way they see fit. They might get a better return. Then again, they might not. But it should be their choice.
While they are still working the money goes to the common retirement fund managed by the state comptroller. You can find details on the comptroller's website. They can't take the $ out as a lump sum because the state and local retirement system is a defined benefit system that provides a monthly payment based more or less on a formula that is a function of years of service and highest annual salary. It's not a 401k or IRA type plan where one can buy an annuity, take a lump sum or some combination of the two. Local governments have very little discretion because the pension system is fixed in state law.
There is one exception that comes to mind. I believe that SUNY/CUNY faculty have the option to participate in an optional retirement plan managed by TIAA/CREF. I believe they can take their accrued funds out as a lump sum at retirement if they don't mind paying income tax up the yingyang on the funds. But I could be wrong.
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