What’s next for New Jersey pension funds?
- September 6, 2021
By the end of this year, New Jersey’s pension funds will have lost nearly $2.5 billion, according to data from the state’s Department of Public Service.
This will come on top of the $3.9 billion they will lose in total over the next five years.
New Jersey’s total pension fund shortfall, which will be around $1.2 trillion over the life of the program, is roughly equivalent to a year’s worth of payroll taxes paid to workers.
It’s a far cry from the $6 trillion pension liabilities that are currently sitting in the hands of a dozen big banks and pension funds across the country.
The pension system has a few things going for it.
The pension system, which has been in existence for nearly 70 years, is managed in a way that can easily be replaced by an investment bank or an insurance company.
It has a history of stable growth and low cost.
The state has an effective pension plan, one that will cover all of its workers in perpetuity, even if they retire in the future.
This means that when workers reach retirement, the state won’t be responsible for any of their costs.
And New Jersey doesn’t have a defined benefit plan like the rest of the country, which can leave some retirees with large amounts of debt, even after they retire.
It also means that, while the government won’t have to pick up the tab for workers’ pensions, it can still invest some of the money back into the economy, which makes it less expensive for employers to offer employees 401(k)-style retirement plans.
And while the retirement system has been improving in recent years, it’s still a far off shot from being able to pay its bills on a daily basis.
It’s worth remembering that New Jersey also runs a separate pension fund for state employees.
And although this system is not yet fully funded, the government has already started paying into the fund, so there is a chance that the future is looking good.
In the short term, New York and Connecticut will likely be the only states to begin raising pension contributions for their employees, which is a positive development.
However, in the long run, New Yorkers are more likely to be paying into a pension plan than a savings account.
If the government does decide to take on a large chunk of the retirement funds and fund it themselves, it could put the onus on employers to ensure that they have enough money in the system to cover the cost.
And if that doesn’t happen, a small percentage of workers will have to pay into the plan.
In either case, New Yorker workers will continue to face significant financial challenges, and will need to look to the state government for help when it comes to paying for them.
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