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3 For 50 Retirement Accounts ~ Bankrupting States And Unions

By
Real Estate Agent

 

No wonder some states are nearing bankruptcy.  In the case of California they offer a retirement program to their State workers called a 3 for 50 plan.

For each year you work you are guaranteed 3% of your annual income for each year of service when you retire.  You can begin to draw retirement at age 50. 

  • Hypothetically, if you are 20 when you take a state job and work for 30 years, you can retire at 90% of your salary at age 50. 
  • Additionally you can leave your career and start a new one while receiving 90% of your salary.
  • Not only does the employee collect monthly benefits, they also have the proceeds from their retirement account, including contributions made by their employer.
  • In most instances Cadillac health care policies are also included.


This type of lavish retirement is not limited to California.  Many states and unions offer this lucrative package to employees.

No wonder General Motors went bankrupt.  Their benefit package was structured in a similar manner.  How can you possibly be profitable when you are paying for the prior workforce as well as the current one?

  • If you ever visit a State or Federal office you have witnessed first hand the work ethic of employees. They are also protected from being fired by very powerful unions. 
  • Once you get yourself hired on - you only have to show up and look busy.  You are insulated from being fired and on the way to retiring in style.


Once an employee retires from the work force the payroll of the department does not go down.  It actually goes up.  Traditionally the replacement employee is receiving an equal compensation to fill the vacancy.

  • Now you are paying 2 for 1.  You are paying two employees for the same job.  If the first employee who retired lives beyond age 80, and the second retires at 50 - you now are paying 3 for 1.


Something needs to be done.  Not only is our federal government taking on unsustainable debt, so are our States and union shop companies.

Add the fact that most State retirement funds have been borrowed against and plundered by lawmakers.  The same with Unions. 

They have made loans and invested in projects that ultimately went belly up. The money simply is not on deposit to even earn interest or pay the monthly obligations.

Sample California Retirement

 

_________________________________________________

William True
True Sarasota Real Estate - Sarasota, FL
Sarasota Real Estate

Good information, Bonnie! There doesn't appear to be any easy solutions though.

Feb 19, 2010 10:05 PM
Wallace S. Gibson, CPM
Gibson Management Group, Ltd. - Charlottesville, VA
LandlordWhisperer

I learned at my grandfather's knee to take care of myself and buy real estate....smart real estate investing of MY OWN money will be my retirement.  I am so fortunate to not depended on the government. My SS retirement is from early retail clerk/real estate support income.

My sister took early retirement from school system AND she will get SS and she now works in a job that she loves and is saving her money to buy her own retirement home for CASH...

Both of us are so fortunate to have learned these lessons EARLY in our lives

Feb 19, 2010 10:06 PM
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

William,  The solution will be hard.  It can be done, but it will be very unpopular.

Feb 19, 2010 10:26 PM
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Wallace,  You had an excellent mentor.  Not everyone was in a position to invest so wisely.  Good for you.

Feb 19, 2010 10:27 PM
Dorie Dillard Austin TX
Coldwell Banker Realty ~ 512.750.6899 - Austin, TX
NW Austin ~ Canyon Creek and Spicewood/Balcones

Good morning Bonnie,

Wow..great post..and I agree with you the solution is hard and will be very unpopular!!

Feb 19, 2010 10:31 PM
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Dorie,  We might all be surprised to find out which states and unions are offering this type of retirement.

Feb 19, 2010 10:33 PM
Mike Saunders
Retired - Athens, GA

Bonnie - Oregon retirees get a guarenteed 8% annual increase, minimum (or at least they did a few years ago). You can bet that the unions and retirees will make every effort to assure that the system is not changed. Not unlike in European countries, such as Sweden that will be going broke but the voters will not let them change the guarented income.

Feb 20, 2010 12:51 AM
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Mike,  We have to do some hard things to turn this around.  I am appalled.  I never knew this existed in State and Federal jobs. These are public servants.  The majority of them could not survive employment in the real corporate world.  I am not in favor of continuing this practice or even guaranteeing those who are on it now.

I was aware that Unions had gold plated benefits.  I am also aware that many industries had to scale back their pay and benefits just to keep their jobs.  I believe the air line industry was one.

Feb 20, 2010 01:55 AM
Mike Saunders
Retired - Athens, GA

Bonnie - it is government worker unions that actually have it the best. Neil Boortz put it quite clearly. Unions in the private sector realize that the company has to actually make money to continue to pay them so they adjust their demands and give concessions accordingly. Public sector unions know that governments don't worry about profits, they make demands, governments raise taxes. We need another Reagen moment with the Air Traffic Controllers union.

Feb 20, 2010 03:46 AM
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Mike,  I remember that bust up well. 

Feb 20, 2010 03:49 AM
Raylene Estabrook
Signature Homes Real Estate Group - Yarmouth, ME

Question: When they set up these systems how did they think they could be substained? The math obviously does not work.

Feb 21, 2010 01:58 AM
Bonnie Vaughan
Scranton, PA
CNE SFR - Buyers/Sellers - Lackawanna & Surroundin

Raylene,  At one time when things were prosperous it looked like it would never end.  Now California is losing residents and businesses because they are so highly taxed. 

Feb 21, 2010 06:45 AM
Raylene Estabrook
Signature Homes Real Estate Group - Yarmouth, ME

Bonnie, call me naive but has history not shown us the ups and downs of economy's. Great post. Time for some tough decisions/solutions

Feb 21, 2010 07:46 AM