POLICE Magazine

AUG 2018

Magazine for police and law enforcement

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52 POLICE AUGUST 2018 to 27%. Huge losses during the market downturns of 2000–2002 and 2008 affect- ed public pension funds just like everyone else. ese losses were a major contribu- tor to the sharp decline in the funded sta- tus of pension plans nationwide. Now let's look at the second reason, failure to set aside the money needed to fund the pensions. A growing gap exists between the amount of money required to fund public pensions and the actual amount contrib- uted by government employers in recent years. Even if every state pension plan had met its assumptions in 2016, the total funding gap would still increase because contribution policies don't require suffi- cient contributions to meet the growing costs (new benefits being paid out and in- ments can least afford to put more into pension funding. So why are some states like Wisconsin doing so much better than others? ere's no secret sauce. States that make their annual actuarial contributions, manage risk, and avoid unfunded benefit increas- es have well-funded pension programs. It's about policy choices. Sadly, most states aren't acting fiscally prudent in this area, and as individuals, it's nothing we can directly control. WHAT CAN YOU DO? Since this issue affects your financial fu- ture and is no doubt important to you, let's focus on what you can control. Besides choosing to work in a state with well-fund- ed pension plans, you can set yourself up Cop Finance for additional income in retirement. In coming years, the name of the game in retirement will be multiple streams of income. Your retirement plan should be diverse enough to include not just your public pension, but other sources of reg- ular income as well. Social security will play a part, but again, it's not the only thing to hang your hat on, and just like pensions, it's not what it used to be. e way it stands, you're going to have to make up the gap. All indications are that public pensions will shift the bur- den onto employees to contribute more toward their own retirement, in order to make up the difference. terest on pension debt). States just haven't set aside enough money. In 2016, only 27 states contributed enough money for their funding gaps to decrease, if their actuarial assumptions were met…and they weren't. Maintain- ing high expected annual rates of return (above 7%) reduces the annual payments into the plan from government budgets. When investment returns fall short of expectations, the government sponsors must increase contributions to make up for the shortfall. is doesn't usually hap- pen, though, because poor market per- formance often coincides with broader economic problems, a time when govern- Saving additional funds, making wise investments, and paying down debt before you leave the job will help you have a happy retirement. PHOTO: GETTY IMAGES

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