While reading my Sunday paper, I read a good editorial on the perils of over-promising and under-delivering. Chicago unfortunately was the guilty culprit. For decades, city employees have been promised healthy pensions yet their employer has not funded those liabilities. What can you learn from this as a retirement saver?
We talk to employees all the time about budgeting, saving, rebalancing, and increasing deferrals with pay increases (both at work and in the home budget). Unfortunately, employees frequently are worried about the here and now (as are most politicians) more than the future. We are asked about the “best” investment option or inverted yield curves but many fail to realize that those aren’t going to have a big impact on their small savings rate and retirement will remain illusive. As employees keep kicking the can down the road, many wake up only to realize they are in their late 50’s and have to save a considerable sum of their income to catch up. This is frequently in conjunction with a realization that retirement at 67 isn’t going to happen.
Chicago is going to be forced into this realization unfortunately it will be paid for by their tax payers and beneficiaries. As an individual, you don’t have a back stop. The same boring stuff still applies. Save early, save often, and increase as you move through your working years.