Pensions versus IRA's

Bob Dwiels asked why his taxes pay government employee pensions. You pay because you're their employer. If your taxes didn't pay into their pensions, they would probably pay matching funds for IRA's instead.

Here is a different perspective on IRA's and pensions:

With an IRA you can chose whether to invest in one and how much. With pensions, from the first day of work you must pay a percentage of your gross income into the pension. Your employer decides how much.

With an IRA: you chose your investments. If they're high risk you take the chance of being hurt in a bad economy. No one can wipe out your IRA but you. With pensions you have no choices in your investments and must trust strangers to make them for you. If they're high risk, your pension fund could be jeopardized. If the company goes bankrupt it can wipe out your pension entirely. If you're in a state like Illinois, they carelessly and criminally borrow from your pension and don't pay it back. Everybody but you can wipe out your pension.

With an IRA you can start withdrawing at age 591/2 and decide how much to withdraw. Some pensions start as early as age 55, but these are usually with jobs - policemen, firemen, linemen - where it's physically harder to do the job as you age. With early retirement you end up with a permanently reduced pension and have no say in how much you receive. Many pensions don't start until age 60 or older.

With an IRA your employer also pays 7.65 percent into Social Security for you. With a pension many government employers don't pay into Social Security. The pension is the only retirement safety net.

With an IRA if it's not enough you have to get another job. With a pension: if it's not enough you have to get another job.

Paula Coughlan

Elburn