Why pension issue not about greed

In the recent letter, “Do the math,” it appears the author does not have an understanding of how the pension system is supposed to work.

In the private sector people invest in various types of retirement plans and expect these funds will earn interest through reinvesting that interest. My personal fund over a 30-year period averaged a return of about 7.5 percent a year. A deposit of $1,000 30 years ago would be worth almost $10,000 today. Most people don’t invest in funds that pay no interest — an assumption that appears to have been made by the author.

The state pension fund was supposed to do the same thing. Employees deposited the funds and the state would invest them for pension payments in the future. This would relieve taxpayers of the burden of paying the bill for retirements. Hence, a teacher who paid 9.4 percent of his/her salary each year would have a sizable amount in the fund. Which in most cases would last a lifetime as it would continue to earn interest as it was being drawn down.

States and local governments that have solvent pension funds have done this.

However, in Illinois the politicians (both parties) are guilty, having “borrowed” these funds to meet state obligations. The funds were replaced with IOU’s. As a result, the funds are gone and they never had a chance to earn interest. Now the state is contractually bound to pay the pensions but the money is gone.

In most cases, these funds are the major portion of people’s retirement, since most are not allowed to collect Social Security. Employees are now being pictured as greedy and undeserving and are being asked to contribute more and accept less in order to let politicians off the hook. Is that fair? Check the math.

Bill Getchius

St. Charles