“The End of the World? In Brazil, It’s Already Here” (nytimes) is interesting for revealing how people think about pensions:
In addition to the spending cap, Mr. Temer has introduced a proposal to revamp Brazil’s pension system. His proposal will set a minimum retirement age of 65, in a country where the average person retires at 54. The law will also require at least 25 years of contributions to the social security system by both men and women.
There are good reasons Brazil hasn’t passed laws like this before. Although the average life expectancy in Brazil is 74, we’re one of the most unequal countries in the world. For example, in 37 percent of the neighborhoods of the city of São Paulo, people have a life expectancy of less than 65 years. It’s even shorter for the rural poor.
It doesn’t sound so bad, right? People retire at 54 and then drop dead around 65, so they are getting paid for 11 years, on average. Could the writer and editors have found a source for why this might not work? How about the New York Times itself! About a year ago they ran “An Exploding Pension Crisis Feeds Brazil’s Political Turmoil”:
When Rosângela Araújo turned 44, she decided that she had worked long enough.
So Ms. Araújo, a public school supervisor, did what millions of others in their 40s and 50s have done in this country: She retired, with a full pension.
“I had to take advantage of the benefit that was available to me,” said Ms. Araújo, now 65. Her government pension stands at about $1,000 a month, five times the minimum wage.
Brazilians retire at an average age of 54, and some public servants, military officials and politicians manage to collect multiple pensions totaling well over $100,000 year. Then, once they die, loopholes enable their spouses or daughters to go on collecting the pensions for the rest of their lives, too.
The phenomenon is so common in Brazil’s vast public bureaucracy that some scholars call it the “Viagra effect” — retired civil servants, many in their 60s or 70s, wed to much younger women who are entitled to the full pensions for decades after their spouses are gone.
… economists warn that the pension crisis will grow more acute regardless of whether Ms. Rousseff stays in office, ranking it among Brazil’s most vexing structural binds. Officials had expected a major shortfall in 2030, but they now say that could happen as soon as next year.
Both articles cite life expectancy at birth. Neither article mentions that life expectancy at age 54 in Brazil is about 26 additional years (source).
Related:
the “Viagra effect” — retired civil servants, many in their 60s or 70s, wed to much younger women who are entitled to the full pensions for decades after their spouses are gone.
Hahaha! I’m a 44-year old Boston firewhiner with 24 years of “service.” For my dedicated “service” to the good citizens of Boston, I deserve to get paid! I’ve got bills! Alimony & child support to three ex-wives, payments on my Escalade, Harley, and speed boat. I’m juggling three girlfriends, and have some serious gambling debts due to my bookie and at the Hard Rock. I now make close to $200K per year but deserve more! Not too bad for a high school grad who was washing cars before I got on with the BFD. I did, however, earn my A.S. degree in “Fire Science” on the City’s dime. You wouldn’t believe how easy that was. The “instructors” were buddies on local FDs, so I passed w/ all As and didn’t have to do any studying! And that silly degree got me promoted three times to Sr. Deputy Assistant Deputy Big-Cheese Battalion Chief Indian Chief. I still have lots of free time to work out while on the job. I trying to get on next year’s “Hottest Firewhiners of Beantown” calendar.
Last year I “worked” tons of OT to spike my pension and next year I turn 45 y/o and will retire and start collecting my $100K lifetime pension with built-in annual COLA. In 20 years, I’ll be 65 (the retirement age for most of you stiffs), the 3% COLA will have nearly doubled my pension to $200K per year! My life expectancy is 88 years, so my pension will double again to almost $400K per year by the time I die. It gets better; my lovely 20-year old Filipina mail-order bride will collect my pension long after I die. Her life expectancy is 90 years. She’ll collect my growing pension for another 25 years after my death! Twenty-five years on the job will trigger almost 70 years of growing monthly pension checks! The City of Boston has been very, very good to me. And I know you don’t feel appreciated, but a big thank you to the Boston taxpayers. Now get back to work and pay those taxes! Oh, by the way, F.U. Pay Me!
Seeing as how you are anti-pensions, you’ve surely seen the news about the last Civil War pensioner just passing away in the last decade.
These are similar cases, where a 90-year-old Civil War veteran married a young 18 y.o. woman so she could receive his pension after his death.
https://en.wikipedia.org/wiki/Maudie_Hopkins
http://www.nytimes.com/2004/06/16/business/the-last-civil-war-widow-has-a-successor-it-would-seem.html?_r=0
http://www.usnews.com/news/blogs/washington-whispers/2012/02/09/us-government-still-pays-two-civil-war-pensions
This also explains why government IT systems are so antiquated — it requires a lot of work to test new software against thousands of old, rare, unique cases.
Mike: I’m not anti-pension! I am against politicians being able to hand them out without paying for them on a current basis. If politicians and government worker unions want to negotiate a deal where some of their pay goes into funding annuities provided by an insurance company at current market rates, I don’t think that would lead to any long-term problems. I just want politicians to stop saying “taxpayers 50 years from now will be on the hook for what I promise today”.
https://i.stack.imgur.com/GQtoL.png
Is that so bad? A retirement age earlier then 60? You have a strong risk of people believing they have more capabilities then they do at those ages.
I don’t see how any management capabilities peak at an age later then the late 30’s, and probably decline. By the late 50’s, you start declining quite quickly.
Maybe the political candidates in the election simply forgot what they said every week, instead of simply trying to play multiple cards at the same time.
TheBears: There is nothing wrong with a retirement age of 54 (or 35!) as long as you fund it. Where governments are now in trouble is that they’ve set up systems where people consume 95 percent of what they earn on a current basis and then retire such that they spend about as many years in retirement as they did in the workforce. For that to work in our low-interest environment people would have to consume, during each earning year, only about 50 percent of what they earn!
But the solution to the issue isn’t lowering pensions(as proposed by the politicians), its increasing the retirement age. That isn’t the correct solution.
The solution should be decreasing the pension by 30% or more, while probably keeping the same retirement age. Perhaps the decrease in spending by increasing the retirement age past 55 is entirely offset by poorer average group leadership decisions.
Even 5 points drops in G(which is around the typical drop per decade past age 40 ) seem to cause large and obvious differences in group outcomes. Crime levels, dropout levels, rule compliance, intellectual interest are all quite visibly different at the small level of finding populations with 5 point differences.
That isn’t even taking into account various health and energy levels, nor levels of emotional adaptations that seem to decrease (particularly in males) with age.
After Friday, Barack Obama will be a 55-year old government retiree enjoying a $200K annual lifetime pension + annual COLA increases. Michelle Obama is 53 y/o and will continue to enjoy that pension long after Pres. Obama’s death. Pres. Obama’s retirement benefit was granted on just eight years of service.
The US taxpayer has been paying Jimmy Carter’s annual pension for 36 years. Former President Carter served just four years.
Our local commissioners have to be re-elected once to vest their pensions (6 years). Beats me why any voter would support an incumbent. How hard can it be to attend one meeting a month and answer a few calls?
@the other Donald: Our local commissioners have to be re-elected once to vest their pensions (6 years).
In 2011, the FL legislators increased the vesting period from six to eight years and raised the full retirement age from 62 (or 30 years of service) to 65 (or 33 years of service) for anyone hired on or after 07/01/11. Police & fire full retirement age remains age 55 (or 25 years of service). There is no pension COLA for workers hired after 07/01/11.
In FL, many cities and all counties & school districts are covered by the FL Retirement System. My City Councilors are mandatory participants in the Florida Retirement System, earn $7500 per year and serve 4-year terms, term-limited to two consecutive terms.
A City Councilor automatically contributes 3% of their salary toward the FL pension plan. The pension for a two term Council person, at age 65, would be $1800 per year.