Knowledge@Wharton recently spoke with PRC Executive Director Olivia S. Mitchell and Boettner Professor Kent Smetters about the funding crisis in public sector pensions. Due to smaller budgets, many public pension systems are facing cuts, and others – such as the state pension system in Rhode Island – are shifting away from defined benefit plans to defined contribution plans.
“The whole prospect of retirement has grown much riskier than for those in previous generations,” remarked Professor Mitchell. “Employer-provided retiree medical plans are being cut; Medicare as we know it is facing insolvency. People hoped to retire on their little bit of savings that now is paying no interest, and Social Security is in bad shape. Homes aren’t worth what people thought they would be, so nest eggs are a lot tinier…. It’s not a very pretty picture for a lot of people.”
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