Public or Private Sector Retirement Plan

The recession and the deep economic recession that the United States is facing, has aroused many doubts in people minds regarding various sectors of the economy. This includes the pension sector.

Many people are in fact arguing that the private sector should not be trusted with important things such as managing retirement plans. This people claim that the government would do a far better job in managing these important issues, which will have a long-term effect on the economy, as well as people’s lives.

The Social Security however lectures against this belief. The Financial Times has compared, is association with Megan McArdle, the financial support of the pension plans of the private sector, to the pensions that are provided to the employees who work in the public sector.

Megan McArdle indicates that the Pension Benefit Guaranty Corporation – regulating and insuring pensions – states that private plans have a total deficit, read around $10 billion, and covered as much as thirty four million workers. These figures are as at September 2008. Since this date the figure has most probably multiplied. In fact to date the underfunding that is covering a number of workers, in the region of 22 million, reads something that is very close, if not more than a trillion dollars.

This is a very big deficit, that when calculated would result in an underfunding of $295 for each employee. As you can probably guess, this is not a good thing. Things however could get a lot worse. If you compare this deficit to plans that are provided by the public sector, it turns out that a private sector employee is better off. Employee deficits in the public sector read $45,500 for each employee.

Reference: http://andrewgbiggs.blogspot.com/2009/04/public-versus-private-pension.html