Pension

It rhymes with tension. And likely for good reason if your teacher’s pension, or fireman’s pension, or other state employee’s pension is backed by a state that’s going bankrupt.

Hi, California. Hi, Illinois. We’re lookin’ at you.

A pension is another term for retirement fund. But what’s special about a pension is that the employer essentially forces you to put away money for your retirement, and invest it. On a salary of 75 grand, a state-employed ditch digger might get a contribution of, say, 10 grand a year into her pension. And that’s each year. Ten grand of forced savings. For as long as she is digging ditches for the state.

And in some states, where the unions are strong and the governing financial knowledge is weak, the government guarantees a minimum financial return on the pension investment made on behalf of the employees. That is, in California, for example, the state guarantees a 10% per year return on their invested pension savings. If the invested return is less than that number, then the state writes to the pension an incremental check to cover the difference.

Remember: Jesus saves. But Moses invests.