Early Retirement

Government money seems to bring out the worst in people.

State pensions are an example. Double-dipping is rampant. That’s where a retiree begins to collect a pension but holds onto the original job. Back-ending or padding is another strategy, where a worker’s final salary is so high that it skews the average. Before he resigned Rod Blagojevich appointed a legislator pal to a $120 thousand-a-year post that his buddy held for only 19 days. But because of the formula, the pension was boosted by $40 thousand per year.

In some places back ending is common. City council members earning token salaries can finish their careers big to qualify for a big payout. While technically legal, these workers didn’t adequately pay in to the system.

Then there’s tacking, as in stringing together multiple jobs to earn a full-time salary. Now, there’s nothing wrong with piecing together part-time work. But some hacks-er-workers have raised it to an art-form. One county official in pension-heaven New Jersey presided over court in eight towns at once, earning over 300-large.

Bridge-jobs are another game. Because many formulas factor in years of service, it’s critical to work continually—even if it’s only for 5,000 per year. This keeps a service streak alive and qualifies the worker for tens of thousands more in benefits. That’s why State capitals often crawl with part-time consultants.

State pensions are complex, and the benefits formulas are often arcane. But as states try to shore-up their finances, reforming this kind of fraud and abuse has to be high on the list.

Douglas R. Tengdin, CFA
Chief Investment Officer
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By | 2014-09-05T17:32:49+00:00 December 1st, 2010|Global Market Update|0 Comments

About the Author:

Mr. Tengdin is the Chief Investment Officer at Charter Trust Company and author of “The Global Market Update”. The audio version of each post can be heard on radio stations throughout New England every weekday. Mr. Tengdin graduated from Dartmouth College, Magna Cum Laude. He received his Master of Arts from Trinity Divinity School, Magna Cum Laude and received his Chartered Financial Analyst (CFA) designation in 1992. Mr. Tengdin has been managing investment portfolios for over 30 years, working for Bank of Boston, State Street Global Advisors, Citibank – Tunisia, and Banknorth Group. Throughout his career, Mr. Tengdin has emphasized helping clients manage their financial risks in difficult environments where they can profit from investing in diverse assets in diverse settings. –
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