Another way to look at it
Since most private sector employees no longer have the opportunity to be part of a defined benefit plan, they take the market risk of appreciation by being in a 401k, and don't fully understand the massive benefit of a DB pension plan. A good way to understand it is to look at the cost/benefit of buying an annuity. For a 45 year old male from Massachusetts to receive $80,000 per year for the rest of his life (with no inflation increase in the future), he would have to purchase an annuity for $1,759,916. That is the after-tax value of the pension plan. Another way to look at that is, if over a 20 year career you wanted to end with that amount of savings to buy that annuity, you would have to save about $88,000 each year - AFTER TAX! Pre-tax, that would be having to EARN income of an ADDITIONAL $135,375 per year. This is in addition to what you actually earned to live off of and pay your bills and received in a paycheck.
Now, a retort to that could be "well, you don't need to save all of that because you will earn some rate of return during those 20-years." That's true, but to guarantee that amount ($1.76 mil) at the end of the 20-years, you would have to invest in government guaranteed debt. Today, 10-year debt yields only 1.72%, so don't expect much of a return.
Overall, I am very appreciative of the work public sector employees do, but when you look at the value of the pensions, I think it is costing us all too much money. Really, with the $135k you have as an allocated contribution to the pension, plus the $100,000 most are earning at the end of their careers, is it worth a quarter million dollars per year per employee? I can't think it is (especially when where I live, all of our firemen are volunteers!)
Just my $0.02...
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