most dictionaries define a millionaire as someone with wealth (i.e., assets) of $1 million. By that definition, many New York teachers and the vast majority of police and firefighters are millionaires, because the “net present value” of their retirement benefits is well in excess of $1 million.
That is, if they had to fund their retirements from their own savings, they’d have to set aside seven figures today.
Few who don’t work for the government sector have comparable assets. Over the last several decades, the private sector has moved increasingly to the 401(k)-style “defined contribution” model, which yields a retirement nest egg based on what both employers and employees have contributed to individual accounts.
Public-sector workers, on the other hand, still rely on “defined benefit” pensions, which provide a guaranteed stream of income based on career longevity and late-career peak salaries.
A New York City public-school teacher earning $100,000 can retire at 55 with a pension of $60,000. A private-sector worker would need $1.2 million to buy an annuity with the same yield and starting at the same (relatively young) age, according to the online pension calculator developed by the Manhattan Institute’s Empire Center.
It would take an even larger nest egg to replicate the pension income of city police officers, who typically retire in their 40s. According to data posted at SeeThroughNY, an Empire Center Web site, the average newly retired city cop collects a pension of $58,563 — plus a $12,000 annual supplement.
(Of course, public-sector workers also receive lavish health-care retirement benefits.)
Few private-sector workers have anything close to $1 million socked away in their retirement accounts. According to the Federal Reserve, the average worker in his late 50s has a balance of $85,600 in his retirement account, and a net worth of $222,300 overall.