New Jersey Pensions

In New Jersey, Rockaway Township’s 47 year-old Police Chief Walter Kimble will receive $267K in a final check when he retires after 25 years on October 1, 2008. He is being compensated for unused sick, personal, holiday and vacation time accrued during his career. The people of Morris County are up in arms over such a large cash payout being offered to yet another retiring public employee.
He will also receive an $80,880 annual pension. According to the Social Security actuarial tables, a 47 year-old male should live to 78, another 31 years. The expected cost of his $80,880 annual pension will be $2,507,528 over time, if he lives that long.
Police officers in New Jersey pay 8.5% of their salary into the pension system. State and local governments contribute the rest. Assuming Chief Kimble’s starting salary in 1983 was $26,000 and his pay raises were 6.75% annually (which would bring him to his final $125,000 salary) his total contribution to the pension system was $135,382. That amount invested at 7.5% over twenty-five years yields $289,645 as his contribution. Funding an $80,800 pension for 31 years requires an initial investment of $1,110,000 invested at 7.5%. Subtracting Chief Kimble’s $289,645 invested contribution from that yields $820,353 as the taxpayers’ contribution. However, for eight years, starting with Governor Whitman’s administration, the State of New Jersey did not contribute their share to the pension system, assuming that a rising stock market would bail the system out. It did not. So, it looks like the taxpayers are on the hook today for somewhere between $820,353 and $1,110,000 for Rockaway Township’s retiring 47 year-old Police Chief Walter Kimble. What a country.