By Donald Albach
New Jersey’s retirement plans for teachers and state workers are in serious trouble. These “pensions” promise to pay retirees every month for the rest of their lives. But both are short on money, and one is in especially bad shape.
The Teachers’ Pension: In Serious Danger
The Teachers’ Pension and Annuity Fund (TPAF) is one of the worst-funded teacher pensions in the country.
- Money saved: $32.4 billion
- Money owed to retirees: $74 billion
- Missing amount: $41.6 billion
- Funding level: Only 56.8%
If nothing changes, it could run out of money by 2038. When that happens, New Jersey would have to pay retired teachers directly from yearly tax collections, which could lead to:
- Large tax increases
- Cuts to schools and public programs
The State Workers’ Pension: Weak, But Recovering Slowly
The Public Employees’ Retirement System (PERS) covers state and local workers.
- Funding level: 55.5% overall
- Local worker plan: 69.6% funded
- State worker plan: Only 35.8% funded
- Shortfall: About $31.5 billion
To be healthy, PERS must earn about 7% per year on investments and receive full yearly payments from the State.
What Happens in a Deep Recession?
If the U.S. goes into a deep recession (a period of severe and prolonged economic downturn marked by sharp drops in spending, investment, and incomes, along with rising unemployment), the pension problem could grow much worse:
- Investments could lose value instead of earning money.
- The State could collect less tax money because people earn and spend less.
- New Jersey might skip or shrink pension payments to cover other costs.
Some might think the federal government could “bail out” the pensions, but that’s not likely. The U.S. already has over $37 trillion in debt, so it may not be able—or willing—to rescue state pensions.
Wealth Leaving New Jersey
Since 2011, New Jersey has lost over $30 billion in net adjusted gross income as people moved to lower-tax states like Florida.
That means:
- Less income tax and sales tax collected
- Less money for pensions and other state programs
- A shrinking tax base, making the burden heavier on those who stay
Social Security: Another Piece of the Puzzle
Social Security itself is in trouble. The Social Security Trustees Report says the program’s trust fund could run short by 2033. If Congress doesn’t fix it, benefits might be cut by about 23%.
We believe this means retirees can’t rely only on Social Security or on pensions; they need other income sources.
Why You Need to Plan
The combination of:
- Underfunded pensions
- Possible deep recession
- Federal debt limits on bailouts
- Wealth leaving the state
- Social Security cuts
…means every New Jersey worker and retiree should have a personal plan to protect their future.
How Millstone Financial Group Can Help
At Millstone Financial Group, we offer The Millstone Advisory Plan, a complete, step-by-step retirement strategy that helps:
- Review your pension and Social Security benefits
- Builds extra income streams to minimize dependency on just one source
- Protect your savings from market declines
- Plans for taxes now and in retirement
We help you take control, so no matter what happens with the state budget, the stock market, or Washington, you can still work toward retiring with confidence.
Bottom line: The teacher pension faces an uncertain future, the state worker pension is still weak, Social Security could see cuts, and the state is losing taxpayers. Waiting to plan could mean facing a retirement full of surprises—but an appropriate strategy today can help you secure your tomorrow.
Schedule a complimentary consultation by calling (732) 385-8544 or emailing info@millstonefinancial.net.
Disclosure:
Insurance products and services and Advisory services offered through Millstone Financial Group Limited Liability Company dba Millstone Financial Group, an Investment Advisor in the State of New Jersey. Millstone Financial Group is not affiliated with or endorsed by the Social Security Administration or any other government agency.
Advisory services are offered through Millstone Financial Group Limited Liability Company, a Registered Investment Advisor in the State of New Jersey. Insurance products and services are offered through Millstone Financial Group Limited Liability Company.
All material discussed is for informational purposes only. Opinions expressed are solely those of Millstone Financial Group Limited Liability Company and staff. All topics covered are believed to be from reliable sources; however, Millstone Financial Group Limited Liability Company makes no representations as to its accuracy or completeness. Investing involves risk including the loss of principal.
This article shall in no way be construed as a solicitation to sell securities or investment advisory services to residents of any state other than New Jersey, or where otherwise permitted. All information and ideas should be discussed in detail with your individual adviser prior to implementation.
Millstone Financial Group Limited Liability Company dba Millstone Financial Group does not offer tax planning or legal services but may provide references to tax services or legal providers. This material is intended to provide general financial education and is not written or intended as tax or legal advice. Individuals are encouraged to seek advice from their own tax or legal counsel. Millstone Financial Group may also work with your attorney or independent tax or legal counsel. Please consult a qualified professional for assistance with these matters. You should always consult with a qualified professional before making any tax or legal decisions.
Sources (in order of use):
- Teachers’ Pension and Annuity Fund of New Jersey Actuarial Valuation Report, 2023
- Addressing and Avoiding Severe Fiscal Stress in Public Pension Plans, 2022
- Public Employees’ Retirement System of New Jersey Actuarial Valuation Report, 2024
- US national debt reaches a record $37 trillion, the Treasury Department reports, 2025
- Interstate Migration: A Lost Cause for New Jersey? – New Jersey State Policy Lab, 2021
- Federal Tax Data Reveals NJ Loss of AGI Due to Outmigration – NJBIA, 2022
- Analysis of the 2025 Social Security Trustees’ Report-Wed, 06/18/2025 – 12:00 | Committee for a Responsible Federal Budget, 2025
