Category Archives: Retirees

Pension Reform Should Not Focus On All-Or-None Solutions

Remember the good ole’ days when retirement planning for most Americans involved income being illustrated as a three-legged stool where the legs of the stool represented 1) income from a pension, 2) Social Security, and 3) personal savings? The thought was that as long as the stool has three legs it will be strong enough to support the person sitting on it. Take one of those legs away, and the stool becomes much less stable. Take two of the legs away and you end up on your back.

So why is it that every time I read about pension reform the proposed solution is always an all-or-none scenario where the pension will be shut down in favor of individual 401(k) accounts? This solution completely removes one leg of the stool (the pension) and reduces the retirement readiness for everyone affected. At LAGERS, we believe everyone who works hard and plays by the rules deserves a secure retirement and that this is best achieved by the three-legged stool approach.

When 401(k)s were first conceived in the late 1970’s, they were never intended to replace pensions, but to supplement the pension plan while allowing employees to defer taxable income. This was originally a great concept – one that furthered the notion of the three-legged stool. But over time, employers have eliminated their pensions and gone completely to the 401(k). The supplement has now become the main retirement income vehicle for many Americans. And it isn’t working. Even if their employer offers a 401(k), two-thirds of Americans aren’t using it to save for retirement.

One of the reasons Americans aren’t saving more is because investing as an individual is hard. Nearly seven of ten Americans cannot pass a basic financial literacy test. The average American worker is just not equipped to know how much to invest, what to invest in, when to re-allocate, and then how to turn their savings into a lifetime stream of income. Also, many Americans simply don’t have the means to go-it-alone in 401(k) accounts. The recommended retirement savings rate for an individual without a pension plan is north of 10% of income. For low-to-middle income workers, this is a daunting, if not impossible task. Pension funds, on the other hand, are invested by professionals and benefit from pooling so that one individual is not taking on all of the market risks.

Watch: Pension vs. 401(k), What’s the Difference?

One argument for moving away from pension plans in favor of 401(k)s is that the individual accounts cannot create unfunded liabilities. This couldn’t be further from the truth. Both pension plans and 401(k)s can create unfunded liabilities. An unfunded liability is established when liabilities exceed assets. In other words, the money you owe is more than the money you have on hand. The presence of an unfunded liability is not necessarily a problem so long as there is a steady, predictable, and disciplined approach to making the required contributions. Individual savers create unfunded liabilities when they fail to save enough for their retirement. When more and more individuals enter into retirement without adequate savings and huge personal unfunded liabilities their only option to sustain themselves in retirement will be to seek public assistance.

The bottom line is this: we need pensions and we need 401(k)s (and similar programs). We should not be seeking solutions that eliminate any one leg of the stool, but rather, to make those legs work together to provide a more stable base for all Americans.

 

Jeff Kempker
Manager of Member Services

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50 Years of Retirement Security and Counting…

50th-2-no-textMissouri LAGERS is preparing to celebrate 50 years of providing retirement security to Missouri’s local government workers!

LAGERS was created by the 74th general assembly in 1967 and officially opened its doors the following year. During its first year of existence, the young system was administered through a contractual agreement with the Missouri Municipal League and added its first full time staff member in 1969.

By June 1969, 70 Missouri local government entities had joined LAGERS with a total of 4,600 member employees and $2.1 million in assets. Today, LAGERS is the largest pension system for local government employees in the state of Missouri, covering over 680 employers, 33,000 active members, and 19,000 retirees, with over $6 billion in assets and an overall aggregate funding level in excess of the national average.

Missouri LAGERS believes that a secure retirement should be for everyone who works hard, and that retirement security is the foundation for building strong communities across the state. LAGERS is an integral part of providing local communities with the tools they need to attract and retain the high quality workers necessary to making communities a great place to live, work, and retire. LAGERS has helped thousands of local government workers retire with dignity and security over the past 50 years and looks forward to carrying our mission into the next 50 years and beyond!

LAGERS is planning to celebrate its 50th birthday in several ways:

New Vision Statement

LAGERS Board of Trustees recently adopted a new vision statement: “A Secure Retirement for All.” Our vision is the very essence of why LAGERS staff gets up and goes to work each and every day. We strive in everything we do to ensure that our members can someday retire with dignity and security.

 

New Responsive Website

Coming in July 2017, LAGERS will be rolling out an all-new responsive website. The new website will feature enhanced user navigation; new, interactive content, and even more great ways to connect with your LAGERS system. LAGERS remains committed to ensuring that you have the best access to information you need about your benefits!

 

A History of LAGERS

Stay tuned on our social media channels throughout the year as we look back at a complete 50 year history of the LAGERS system. Beginning as a dream in 1967, LAGERS has grown into a nationally acclaimed pension system, setting the gold standard for pension administration across the county.

 

LAGERS Annual Meeting

Don’t forget to join us at our annual meeting as we return to the site of our very first LAGERS Annual Meeting at Lake of the Ozarks.

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I Wish I Could Bottle Up the Holidays

 

This time of year is sometimes a mess. It’s dark when we go to work and dark when we head home, the weather is cold, dreary and unstable. And the kids secretly plot against us and take turns deathtostock_slowdown1being sick (I swear they do). We’re all especially busy and should be at our wits end.

But we aren’t.

To me, this time of year always seems different. My most enjoyable part of the holiday season is the almost random consideration that seems to overcome most of us. At this time of year we as a society seem, for whatever reason, to look beyond the surface of our fellow man and actually see the commonality of goodness we share. Whether at the gas station, store, at work or even passing each other on the street; we look at each other differently. We don’t look past each other as we scurry on our busy paths. We actually look into each other’s eyes – past that outward shell and actually SEE each other; maybe even say “hello”.  Have you noticed? So simple, yet so wonderful.

Whether a kind word, a thank you, a smile or even a simple nod of the head – signaling we appreciate the smallest of gestures. Even though we should be more stressed, we’re actually all a little more happy than normal during the holidays. Really. If you haven’t, noticed I urge you to keep an eye out on the way home from work tomorrow. You may experience the kind of subtle kindness that I’m talking about. It is so refreshing.

If I could bottle the holidays I surely would. If we could somehow carry that over to the rest of the year what great things we could accomplish. That’s my thought for the New Year.

From all of us at LAGERS, we thank you for the honor to serve you and we wish you the very best this time of year, and all year round!

 

Robert Wilson, Asst. Director

Robert Wilson, Asst. Director

Top LAGERS News of 2016

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It’s hard to believe 2016 is coming to an end and 2017 is closing in on us like a blustery Missouri cold front. In case you missed it, a lot happened with your retirement system over the last 12 months! Here is a brief compilation of the top news-worthy events.

Important Legislation was Passed

The 2016 Missouri Legislative Session saw the passage of HB 1443, a bill that LAGERS proposed. This important legislation allows local governments in Missouri who are running their own pension plan to choose LAGERS as the administrator of that plan. This will permit these smaller plans to take advantage of LAGERS’ expertise and economies of scale, resulting in lower administrative costs for the local entity and ensuring that these plans maintain financial stability. LAGERS staff has been working diligently to begin accepting these new plans since Governor Nixon signed the bill. Read more.

LAGERS Members are Living Longer

Every five years, LAGERS takes an in-depth look at our membership to take stock of changing demographics and other trends. One of the key findings from the 2016 study was that LAGERS members are living longer, which is great news! A 60-year-old male is now expected to live to age 84 and a 60-year-old female to age 88! Because of this, LAGERS’ Board updated the mortality tables we use to reflect the longer lifespans in order to ensure benefits will be properly funded. Read more.

LAGERS Funding Level Reaches 94.7%

Pension funds often measure their financial stability using a “funded ratio.” This is simply a measure of the fund’s ability to meet all of its obligations to members and retirees now and into the future. All pension plans strive for a 100% funding ratio. At 100% funded, a pension plan has all the assets it needs on hand to meet all of its liabilities. This is kind of like being fully paid up on your mortgage. If you paid off your mortgage, you could say your home is 100% funded. Being under 100% funded as a pension plan is not necessarily a problem because all of the participants in the plan won’t need to be paid on the same day. What is important is that there is a dedicated method to pay the liabilities and that the plan is moving toward 100%. A pension plan that is above 80% funded is normally considered to be on stable financial ground. Read more.

12 New Employers Joined LAGERS in 2016

LAGERS continues to be an attractive option for local government employers looking for ways to recruit and retain high-quality workers to serve their communities. Seventy-five local governments have joined LAGERS in the last five years and half of these switched from 401(k)-type plans to the stability and security of LAGERS’ defined benefit approach. Why the switch? We are increasingly hearing from government officials the need to enhance the services of their communities by hiring and keeping the best people to fill those jobs. I attended a city council meeting recently and heard from one official, “We are a service-based industry and to provide the best service to the citizens of this city, we do that through the people we hire.”

The last year was an exciting one for LAGERS and as we look forward to 2017 and LAGERS’ 50-year anniversary we expect nothing but continued success in helping Missouri’s communities accomplish great things!

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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Being Thankful for Public Service

Thankful message Some fall leaves and retro pocket watch with text A Time to give Thanks

“Never doubt that a small group of thoughtful committed citizens can change the world; indeed, it’s the only thing that ever has.” ~Margaret Mead

I’m guessing you don’t often think about your job like this. But this quote really resonated with me. When I think about public service, and our members who dedicate their lives to this endeavor, I realize that even though this group is not normally celebrated and honored I am thankful for them none the less. Public servants truly do change the world for the better, every day.

Here’s why:

  1. They keep our communities running – public sector employees are the glue that holds our communities together. They maintain the books, make sure the roads are smooth and easy, our water is clean and our trash is taken at the curb. From libraries to public works to the county clerk, these jobs might not be glamorous, but without them where would we be?
  1. They protect us – EMTs, fire and police personnel work crazy hours and do the job of protecting the citizens without expecting thanks or gratitude. Most calls they receive are humbling and thankless as well as dangerous. We are safe because of them. Don’t forget that.
  1. They are dedicated – this group of individuals is truly dedicated to their work. They do their jobs out of a genuine love for their city/county/township and a desire to serve the people that are their neighbors and friends. They don’t do it for the recognition, because they do not get enough of that! Wanting to serve is the reason why.
  1. They are experienced – part of the dedication of this group leads them to be incredibly experienced at their chosen occupation. During my time at LAGERS I’ve traveled around Missouri and met with public servants in many parts of the state. I’ve been fortunate and impressed to meet people who have dedicated 35 and even 45 years to their community working for local government in some capacity. That amazing dedication leads to incredibly hard working and experienced workforce.

Mohammad Ali said “Service to others is the payment you make for your space here on earth.” Local government employees have given me lots of reasons to be thankful, and their sacrifices every day for the rest of us are admirable. They are definitely paid in full.

See how LAGERS is Getting it Right every day to work to give them the secure retirement future they so deserve. 

Being Thankful for Public Service

The Unfunded Liability Nobody is Talking About

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You hear a lot in the news these days about the looming pension crisis and their mounting unfunded liabilities. When I try to imagine how I would react to these headlines if I did not work in the retirement industry, I imagine that the phrase ‘unfunded liability’ would sound absolutely terrifying, and that if I ever heard that phrase being thrown around when it came to my employers’ retirement plan, I would be concerned. At that point I would probably do what any normal person would do when they hear about something this scary: I’d Google it.

So this morning, I decided to do a little experiment: I typed ‘unfunded liability’ into my trusty search engine just to see what would come up, and the results were undoubtedly alarming. Headlines reading: “Unfunded public pension liabilities near $5.6 trillion”; “How pensions pass the buck to future generation”; and “$60 billion unfunded liability looms over Pa. as lawmakers move toward pension vote” were just the beginning of a laundry list of stories listed on the topic.

Now to be clear, I believe that every pension plan should have sound plan design with a solid funding policy, so that, like LAGERS (and many other well-run pensions across the county), the promised benefits are fully funded today and plan participants can go to work and retire with the peace of mind in knowing that their retirement will be secure. Pension plans that are not doing this should be fixed. But what I found most disturbing about my search was that in all the results that popped up about unfunded liabilities, there appeared to be one major unfunded liability that nobody is talking about….yours.

‘My unfunded liability?’ you may ask. ‘I don’t have an unfunded liability.’  And that is where many of you would be mistaken. Like most Americans, you are probably planning to retire at some point in your life – either at a time of your choosing or perhaps for reasons beyond your control, such as failing health.  And when that time comes, you’re going to need to have income to live off of for the rest of your life.

In order to be able to quit working or to reduce your work hours in retirement, you need to be saving every month to ensure your nest egg will be large enough to sustain you for the rest of your life. Savers (especially those without pensions) who fail to set aside enough money each month for their retirement are creating a huge personal unfunded liability – a gap between how much they have saved and how much they will need in retirement.

According to the National Institute on Retirement Security, 45% of American households do not own any type of retirement account, with a disproportionately large number of low-income households saving nothing for retirement. Even more shocking, of households that do have retirement savings accounts, the average balance for individuals nearing retirement (age 55-64) is a mere $104,000; and if we included the households that are saving nothing, that average drops to just $14,500 saved by those who are at the doorstep of retirement.

This means that most Americans will be facing their own unfunded liabilities at retirement, and that presents a big problem. If I’m an average saver with $104,000 and I need to draw out $1300/ month to survive in retirement, my savings would not last 7 years…and that’s not even taking into account inflation or any unplanned expenses (such as a big medical bill). If I live 20 years into retirement, I need to have saved at least $312,000; and if I live 30 years, I better have $468,000 in the bank. Since I only have $104,000, I have a personal unfunded liability of over $360,000. While granted, my math is simplified, take that average times the estimated 80 million people who will be retiring over the next twenty years and you get upwards of 30 trillion dollars in unfunded liabilities in Americans’ personal defined contribution accounts.

I can’t help but think to myself, “What is going to happen when these folks can no longer work? What are they going to do when they cannot afford to retire?” As we usher out the era of private pensions, what is going to happen as more and more individuals enter retirement without adequate savings and with a huge personal unfunded liability? What is going to happen when they lose their home because they can’t make the mortgage payment, or go without food to be able to afford their medication? As a society and as taxpayers, what are we going to do?

It seems to me that many are suggesting that the solution to these pensions’ unfunded liabilities is to replace them with even bigger personal unfunded liabilities by forcing people to plan for retirement on their own. Pensions that have sound plan design and solid funding policies work, and they work well. They don’t pass cost onto future taxpayers because the liabilities (benefits) are prefunded, and participants can take advantage of longevity risk pooling and professionally managed investments. And while LAGERS members receive only a modest monthly benefit that often still requires some additional personal savings, their pension is the foundation of their retirement security, and it’s one they can count on.

The switch from pensions to defined contributions plans (e.g. 401(k)s) may indeed seem like a simple fix to all the mounting pension headlines, but until we start quantifying the unfunded liabilities in individual retirement plans, many Americans are going to be in for a big surprise when they are ready, but cannot afford to retire.

Elizabeth Althoff Communications Specialist

Elizabeth Althoff
Communications Specialist

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The Significance of Your LAGERS COLA Benefit is Larger Than You Think . . .

This year LAGERS retirees will receive a COLA (Cost of Living Adjustment) of around 1%. This increase will be reflected on October 1st and it means much more than just a slight increase to your monthly benefit. It shows the strength and overall financial security of your LAGERS pension system.

By now you know you’re rather fortunate to have a defined benefit pension plan as the foundation of your financial future. As a retired local government employee, LAGERS provides you with an exceptionally strong and secure pension plan. However, the added stability of your COLA is also something to be thankful for. More and more, we find other pension plans are not able to provide this to their retirees, ever, much less on a yearly basis, as LAGERS has historically been able to do. This means as time goes on; your benefit keeps pace with the economy and spending levels on goods and services, and won’t lose value every year.

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Source:NRTA Pension Education Toolkit

“LAGERS cost of living adjustments are granted annually based upon the retirees date of retirement and applicable changes in the ‘consumer price index’ (CPI). Though this process may seem unnecessarily complex, I am extremely proud to share that 100% of LAGERS retirees have received increases equal to the CPI thereby maintaining 100% purchasing power in retirement,” says Keith Hughes, Executive Secretary.

Below are some things to understand about the benefit of having a COLA with your LAGERS benefit:

  •  It is based on inflation and the consumer price index and is designed to keep your benefit at 100% purchasing power.
  • The LAGERS board meets annually to determine the COLA adjustment based on the financial solvency of the system. The COLA is not an automatic benefit, but don’t worry, LAGERS is fiscally sound and even though it isn’t automatic every year, LAGERS has historically been able to provide this to retirees consistently. In order to continue to keep benefits at a high level of strength and security for years to come the COLA will never be over 4% in a year. However, if the CPI is higher than 4% in any given year, this will be considered and additional increases will be given in future years to “catch up”.
  •  The LAGERS plan is exceedingly stronger than other plans of similar nature – Without going into the weeds on the specifics, just know that the fund we use only for paying our retirees’ benefits is slightly over 100% funded. Yes, you read that right. Overall, LAGERS is around 94% funded when the industry average for similar plans is around 73%. This means LAGERS is in a better position to meet all of our obligations to retirees for decades to come.
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Source: NRTA Pension Education Toolkit

To give you a real life example of the power of having a COLA, the oldest of our members currently receiving a retirement benefit is 107. She retired in 1979 at the age of 70 and is currently receiving more than three times her original base benefit with accumulated COLA’s applied.
While this is obviously an extreme case, as we won’t all live to 107, it does show the significance of your COLA and how it affects your purchasing power in a positive fashion.

More good news, right? Keeping your benefit at pace with inflation is significant, especially when looked at over the lifetime of a retirement. So while the annual number may look insignificant, now you know that over time it matters much more than at first glance.
ALL retirees will receive a paystub in October showing your individual increase.

 

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September Article Roundup

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It seems like we are constantly hearing things like, “age 60 is the new 40,” and “age is just a number.” There is also a changing view of retirement from a period of leisure to more of a phased approach, where people aren’t stopping work altogether, but just scaling back or starting something new. Does this mean retirement is now a dirty word? Are the days of celebrating retirement over?

Read “When did retirement become a dirty word?”

 

Talking to a financial advisor is a great way to stay on track with your goals. Wading through the investment and benefits waters can be overwhelming if you try to go-it-alone. Financial advisors can be great resources, but there are some things you need to know before deciding who to trust with your fiscal future.

Read “10 Questions to Ask Before You Hire a Financial Advisor”

 

The American retirement savings crisis is well documented. About half of US workers don’t have access to employer-sponsored retirement plans and those that do, for the most part, are not saving enough. The Americans who have the steepest hill to climb are those that probably need the most help – those with lower levels of education.

Read “Workers without college degrees fare worse with 401(k)s”

 

The National Institute on Retirement Security released a report last week that shows the profound economic impact of public pensions in the U.S. Public pensions, like LAGERS, pay retirees steady monthly income. That income is not stuffed under mattresses, but put to use purchasing local goods and services. LAGERS, for example, pays over $250 million per year to retirees – $230 million stays in Missouri! The full report and state-by-state information can be viewed here.

Read “Pension Spending 7.1 million jobs, $1.2 Trillion Economic Output across the U.S.”

 

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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My Vesting Milestone

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Yesterday was a big day for me. It’s the day I became a vested member in the LAGERS system. Reaching this important milestone on the road to retirement has been an easy one for me. It’s been easy because I truly love my job, the wonderful relationships I have established with my co-workers and our members and to be part of such a great organization. To be part of something that is bigger than me, that positively impacts people every day, is so rewarding. Here are the top three things that I think makes your and my retirement system great!

 

1.  LAGERS is Innovative.  The year before I began working at LAGERS, we had just introduced our online reporting system, ECLIPSE. It was developed to not only integrate the different systems we were previously utilizing, but to also make the process of working with LAGERS more streamlined for employers and members. It ensures that anything from a benefit being calculated to the monthly contribution amount due is completed efficiently and accurately. We have even had other retirements systems across the nation inquire on setting up a system similar to ECLIPSE.
2.  LAGERS is Member Focused. We are constantly seeking methods to improve how we educate and communicate with our members. We are currently working on a responsive website, have redesigned our forms, launched the myLAGERS member web portal, began providing training and informational webinars and even introduced our blog you’re reading now. For our retired members, we also have Link Meetings, where you can come receive updates on your LAGERS system and connect with other retired LAGERS members.
3. LAGERS Gets it Right. It is our motto. When you call or meet one of us at an event, you will be speaking with someone who has taken the necessary steps to assure that not only are we measuring up to our financial obligations but also our service to our members. We strive to provide great customer service because we hire people who care about you. Everything we do affects our members so we consistently strive to get it right.
Remember this is your retirement system! If there is something that you feel could make us better, please do not hesitate to reach out to us to let us know. We are here for you, not just now, but for many years to come.

 

Dennise Schaben Accounts Analyst

Dennise Schaben
Accounts Analyst

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3 Things I Learned From Being a Firefighter for a Day

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Recently I was able to be a firefighter for a day. Well, not really a full-blown firefighter, but I did have the opportunity to participate in a Fire Ops 101, which is basically a slightly more timid, highly controlled training day for people who realistically have never even operated a fire extinguisher.

This particular Fire Ops 101 was a joint effort between the Lee’s Summit IAFF Local 2195 and the City of Lee’s Summit Fire Department.  According to the International Association of Firefighters website, “[Fire Ops 101 is an event that] exposes participants to the smoke, the adrenaline rush, and the physical stress and strain fire fighters and emergency medical personnel face while protecting communities . . .” Let me tell you, this is an accurate description.  Here are some of the things I took away from this awesome experience.

You have to move quickly, all the time.

I wouldn’t describe the entire day as a full-blown sprint, but it did seem as if I was participating in seven hours of interval training. Short periods of moderate to intense physical activity followed by short periods of rest, but we were always moving quickly. Frankly, we had to in order to keep up with the real firefighters. Just walking between the training stations was a small workout because I wasn’t used to wearing the gear.

The first thing I noticed about the gear was the weight. The firefighter responsible for our team told us that by the end of the day our shoulders and necks would be sore just from the weight of the jacket and helmet. Yep, he was right. So if just walking around at a quick pace is difficult for a newbie in all this gear, moving at a quick pace through the training evolutions was much harder.

Firefighters take care of each other.

The firefighter that was leading my team constantly had his head on a swivel. He was always checking and double-checking to make sure his team was whole. Even when we were just standing 28081090671_e28ea26c0e_h (2)around drinking water, he made sure we were all together. Once, one of our teammates was separated from us for a few seconds after a water break. Our leader noticed immediately, while the rest of us simply continued to the next training evolution. “Wait, hold up,” he said. “We’re missing someone.” After the tardy teammate rejoined the group, I asked our leader about his protective mentality. I wanted to know if this was just something he was doing for that day or if there was something deeper at play, which I suspected was the case.

“As firefighters, we are never alone, like never,” he said. “It’s not safe to be alone. Even at the fire house if we’re in a room by ourselves it’s a little weird because it never happens. We’re trained to do everything at least in tandem to keep each other safe.”

Physical strength and stamina are key.

I consider myself a reasonably fit guy but I soon found out during Fire Ops that my workouts had nothing on the functional strength and stamina required to do the job of a firefighter. One thing the firefighters continually stressed throughout the day was that there was no fire, we didn’t need to push ourselves as hard as they would because we were not dealing with a life or death situation. But I wasn’t there to play dress-up, I was there to just get a little taste of their world. I was first to volunteer for everything and I pushed as hard as possible. I really wanted the full experience.

But it was hard. The tools are heavy, the boots are heavy, the helmet is heavy, and the air pack is VERY heavy. And, let’s be honest, I was just playing dress up. There was no fire. There were no consequences if I didn’t move fast enough or if I was too rough dragging the “victim” (150 lb. dummy) from the smoking building. I had no mental stress worrying about what would happen if I placed my foot in the wrong spot causing the floor to give way below me. But for the firefighters, there are real consequences if things go wrong. They have to be physically and mentally prepared to minimize the risk of mistakes that could get someone killed.

Possibly the greatest thing I took away from the Fire Ops was an admiration for how much pride these men and women have in serving their community. They truly have a calling and are acting on it every day. These firefighters really care about the citizens they serve and they take their responsibilities very seriously.  They train hard so they can be ready to answer the call, to save lives, to keep us safe. I have always had a great respect for the firefighter profession, now I have a much deeper appreciation for what they do for us.

Jeff Kempker Manager of Member Services

Jeff Kempker
Manager of Member Services

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