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tony

States Looking At Hybrid Pension Plans

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Darn, if it weren't for all of those public workers who have those "lavish" pension, the enconomy would be terrific and there would be no state deficits. People wondered why we would go into a profession that demanded much in education and paid so little. Now those same people are screaming that we are making too much and our pensions are lavish. Instead of looking at the problem that the middle class private sector share of the wealth has retreated while the wealthy got more wealthy with the middle class enthusiastic support for tax cuts for the wealthy, they are screaming bloody murder at us with our lavish pensions. Who can blame them, the middle class status has gone way done and educators salaries are looking a little too good by comparison. Private sector pensions? There gone and not a whisper of complaint. Public pensions are much more easier to attack. Its just easier, conceptually understood and politically correct to want our pensions gone too. Sounds quite reasonable, the pain of the slowdown should be shared by all. But the facts are that the educated public workers salaries, while low 30 years ago and are horrifically lower with other educated professions, managed to keep up with inflation (although I have no data to back that up).

2 cents,

Steve

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Darn, if it weren't for all of those public workers who have those "lavish" pension, the enconomy would be terrific and there would be no state deficits. People wondered why we would go into a profession that demanded much in education and paid so little. Now those same people are screaming that we are making too much and our pensions are lavish.

Steve

Once the facts about STRS "lavish" pensions are presented, things look a little different. A while back you showed that the average STRS pension goes to someone who retired at about age 60-61, and was for the munificent amount of about $38,000.

 

You are right on about this, Steve. Teachers are the whipping boys for California's fiscal woes.

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Darn, if it weren't for all of those public workers who have those "lavish" pension, the enconomy would be terrific and there would be no state deficits. People wondered why we would go into a profession that demanded much in education and paid so little. Now those same people are screaming that we are making too much and our pensions are lavish.

Steve

Once the facts about STRS "lavish" pensions are presented, things look a little different. A while back you showed that the average STRS pension goes to someone who retired at about age 60-61, and was for the munificent amount of about $38,000.

 

You are right on about this, Steve. Teachers are the whipping boys for California's fiscal woes.

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Darn, if it weren't for all of those public workers who have those "lavish" pension, the enconomy would be terrific and there would be no state deficits. People wondered why we would go into a profession that demanded much in education and paid so little. Now those same people are screaming that we are making too much and our pensions are lavish.

Steve

Once the facts about STRS "lavish" pensions are presented, things look a little different. A while back you showed that the average STRS pension goes to someone who retired at about age 60-61, and was for the munificent amount of about $38,000.

 

You are right on about this, Steve. Teachers are the whipping boys for California's fiscal woes.

 

Hello. We truly need to "create a culture of saving" in this country as is correctly stated in the wsj article.

 

Edy

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EDY

 

Yes we do need to encourage a culture of saving but one has to be paid a decent wage in order to save. Teacher wages are eroding and prices are higher than ever.

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Hi Fellows,

Because of a conversation with a lady at Starbucks, I wrote and submitted this article to newspapers across the country.

Enjoy,

Steve

 

100%=49% New Math about “Lavish” Public Pension Benefit

By

Stephen A. Schullo, PhD

 

“You have a great pension and get 100% of your salary”, a stranger in Starbucks said to me upon learning that I am a retired teacher. Her comment was not a question.

When I corrected her, saying that my California State Teachers’ Retirement System (CalSTRS) pension pays me 49% of my teacher’s salary, her imagination about public servants getting those lavish retirements at taxpayer expense must have deflated like yesterday’s newspaper blowing down an alley.

 

Napoleon Hill wrote, “The imagination is the most marvelous, miraculous, inconceivably powerful force the world has ever known.” The nice lady at Starbucks was not some anti-government tea-bagger, just misinformed. When viewed in context by the private sector, where employment so bleak and corporate pension systems nearly vanished, public pensions do appear “lavish” in comparison. Public opinions are strident and come from the cultural narrative that is driven by the current virus of economic stress that the general population has not experienced since the Great Depression. The robbing the tax payers comments reflect more about the shrinking of the middle class along with a generation of private sector stagnate wages than public servants wages and pensions. Department of Labor Statistics recently reported that private sector total compensation, wages and salaries and benefits, have fallen behind the public sector.

 

According to the CalSTRS website, the average pension benefit for 2009 retirement class--which includes the highest paid administrators was about $4300 per month. While my benefit is below the average, it is about 39% more than what I would have received from Social Security. This increase is not so much because of the taxpayer, but how pension plans work. I don’t have to remind people that pension plans are invested in stocks and bonds, whereas Social Security is pay-as-you-go. That’s a significant difference. Still, my pension benefit is nowhere near 100% of my salary!

 

Interestingly, few have complained about this arrangement until now. In the past, people have asked, lightheartedly, why someone would want to go into a profession that demanded high educational status, but paid so little. Little did I know that today, some of these same people are complaining about our perceived lavish retirement and sometimes our salaries! For years, I saved for retirement, investing a part of my salary into a voluntary 403b tax-deferred retirement savings account (401k equivalent in the private sector).

Financial success is like the preverbal race between the tortoise and the hare: It is not the great salary that builds wealth; it’s the constant investing and putting away steadily over many years. The financial tortoise always wins. Warren Buffett would surely understand.

 

Teachers and other public workers had little incentive to pay attention to personal finances. But the times are changing. The mass media has been reporting for years to all Americans that pension plans and Social Security were never designed to provide 100% financial support during retirement. Many of my former colleagues do not yet seriously believe that this safe haven is gradually eroding. The good citizens of our state, erroneously thinking, as the lady at Starbucks I encountered, that our pensions are 100% of our salary may want to cut the state contribution, reduce pension benefits or turn our traditional pension into a risky defined contribution plan.

 

I suggest a smarter strategy although it requires a little courage, but the benefits in life and retirement are well beyond what we initially perceive as the heartless and cold pecuniary dividends. Instead of waiting for the government, try investing in yourself and learn about personal finance. When my companion and I started our life together 35 years ago, like many young people, we had only a few hundred dollars in the bank and two aging Volkswagens. Yet, we have gone well beyond our wildest financial imaginations on educators’ salaries. But our success is not only because of what we earned from the public institutions (recalling that I get 49% of my salary), or even through our 403b stock market investment returns (although both helped), it is more about what we did and what we learned about the values so important to a balanced life of friends, nature, literature, giving, arts and politics. All of those boring and unappreciated habits that we find unbearable in our consumer culture, but are priceless in so many ways—living within ones means, eschewing debt, saving consistently through good and bad economic times and sticking with a simple investment plan with low costs (e.g., TIAA CREF or Vanguard) and tax deferred. We have all heard these habits and they work! We were very fortunate--slowly, consistently, unwaveringly while learning from our mistakes. The financial payoff was beyond our original imaginations. Napoleon Hill was right and Warren Buffett would be proud.

 

Author is a retired teacher and former UCLA Extension Instructor currently is the Alternate Chair of Los Angeles Unified School District Defined Contribution 457b/403b Oversight Advisory Committee.

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Hi Steve,

Nice letter. Did any newspapers print it?

 

You letter states what I tell people about savings: it is not a get rich scheme, you create wealth over time.

 

Best Wishes,

Joe

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Hi Steve,

Nice letter. Did any newspapers print it?

 

You letter states what I tell people about savings: it is not a get rich scheme, you create wealth over time.

 

Best Wishes,

Joe

 

I submitted it to the op ed editors. All rejected, but I will keep trying. Its probably not anti union enough.

Thanks,

Steve

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According to the CalSTRS website, the average pension benefit for 2009 retirement class--which includes the highest paid administrators was about $4300 per month.

It's also important to note that the 2009 retirement class is a small fraction of the overall STRS retirement beneficiaries, the latter of which have a smaller pension benefit. In fact, those who retired years ago would have significantly less of a benefit than $4300 per month.

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Hello. Actually, anyone can save regardless of income level. Of course, a person earning little will likely not be able to save the max in an IRA or a 403b. However, any income level should see some amount of saving. Over a lifetime, that will add up.

 

As I always tell colleagues--having a portfolio of $25,000 is better than nothing at all--$50,000 is better than $25,000, $100,000 is better than $50,000, etc.

 

We need to encourage everyone with any level of income to save at least a little--even children so they develop this good habit.

 

My 2cents for a lonely Friday evening. (Wife is visiting colleges with senior daughter.)

Edy

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Hello. Actually, anyone can save regardless of income level. Of course, a person earning little will likely not be able to save the max in an IRA or a 403b. However, any income level should see some amount of saving. Over a lifetime, that will add up.

 

As I always tell colleagues--having a portfolio of $25,000 is better than nothing at all--$50,000 is better than $25,000, $100,000 is better than $50,000, etc.

 

We need to encourage everyone with any level of income to save at least a little--even children so they develop this good habit.

 

My 2cents for a lonely Friday evening. (Wife is visiting colleges with senior daughter.)

Edy

 

Exactly Edy,

Read this.

Steve

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Steve your letter was great. I can't tell you how many times I had to endure demeaning comments from people who said I made so little money as a teacher. Now I have to endure comments that I have it made and that I don't deserve a defined benefit pension.

 

 

The link about the Janitor touched my heart. I'm Italian. I was born there and came over with my parents who had 50 dollars in their pocket when they got off the boat.

My mom and dad were amazingly frugal. Unfortunately. living as an adult in the USA I have not been able to be as frugal as they were but I'm more frugal than many. My parents need nursing home care as they are in their late eighties but they refuse because they want to leave the money they saved for their grandchildren instead. Totally unselfish people.

 

 

Edy,

 

I totally agree with you but the problem I see is that folks that can afford to save more are simply investing the minimum and that simply won't get them to a secure

retirement. Even at my school, the maintenance personnel who make less than teachers are doing a better job at putting money away than the teachers!!

 

 

 

Tony

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