red states rule
12-10-2012, 04:27 AM
Interesting article that brings out facts about IL teachers and the union
Now this "4% rule (http://www.smartmoney.com/retirement/planning/is-the-4-percent-rule-viable-1326840051207/)" is based on a planning horizon of about 30 years, meaning it is used primarily for retirement planning, or people over 50. If you're young, you should probably go with, say, government bond yields. Today's 30-year US bonds yield about 2.8%. So if you are more like 30 years old, your $1 million life savings is more like an annual income of $28,000.
(By the way, this investment-income equivalence exercise is the same as pricing an annuity. I dare you to try to price an annuity. There are many web sites that will tell you how to build a watch, but virtually none tell you the time. I'll save you some research: the 4% rule is not far from the mark.)
So in round numbers, let's say a $1 million investment nest egg is equal to an annual income of $40,000. Suddenly, $1 million doesn't seem so rich. That relationship can be turned around: if you have an annual pension of $40,000, you are effectively a millionaire, especially if that pension is adjusted for cost of living.
Now let's look at public school teachers. In Illinois, where I live, the Illinois State Board of Education (http://www.isbe.state.il.us/research/pdfs/teacher_salary_11-12.pdf) puts out a report on teachers' salaries. The table below is a pretty good summary of that 110-page report. A beginning teacher with a Bachelor's degree in a median school district might make about $40,000 per year. But by the time a teacher retires, she could be making $55,000 to $120,000, depending on how much graduate education she got and her school district.
http://www.americanthinker.com/articles/assets/Teacher%20salaries.jpg
And when that teacher does retire, what is her pension? If most school districts are like Chicago's (http://members.ctpf.org/preparing-for-retirement/estimate-your-pension/), the teacher will make about 50% of her final salary if she retires at age 55, or 75%, the maximum, if she waits until age 59.
I compiled some representative values based on the assumptions noted above.
Equivalent Net Worth of Illinois Teachers' Pensions
<tbody>
Teacher Situation
Salary at Retirement
Annual Pension
Equivalent Net Worth
Quincy district, Bachelors, age 55
$55,595
$27,798
$694,938
Quincy district, Bachelors, age 59
$55,595
$41,696
$1,042,406
"Typical", age 55
$85,000
$42,500
$1,062,500
"Typical", age 59
$85,000
$63,750
$1,593,750
Aurora West, Masters plus, age 55
$103,277
$51,639
$1,290,963
Aurora West, Masters plus, age 59
$103,277
$77,458
$1,936,444
</tbody>
Assumptions: pension is 50% of salary if retirement is at age 55, and 75% if at age 59; annual pension is 4% of equivalent net worth.
In short, a lot of retired Illinois teachers are millionaires.
Read more: http://www.americanthinker.com/2012/12/millionaires_billionaires_and_teachers.html#ixzz2E hN8ZSY1
Now this "4% rule (http://www.smartmoney.com/retirement/planning/is-the-4-percent-rule-viable-1326840051207/)" is based on a planning horizon of about 30 years, meaning it is used primarily for retirement planning, or people over 50. If you're young, you should probably go with, say, government bond yields. Today's 30-year US bonds yield about 2.8%. So if you are more like 30 years old, your $1 million life savings is more like an annual income of $28,000.
(By the way, this investment-income equivalence exercise is the same as pricing an annuity. I dare you to try to price an annuity. There are many web sites that will tell you how to build a watch, but virtually none tell you the time. I'll save you some research: the 4% rule is not far from the mark.)
So in round numbers, let's say a $1 million investment nest egg is equal to an annual income of $40,000. Suddenly, $1 million doesn't seem so rich. That relationship can be turned around: if you have an annual pension of $40,000, you are effectively a millionaire, especially if that pension is adjusted for cost of living.
Now let's look at public school teachers. In Illinois, where I live, the Illinois State Board of Education (http://www.isbe.state.il.us/research/pdfs/teacher_salary_11-12.pdf) puts out a report on teachers' salaries. The table below is a pretty good summary of that 110-page report. A beginning teacher with a Bachelor's degree in a median school district might make about $40,000 per year. But by the time a teacher retires, she could be making $55,000 to $120,000, depending on how much graduate education she got and her school district.
http://www.americanthinker.com/articles/assets/Teacher%20salaries.jpg
And when that teacher does retire, what is her pension? If most school districts are like Chicago's (http://members.ctpf.org/preparing-for-retirement/estimate-your-pension/), the teacher will make about 50% of her final salary if she retires at age 55, or 75%, the maximum, if she waits until age 59.
I compiled some representative values based on the assumptions noted above.
Equivalent Net Worth of Illinois Teachers' Pensions
<tbody>
Teacher Situation
Salary at Retirement
Annual Pension
Equivalent Net Worth
Quincy district, Bachelors, age 55
$55,595
$27,798
$694,938
Quincy district, Bachelors, age 59
$55,595
$41,696
$1,042,406
"Typical", age 55
$85,000
$42,500
$1,062,500
"Typical", age 59
$85,000
$63,750
$1,593,750
Aurora West, Masters plus, age 55
$103,277
$51,639
$1,290,963
Aurora West, Masters plus, age 59
$103,277
$77,458
$1,936,444
</tbody>
Assumptions: pension is 50% of salary if retirement is at age 55, and 75% if at age 59; annual pension is 4% of equivalent net worth.
In short, a lot of retired Illinois teachers are millionaires.
Read more: http://www.americanthinker.com/2012/12/millionaires_billionaires_and_teachers.html#ixzz2E hN8ZSY1