Author Topic: Public School Retirement System -- Help Me Understand  (Read 4982 times)

rjbf65

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Public School Retirement System -- Help Me Understand
« on: October 13, 2017, 08:48:06 AM »
My DW is a high school teacher.  She is forced to participate in the State Retirement plan for teachers.  I have always heard that our state (Missouri) has one of the best plans out there.  After looking at some numbers I think that is true.  But what I'm wondering is how it affects our FIRE Date. 

The particulars of the plan is she has to contribute 14.5% of her salary and it is matched by school district.  So far she has contributed just at $40K in a little over 5 years of service.  They have different formulas to determine what she gets at retirement based on how long she teaches and also how much she makes.  I just ran a calculator scenario to estimate our benefit at retirement age.  The earliest retirement program they have for our scenrio is called 25 and out.  So she would have to teach another 20 years and retire at 47 to get this benefit. 

Say she makes $45K per year right now and if we project a 2% increase per year for the next 20 years it would put her at a final average salary of $5356/month. 

The benefit formula that is set goes like this --  2.2% * $5,356 x 25 years of service = $2,945 per month for her single life benefit. 

The 100% Joint benefit - which is her and me gave me a number of $2,838 for each of us as long as we live.  So that looks like a no brainer for me.

Right now her 14.5% comes to $678/month.  She has $40K that she has contributed to this plan so far.  If I put in a calculator a $40K starting balance - $678/month contributions, and a 7% return. In 20 years we would have $511,674.

A 4% withdrawal rate on that money would be $1,705 at that time.  So, looking at it that way it appears that the school plan is fantastic.  But if her and I passed on early then I'm assuming it sucks as I'm not sure if that we would have money to pass down to heirs.

Other info.  We have $130K of other money saved up in retirement plans.  The plan for now is to max out my 401K and both our tradional IRA's for the next few years.  That would be $29K per year.  The plan is that is our minimum and hopefully more on top of that. 

Our annual spending right now is around $45K.  So it appears to me that her school retirement system alone would fund our normal family living expenses in retirement.  --$2,838 * 2 = $5,676 * 12 = $68,112 per year.  If that is the case then the other money we have been saving will not even need to be touched. 

Has anyone else had this type of retirement system available to them?  I'm curious to know if I'm looking at this correctly.  If I am then we are set up better than I thought, BUT, she has to teach another 20 years to get that amount.   








rjbf65

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Re: Public School Retirement System -- Help Me Understand
« Reply #1 on: October 13, 2017, 12:15:09 PM »
Here is a link to the benefit calculator if anyone wanted to look at that before crafting a response. 

https://wms.psrs-peers.org/OpenBenefitEstimate


maizeman

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Re: Public School Retirement System -- Help Me Understand
« Reply #2 on: October 13, 2017, 01:17:13 PM »
It is a good deal. It can afford to be for three primary reasons:

1) pensions, link annuities, benefit from the early deaths of some of the participants. If you're retiring with personal savings you need enough money to last for the longest you could reasonably expect to live. If you're retiring as part of a large group with pools savings to last all of you for your average life expectancy, not the longest.

2) If you have to work 25 years to get anything, you're also benefiting the contributions of from teachers who work less than 25 years in the system (either they burn out, transfer to teach outside of the system, or even keel over and die before retiring).

3) (The only one you should worry about) Most government pensions tend to forecast rather optimistic long term returns (~8%), which exceed the long term CAGR of the stock market (6.8%) when they calculate how much money the employer and employees have to pay in to support a particular level of pension pay outs in the future.

One other thing to keep in mind is that since you included cost-of-living increases in pay for the next 20 years, you're calculating your wife's pension in today's dollars. That means you should also account for inflation in your own cost of living over the next twenty years.

Cranky

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Re: Public School Retirement System -- Help Me Understand
« Reply #3 on: October 13, 2017, 02:41:11 PM »
Your state pension reps should come around giving talks pretty often, and usually they have several versions - early career, late career, individual meetings a year of so before retirement.

My dh is in Ohio's STRS system, and yes, it's a good pension. And it should be, because we've put a ton of money into it over the past 25 years.

clarkfan1979

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Re: Public School Retirement System -- Help Me Understand
« Reply #4 on: October 13, 2017, 04:25:58 PM »
It is a good deal. It can afford to be for three primary reasons:

1) pensions, link annuities, benefit from the early deaths of some of the participants. If you're retiring with personal savings you need enough money to last for the longest you could reasonably expect to live. If you're retiring as part of a large group with pools savings to last all of you for your average life expectancy, not the longest.

2) If you have to work 25 years to get anything, you're also benefiting the contributions of from teachers who work less than 25 years in the system (either they burn out, transfer to teach outside of the system, or even keel over and die before retiring).


3) (The only one you should worry about) Most government pensions tend to forecast rather optimistic long term returns (~8%), which exceed the long term CAGR of the stock market (6.8%) when they calculate how much money the employer and employees have to pay in to support a particular level of pension pay outs in the future.

One other thing to keep in mind is that since you included cost-of-living increases in pay for the next 20 years, you're calculating your wife's pension in today's dollars. That means you should also account for inflation in your own cost of living over the next twenty years.



For teachers that don't make it 25 years, they still get a refund of their 8%. However, the state was able to use that money to generate income.   

the state refunds the principle, but not the interest generated.


CFAhedge

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Re: Public School Retirement System -- Help Me Understand
« Reply #5 on: October 13, 2017, 04:55:41 PM »
Just wanted to throw out there that you may have misunderstood 100% joint. Typically, it means there's only one payment (not two), but that it will continue if your, in this case, wife predeceases you. Probably worth clarifying, at it's a huge difference. The numbers would make more sense that way, though.

rjbf65

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Re: Public School Retirement System -- Help Me Understand
« Reply #6 on: October 13, 2017, 09:21:23 PM »
Just wanted to throw out there that you may have misunderstood 100% joint. Typically, it means there's only one payment (not two), but that it will continue if your, in this case, wife predeceases you. Probably worth clarifying, at it's a huge difference. The numbers would make more sense that way, though.

Ahhh... that makes a lot more sense.  Yes huge difference. I knew the way I was looking at it was too good to be true. 

MDM

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Re: Public School Retirement System -- Help Me Understand
« Reply #7 on: October 14, 2017, 12:41:08 AM »
Say she makes $45K per year right now and if we project a 2% increase per year for the next 20 years it would put her at a final average salary of $5356/month. 
...
Our annual spending right now is around $45K.
If inflation is 2%/year, in 20 years that $45K would need to be ~$67K to buy the same things.

Rather than inflating both salary and spending, it's often easier to project increases only to the extent they are above inflation.  E.g., if pay increases exactly at the same rate as inflation, just use today's salary for the pension calculation.

MrsPete

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Re: Public School Retirement System -- Help Me Understand
« Reply #8 on: October 14, 2017, 08:20:28 AM »
Comments from a teacher in another state with only a few years left -- filter this all through your own state's rules: 

Teacher pensions are a good source of retirement income, but ONLY if you max out your years.  If you started teaching at age 22 and put in 30 years, you'd qualify for a maximum pension at age 52 ... and also have basic paid medical (and can add your spouse to your medical at cost).  That's the person who "wins" at the pension game:  The person who starts working early, maxes out the years, never changes jobs, and begins collecting at a relatively young age. 

As a result, they may not be attractive to the hard-core members of this website.

If you leave teaching at 20-25 years (instead of making it to the full 30), the deduction is fairly substantial ... and if you're younger than 62 (62?), they knock more off for your young age (because they'll be paying you longer).  If you want to leave at 20-25 years but are willing not to begin collecting your pension until age 65, you can avoid this deduction.  Some of my friends who are older say their deduction is only $20-25/month, but because I'm younger it would've been almost like cutting my pension in half.  It's really a bit like the question of when to begin collecting Social Security -- so many individual circumstances, and you must run the math scenerios for yourself.  It's complicated, and we have pages and pages of charts in our retirement handbook to tell you exactly what they deduct if you begin collecting your pension at age 60 with 26.4 years of service

Note that those 20-25-30 years must all be worked in the same state.  Your wife is a STATE employee.  If you're offered a job in another state, or y'all just decide you want to live in Florida, she leaves the pension program.  She can leave her money in the system and can some day collect a small pension from two different states ... but every teacher I know who has moved from one state to another mid-career has said the same thing:  It's pension suicide.  To say it more clearly:  If you were to  move to Florida next year, she would be hired in to a new school at a 6th year teacher's salary ... but she would start from Square 1 for her new Florida pension.  So think carefully about whether you're likely to stay in your current state (or on the borders of your state so that she could reasonably commute to a -- did you say Missouri? -- school).  20-25 years is a long time.

Lots of states are dropping pensions; with people living longer, they're expensive to maintain.  As long as your wife remains "in the system" under her current contract, she's "in".  But if she were to take off a couple years (a new baby, illness, whatever), she might be forced to come in under a new no-pension system.  Our state is moving this direction for teachers, yet they're not treating other state employees the same way.

Another big thing that's disappearing is paid medical for retirees.  I'm "in" under the old system.  I will have basic paid medical (for myself only) from the first day I begin collecting my pension.  I will want an additional small policy because basic is BASIC.  Younger teachers don't have this; it wasn't in their contracts on the day they joined the system.

If I want to cover my husband on my medical insurance in retirement, he must be "on my plan" at least the last year I am employed by the school system. 

Teachers only a year or two older than me have a great retirement benefit:  They will pay no state taxes on their pension.  That benefit disappeared just before I started, and it's not in my contract.

Be sure you investigate your wife's options for sick days.  In my state we can use sick days to "complete" 30 years (not 20-25 years ... you cannot use sick days unless you "max out").  So this means that if your wife has two years of sick days, she can retire at 28 years of service ... and it counts just as if she had 30.  Except, of course, that her salary would be a little higher if she went to the full 30.  Age doesn't matter /you have no deductions if you max out your years.  I personally have SO MANY sick days, and I will not use them as sick days; I will drag my sorry, sick self into school no matter what ... and pretty soon it's going to pay off for me.  Why does the state do this?  Because it's to everyone's advantage if teachers DON'T stay out ... and they don't want to create a use-it-or-lose-it mentality with sick days.

An odd little note on sick days shared between teachers and other state employees:  We can "gift" sick days to immediate family members.  The intention is that a wife could "gift" sick days to a husband who is fighting cancer (or any number of similar situations); the intention is that benefits can be shared within a family.  I have a friend whose husband is a state employee (not a teacher), and he is required to work loads and loads of overtime in the summer months ... he receives comp time/not pay for that overtime ... and at the end of the year all that comp time "rolls into" sick days ... and he "gifts" them to his wife ... eventually she will use these to reach 30 years/full service sooner.  In this way, they are "buying back" the years she stayed home with small children ... their goal is to get themselves "even" so they can retire at the same time, even though she will have worked fewer years. 

When I begin collecting my pension, I will have one chance to select from four options:   

- Because I am younger and in better health than my husband, I will almost certainly choose the Maximum Option, which means I'll get the largest amount for the rest of my life ... and when I'm gone, the payments stop.
- I can accept a lower amount of pension; but if I die first, my husband would continue to receive 50% of my pension for his life. 
- I can accept a lower still amount of pension; but if I die first, my husband would continue to receive 100% of my pension for his life. 
- The last option is Social Security Leveling.  The state figures up what my Social Security would be at age 62, and they pay me a MUCH lower pension ... but they also pay me what I will eventually receive in Social Security ... and then at age 62 I begin collecting Social Security and the state continues to pay the MUCH lower pension.  This option is wildly popular among the math-impaired, as they cannot be convinced it isn't a way to collect Social Security at age 55 or so.  Their typical "evidence" that it's a good choice:  My friend turned 62, and her payments didn't change a dime! 

Thing about these choices:  You only get one chance to make the choice.  As someone else pointed out to you, these options don't mean that you're BOTH receiving a pension ... only that if you make the right choice, you could continue collecting, even if she died early.  Obviously, at your age you can't begin to choose -- you'll have to consider your health and your family's longevity as retirement age approaches.

Lots of teachers who are good at math opt to take their pension ... then substitute teach.  Subbing means a teacher can work 8-9 days a month and (with the pension) have just as much money as they had while working full time.  It's a job that's flexible for a retiree:  You can say, "No, I can't work the last two weeks of the month.  I'll be traveling."  You're out the door at 2:30 -- but you have no parent conferences, no grades to calculate, no lessons to plan, no after school duties.  Of course, it also means that you can't work in the summers, you won't have much work the first month of school, and you'll be asked to work a lot of Fridays.  I am given to understand that subs watch HALF of a lot of movies.  In my state -- for reasons I don't understand -- you cannot work in any paid capacity for the school system until you have been retired /collecting pension for six months. 

Another good teacher option is tutoring.  Our county office maintains a list of tutors, and parents can call whomever they like.  Tutors set their own prices, and most opt to meet their students at the public library. 

When you're looking at your state's formula for calculating pension, be sure you're basing your estimates ONLY on your wife's base salary.  My state has started giving bonuses for various things (in place of raises); bonuses do not raise your retirement.  Likewise, if your wife coaches the tennis team or does any other type of "extra" activity that boosts her salary, that doesn't raise her retirement.  Only base salary raises her retirement. 

Look into when she is allowed to retire.  In my state, we are required to retire either on the first day of a month OR at the end of a grading period.  Teachers who are good at math spend some time with the calendar and a calculator figuring up exactly whether it's wise to stay past spring break ... or whether they should leave at the semester break.  Some people will say, "I'm retiring at the end of the semester so I can be paid for Christmas break", while others will say, "If I leave before Christmas break, those days will roll over into sick days and will bring me to my full 30 years."  One friend of mine was planning to retire at the end of the school year ... but he realized that the bump-up in pension was enough to convince him to work fall semester /leave after first semester finals ... and it allowed him to coach fall track one more time, something he says he will miss.  This, of course, is all highly personal and depends upon whether you were originally hired in the fall or (like me) mid-year and whether you've ever taken any time off (for children, perhaps). 

Teachers have the option to "buy back missing time" under certain circumstances.  If you took off a couple months for the birth of a child, for example, you can pay the state the amount of pension that would've been paid in during that time period (plus their half, plus a little more just because).  You can also "buy back" time you missed during an extended illness or military service.  I don't know as much about this.

If -- as the years progress -- your wife becomes dissatisfied with teaching (and, trust me, it's a burn-out job), remember that she can change jobs within the same system and remain in the pension system.  So she could put in 20 years as a teacher, then she could "step down" to become a teacher assistant (no lessons to plan, no papers to grade, just helping a teacher), or she could become the school's receptionist ... and she'd still be working towards her 30 years ... in my state the formula uses your "four years of highest salary", so you can understand how that would work.

Another thought altogether:  In your state, do teachers pay into Social Security?  In my state, we do; thus, I will collect both a pension and Social Security (eventually).  In some states, teachers are exempt from Social Security, so this isn't true for them.  Just be sure you know where you stand on this subject.

Does your state offer cost-of-living increases for retirees? 

Yes, a pension is an uncertain risk.  A pretty big bite of my paycheck is deducted every month -- at this point, I have contributed a great deal to that fund.  If I retire and die two years later, I will lose big time -- and my children would not inherit my "leftover money".  On the other hand, if as expected, I live well into my 90s, possibly past 100, I will collect back every penny I put in -- and more.  It's a "defined benefit" plan.  The benefit is defined, and I cannot outlive my money.  But it'll be decades 'til I know whether I am "winning" this bet or not. 

Final thought:  Look online and see if you don't have LOTS of information specific to your state.  We have a whole handbook and a very informative power point online.  I attended the "You're within five years of retirement" meeting last year, and I learned nothing -- it was all already online. 

Good luck.  I hope this is helpful
Ahhh... that makes a lot more sense.  Yes huge difference. I knew the way I was looking at it was too good to be true.
No, the teacher pension is not "too good to be true".  If you put in the years and make the right choices, it is definitely a good thing, but not "too good to be true". 

My husband and I've been working on retirement numbers this week.  I anticipate having $2344/month in pension /after taxes.  Plenty for a comfortable day-to-day life, given that our house is paid for.  Then we'll have our savings /investments for travel, fun, an occasional new roof or new car. 
« Last Edit: October 14, 2017, 08:41:29 AM by MrsPete »

rjbf65

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Re: Public School Retirement System -- Help Me Understand
« Reply #9 on: October 14, 2017, 08:57:28 AM »
Comments from a teacher in another state with only a few years left -- filter this all through your own state's rules: 

Teacher pensions are a good source of retirement income, but ONLY if you max out your years.  If you started teaching at age 22 and put in 30 years, you'd qualify for a maximum pension at age 52 ... and also have basic paid medical (and can add your spouse to your medical at cost).  That's the person who "wins" at the pension game:  The person who starts working early, maxes out the years, never changes jobs, and begins collecting at a relatively young age. 

As a result, they may not be attractive to the hard-core members of this website.

If you leave teaching at 20-25 years (instead of making it to the full 30), the deduction is fairly substantial ... and if you're younger than 62 (62?), they knock more off for your young age (because they'll be paying you longer).  If you want to leave at 20-25 years but are willing not to begin collecting your pension until age 65, you can avoid this deduction.  Some of my friends who are older say their deduction is only $20-25/month, but because I'm younger it would've been almost like cutting my pension in half.  It's really a bit like the question of when to begin collecting Social Security -- so many individual circumstances, and you must run the math scenerios for yourself.  It's complicated, and we have pages and pages of charts in our retirement handbook to tell you exactly what they deduct if you begin collecting your pension at age 60 with 26.4 years of service

Note that those 20-25-30 years must all be worked in the same state.  Your wife is a STATE employee.  If you're offered a job in another state, or y'all just decide you want to live in Florida, she leaves the pension program.  She can leave her money in the system and can some day collect a small pension from two different states ... but every teacher I know who has moved from one state to another mid-career has said the same thing:  It's pension suicide.  To say it more clearly:  If you were to  move to Florida next year, she would be hired in to a new school at a 6th year teacher's salary ... but she would start from Square 1 for her new Florida pension.  So think carefully about whether you're likely to stay in your current state (or on the borders of your state so that she could reasonably commute to a -- did you say Missouri? -- school).  20-25 years is a long time.

Lots of states are dropping pensions; with people living longer, they're expensive to maintain.  As long as your wife remains "in the system" under her current contract, she's "in".  But if she were to take off a couple years (a new baby, illness, whatever), she might be forced to come in under a new no-pension system.  Our state is moving this direction for teachers, yet they're not treating other state employees the same way.

Another big thing that's disappearing is paid medical for retirees.  I'm "in" under the old system.  I will have basic paid medical (for myself only) from the first day I begin collecting my pension.  I will want an additional small policy because basic is BASIC.  Younger teachers don't have this; it wasn't in their contracts on the day they joined the system.

If I want to cover my husband on my medical insurance in retirement, he must be "on my plan" at least the last year I am employed by the school system. 

Teachers only a year or two older than me have a great retirement benefit:  They will pay no state taxes on their pension.  That benefit disappeared just before I started, and it's not in my contract.

Be sure you investigate your wife's options for sick days.  In my state we can use sick days to "complete" 30 years (not 20-25 years ... you cannot use sick days unless you "max out").  So this means that if your wife has two years of sick days, she can retire at 28 years of service ... and it counts just as if she had 30.  Except, of course, that her salary would be a little higher if she went to the full 30.  Age doesn't matter /you have no deductions if you max out your years.  I personally have SO MANY sick days, and I will not use them as sick days; I will drag my sorry, sick self into school no matter what ... and pretty soon it's going to pay off for me.  Why does the state do this?  Because it's to everyone's advantage if teachers DON'T stay out ... and they don't want to create a use-it-or-lose-it mentality with sick days.

An odd little note on sick days shared between teachers and other state employees:  We can "gift" sick days to immediate family members.  The intention is that a wife could "gift" sick days to a husband who is fighting cancer (or any number of similar situations); the intention is that benefits can be shared within a family.  I have a friend whose husband is a state employee (not a teacher), and he is required to work loads and loads of overtime in the summer months ... he receives comp time/not pay for that overtime ... and at the end of the year all that comp time "rolls into" sick days ... and he "gifts" them to his wife ... eventually she will use these to reach 30 years/full service sooner.  In this way, they are "buying back" the years she stayed home with small children ... their goal is to get themselves "even" so they can retire at the same time, even though she will have worked fewer years. 

When I begin collecting my pension, I will have one chance to select from four options:   

- Because I am younger and in better health than my husband, I will almost certainly choose the Maximum Option, which means I'll get the largest amount for the rest of my life ... and when I'm gone, the payments stop.
- I can accept a lower amount of pension; but if I die first, my husband would continue to receive 50% of my pension for his life. 
- I can accept a lower still amount of pension; but if I die first, my husband would continue to receive 100% of my pension for his life. 
- The last option is Social Security Leveling.  The state figures up what my Social Security would be at age 62, and they pay me a MUCH lower pension ... but they also pay me what I will eventually receive in Social Security ... and then at age 62 I begin collecting Social Security and the state continues to pay the MUCH lower pension.  This option is wildly popular among the math-impaired, as they cannot be convinced it isn't a way to collect Social Security at age 55 or so.  Their typical "evidence" that it's a good choice:  My friend turned 62, and her payments didn't change a dime! 

Thing about these choices:  You only get one chance to make the choice.  As someone else pointed out to you, these options don't mean that you're BOTH receiving a pension ... only that if you make the right choice, you could continue collecting, even if she died early.  Obviously, at your age you can't begin to choose -- you'll have to consider your health and your family's longevity as retirement age approaches.

Lots of teachers who are good at math opt to take their pension ... then substitute teach.  Subbing means a teacher can work 8-9 days a month and (with the pension) have just as much money as they had while working full time.  It's a job that's flexible for a retiree:  You can say, "No, I can't work the last two weeks of the month.  I'll be traveling."  You're out the door at 2:30 -- but you have no parent conferences, no grades to calculate, no lessons to plan, no after school duties.  Of course, it also means that you can't work in the summers, you won't have much work the first month of school, and you'll be asked to work a lot of Fridays.  I am given to understand that subs watch HALF of a lot of movies.  In my state -- for reasons I don't understand -- you cannot work in any paid capacity for the school system until you have been retired /collecting pension for six months. 

Another good teacher option is tutoring.  Our county office maintains a list of tutors, and parents can call whomever they like.  Tutors set their own prices, and most opt to meet their students at the public library. 

When you're looking at your state's formula for calculating pension, be sure you're basing your estimates ONLY on your wife's base salary.  My state has started giving bonuses for various things (in place of raises); bonuses do not raise your retirement.  Likewise, if your wife coaches the tennis team or does any other type of "extra" activity that boosts her salary, that doesn't raise her retirement.  Only base salary raises her retirement. 

Look into when she is allowed to retire.  In my state, we are required to retire either on the first day of a month OR at the end of a grading period.  Teachers who are good at math spend some time with the calendar and a calculator figuring up exactly whether it's wise to stay past spring break ... or whether they should leave at the semester break.  Some people will say, "I'm retiring at the end of the semester so I can be paid for Christmas break", while others will say, "If I leave before Christmas break, those days will roll over into sick days and will bring me to my full 30 years."  One friend of mine was planning to retire at the end of the school year ... but he realized that the bump-up in pension was enough to convince him to work fall semester /leave after first semester finals ... and it allowed him to coach fall track one more time, something he says he will miss.  This, of course, is all highly personal and depends upon whether you were originally hired in the fall or (like me) mid-year and whether you've ever taken any time off (for children, perhaps). 

Teachers have the option to "buy back missing time" under certain circumstances.  If you took off a couple months for the birth of a child, for example, you can pay the state the amount of pension that would've been paid in during that time period (plus their half, plus a little more just because).  You can also "buy back" time you missed during an extended illness or military service.  I don't know as much about this.

If -- as the years progress -- your wife becomes dissatisfied with teaching (and, trust me, it's a burn-out job), remember that she can change jobs within the same system and remain in the pension system.  So she could put in 20 years as a teacher, then she could "step down" to become a teacher assistant (no lessons to plan, no papers to grade, just helping a teacher), or she could become the school's receptionist ... and she'd still be working towards her 30 years ... in my state the formula uses your "four years of highest salary", so you can understand how that would work.

Another thought altogether:  In your state, do teachers pay into Social Security?  In my state, we do; thus, I will collect both a pension and Social Security (eventually).  In some states, teachers are exempt from Social Security, so this isn't true for them.  Just be sure you know where you stand on this subject.

Does your state offer cost-of-living increases for retirees? 

Yes, a pension is an uncertain risk.  A pretty big bite of my paycheck is deducted every month -- at this point, I have contributed a great deal to that fund.  If I retire and die two years later, I will lose big time -- and my children would not inherit my "leftover money".  On the other hand, if as expected, I live well into my 90s, possibly past 100, I will collect back every penny I put in -- and more.  It's a "defined benefit" plan.  The benefit is defined, and I cannot outlive my money.  But it'll be decades 'til I know whether I am "winning" this bet or not. 

Final thought:  Look online and see if you don't have LOTS of information specific to your state.  We have a whole handbook and a very informative power point online.  I attended the "You're within five years of retirement" meeting last year, and I learned nothing -- it was all already online. 

Good luck.  I hope this is helpful
Ahhh... that makes a lot more sense.  Yes huge difference. I knew the way I was looking at it was too good to be true.
No, the teacher pension is not "too good to be true".  If you put in the years and make the right choices, it is definitely a good thing, but not "too good to be true". 

My husband and I've been working on retirement numbers this week.  I anticipate having $2344/month in pension /after taxes.  Plenty for a comfortable day-to-day life, given that our house is paid for.  Then we'll have our savings /investments for travel, fun, an occasional new roof or new car.
 


Extremely helpful!  Thank you for the detailed response! 

Her check does not have SS deduction.  Which I like.  Wish I could do the same thing. 

It's essentially a piece of our puzzle.  For easy figuring, let's say her pension provides $2000 per month and we spend $5000.  We need $3000 from our other retirement sources.   So $36,000 per year * 25 = $900,000 to reach our number using the 4% rule.   
 
I don't see us ever leaving Missouri but burnout is definitely a possibility. 

Cyanne

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Re: Public School Retirement System -- Help Me Understand
« Reply #10 on: October 14, 2017, 09:53:59 AM »
Don't be too excited about your wife not paying into social security. If she chooses to leave teaching and get a job that does pay into social security she may be subject to the Windfall Elimination Provision.

https://www.ssa.gov/planners/retire/wep.html

Bicycle_B

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Re: Public School Retirement System -- Help Me Understand
« Reply #11 on: October 14, 2017, 02:20:32 PM »
Your wife seems to be in a good plan.  The details of such plans make a big difference.  I am in one that has different details.  They're real.  Learn them to your advantage, as other posters have shown. 

The big key is reconciling your overall life to whatever she needs to do to efficiently reach retirement payout.  Not to be macabre, but plan for contingencies.  If she dies prior to retirement, do you get a return of funds instead of a prorated pension?  Do you therefore need life insurance?  Or are your finances such that no life insurance is needed anyway? 

Another consideration:  Whether she can persist the 25 years.  If she can't, the time to cut and run by living your life differently is now, not later. 

A final thought is about inflation.  Is the payout inflation adjusted?  Mine isn't.  I've stopped working, but I'm not old enough to draw.  I'm just entitled to a partial pension when I'm 65 - similar to if her plan let her quit after 10 years in exchange for a smaller payment that would start later.  Anyway, in the future I will get a payment stream of a known fixed amount.  What's unknown is how much inflation will erode the payments' value by the time I can draw.  Once your wife draws, she too could be affected by inflation.  In that case, consider adjusting your investment portfolio.  My personal approach is that rental real estate with a mortgage can protect against inflation.  I can buy a property with a $1000 per month mortgage, for example, to cover inflation's effect on a $1000 per month pension payment. There might be better solutions out there, but study the plan's details and consider your investing plans accordingly.

It sounds like staying the course will work out great for you.  Just think it through. 

aceyou

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Re: Public School Retirement System -- Help Me Understand
« Reply #12 on: October 14, 2017, 08:00:38 PM »
Posting to follow.  My wife and are are in a similar position as your wife.  We have to teach 25 total years because we bought 5.  We are in Michigan.

-We will get 45% of the average of our three highest paying years. 
- I pay 7% towards it, she pays 10% because she will get us health care in retirement.
- After the first year of retirement our pension will increase by 3%.  Whatever that amount of money is, our pensions will increase by that number each year.  So, the increase will be slightly lower as a percent each year, but it'll still go up.
- We will hit 25 years at age 48, but she'll retire a year b/c a year younger.
- We also pay into social security. 
-  We have access to 403b or Roth 403B, as well as a 457 each, so we can shelter 72k/year in pretax, plus 11k through a roth ira.  Or we can Roth more if we want to push more to the Roth 403B.  We pretty much max these out, because what better way to spend all our money than VTSAX, right:)
- I have 14 years to go, she has 15 years to go, if you count the year we are currently in. 
- We will likely be quite wealthy at age 48.

If your wife enjoys teaching, I recommend she sticks with it and that you both keep stashing like champs every year in the meantime.  It'll be worth it!

aceyou

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Re: Public School Retirement System -- Help Me Understand
« Reply #13 on: October 14, 2017, 08:16:07 PM »
Mrs. Pete, wow, thanks for the thoughtful post.  Can you elaborate on why the equated option of getting paid more up front so that you level out when social security kicks in is a bad thing mathematically?  I'm not disagreeing with you, I just haven't ran the numbers so I don't know. 

I have thought I would very possibly choose an equated option, and that my wife may do the same.  Here is our rationale:

- We should have plenty of money anyway, so it's not like there will be a big risk of going broke as we get old. 
- We will retire at age 48, at that time we will have the following expenses that will not occur when we are older:
     -We will have to pay all of our health insurance costs out of pockets for 5 years...you can get a full pension after 25 years if you buy years, but you don't get health insurance until it's literally been 30 years under my contract. 
     - The first 5 years of retirement are when my two children will be in college. 
     - The first 5 years of retirement are when we are more likely to want to travel, as opposed to when we are in our 70's and older.  This assumption could end up being wrong, but I think it's a fair assumption. 
   
If I can use my pension income to pay for all this, I can keep my stash invested and growing, leaving me with a larger stash
 when I hit social security age.  Putting all those things together, my rationale has been that  I might as well take a higher income from age 48-62. 

Any input on why the math works against us to not do this would be appreciated, because I just want to do whatever ends us up with the most money.  Thanks!

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Re: Public School Retirement System -- Help Me Understand
« Reply #14 on: October 14, 2017, 10:20:02 PM »
Mrs. Pete, wow, thanks for the thoughtful post.  Can you elaborate on why the equated option of getting paid more up front so that you level out when social security kicks in is a bad thing mathematically?
It probably has to do with the word in all caps: "The state figures up what my Social Security would be at age 62, and they pay me a MUCH lower pension...."

One would need the actual numbers to check.  Also, as with many pension and SS questions, knowing the date of one's death in advance would make the monetary decision much easier.

MrsPete

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Re: Public School Retirement System -- Help Me Understand
« Reply #15 on: October 15, 2017, 09:13:20 AM »
Another consideration:  Whether she can persist the 25 years.  If she can't, the time to cut and run by living your life differently is now, not later. 
Yes, very good advice.  As I said earlier, you "win" the teacher pension game by staying in the job long-term.  If she were to leave at the 18 year mark, you'd get her deductions back ... but nothing compared to a full pension.

- I pay 7% towards it, she pays 10% because she will get us health care in retirement.
You have the choice?  That's nice!  One concern:  What if she dies first?  Do you still have coverage?   

Mrs. Pete, wow, thanks for the thoughtful post.  Can you elaborate on why the equated option of getting paid more up front so that you level out when social security kicks in is a bad thing mathematically?  I'm not disagreeing with you, I just haven't ran the numbers so I don't know. 
If you take the Social Security Leveling option, you're accepting the amount of SS you'd receive if you started collecting at age 62 ... for most of us, our Full Retirement Age is 67 ... and for every year we take it early, we give up 6% ... so automatically these people are accepting 30% less in SS than they could've had.  PLUS to get the state to pay this amount to them early, they must accept a lower pension (for the rest of their lives) ... this exact amount differs; the state figures it up based upon your age (how many extra months they'll be paying you) and the amount of your SS.  And you only get one shot in your whole life to make this decision, so you'd better get it right!

The upshot is that these individuals have paid into SS and the state pension for decades ... and if they take the Social Security Leveling, they're accept a significantly smaller amount of money than they have coming to them (though they will collect for more months).  They're accepting a lower amount on their investment ... so they can have their money a few years earlier.

Now, for some people it might be a good choice; say, if your health is bad and you fear you might not live to collect later -- yeah, it might be a good choice.  But that's not true for most people in their late 50s-early 60s who are making this choice.  For most people, a better choice is to take the pension and work part-time ... you can have just as much money and still be semi-retired.  Once you're retired (and actually elderly -- not late 50s-early 60s), you have no guarantee of cost-of-living increases either from your pension or SS. 

I have thought I would very possibly choose an equated option, and that my wife may do the same.  Here is our rationale:

- We should have plenty of money anyway, so it's not like there will be a big risk of going broke as we get old. 
- We will retire at age 48, at that time we will have the following expenses that will not occur when we are older:
     -We will have to pay all of our health insurance costs out of pockets for 5 years...you can get a full pension after 25 years if you buy years, but you don't get health insurance until it's literally been 30 years under my contract. 
     - The first 5 years of retirement are when my two children will be in college. 
     - The first 5 years of retirement are when we are more likely to want to travel, as opposed to when we are in our 70's and older.  This assumption could end up being wrong, but I think it's a fair assumption. 
I see your argument, and it makes sense.  You should absolutely do the math and decide which option works for you.  Obviously, I don't know how much you have invested /how much you are likely to earn by keeping your savings/investments working for you.  I will point out one consideration:  Your pension and SS are a "defined benefit", which means they're guaranteed for your lifetime ... whereas your investments (depending upon what they are) can be lost. 

Regardless, your argument is not the one I hear from my fellow teachers; what I hear them say is, "I have little-to-no-other-savings, and if I don't take the SS Leveling, I cannot retire now."  To which, I think but do not say, "Then maybe you can't afford to retire now."  I do suggest to them that they might postpone putting their hand into the only pocket they have at their disposal by working part time /postponing the SS payments.  That tends to get me a weird look and comments about how that isn't retirement.  Some people have the weird and mistaken idea that once you're collecting a pension you're not allowed to work anymore.
Mrs. Pete, wow, thanks for the thoughtful post.  Can you elaborate on why the equated option of getting paid more up front so that you level out when social security kicks in is a bad thing mathematically?
It probably has to do with the word in all caps: "The state figures up what my Social Security would be at age 62, and they pay me a MUCH lower pension...."

One would need the actual numbers to check.  Also, as with many pension and SS questions, knowing the date of one's death in advance would make the monetary decision much easier.
Exactly.  And you can't figure up just how much they'd deduct with a nice, easy little formula.  Instead, you have to get the pension people to figure up a customized estimate for you personally.  Why?  Because you're balancing all your personal SS details plus your 30 year career details ... and small things like your hire date ... the job you held before you were a teacher, and your age ... they all make a difference.  But I've talked to a couple people about it, and I was SHOCKED at how much they were willing to give up (in the future) to have money in their pocket right this minute. 

I really think that for the average person, it's a big mistake.  For someone like AceYou -- who has other savings, which I assume are significant -- it's a huge mistake.  Not today, but tomorrow.
« Last Edit: October 15, 2017, 09:18:14 AM by MrsPete »

aceyou

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Re: Public School Retirement System -- Help Me Understand
« Reply #16 on: October 16, 2017, 07:28:46 PM »
This is a great discussion, and I really appreciate the conversation.  I don't really have anyone to think out loud about this with in real life, because a) it come across as a huge rich person problem, and b) I don't think any other teachers I'm around are chewing on this question at all anyway. 

MrsPete, I see your point, and it seems like a good one. 

I haven't run the numbers out on my thoughts, but I will try to do so.  Here's my rationalization, which of course will force me to project a bunch of things that may or may not actually happen, but I'll give it my best guess: 

Step 1: examine what life could be like from age 48-53 for me...the first 5 years of retirement.
Assumptions about assets (in 2031 dollars):
- Stash at age 48 (year 2031):  2 million
- House paid off and worth about 400k
- Pensions if I don't take equated option:  45k for me and 50k for my wife: total: 95k/year
- Pensions if I take the equated option:  70k for me and 75k for my wife: total 145k/year

Assumptions(aka wild guesses) about spending:
- Normal expenses for my wife and I: 40k
- Health care from 2031-2036: 30k/year
- College for kids: 40k/year
- travel expenses: 15k/year
- taxes 20k
Total annual expenses for those 5 very unusually expensive years right after retiring:  145k/year

Suppose taking the equated option allows me to pay for all these expenses without dipping into my stash.  Over those 5 years, from age 48-53, that could save me about 250k that would have left the stash.  On top of that, I will have whatever that 250k earns over that half decade.  Let's say that's 350k by age 53. 

Step 2: What might life be like from age 53-62 for me:
Ok, now I'm 53 years old, my wife is 52, and we have this extra 350k in our stash what wouldn't have been there otherwise had we not chosen the equated option.  Kids are out of college and I'm now getting health care again.  From age 53 to age 62, I now have about a decade to enjoy two additional benefits:
1) that 350k has another 9 years to keep growing, and
2) I'm getting larger checks from age 53-62 due to still reaping benefits from equated options.  Our spending is far less than 145k/year now, and yet we keep getting these pension checks.  I never have to dip into my stashe unless I want to buy a big ticket item like a boat or something. 

Step 3: Ok, now I've finally hit 62 years old:
At this point I'm for the first time facing a negative consequence of my earlier choices.  I would have gotten a significant increase in monthly income with my pension, but since I chose the equated option, I'm still on the lower trajectory.  However:
1) Over those 9 years, my extra 350k from the stash has doubled to about 700k, and
2) I have money leftover from the 9 years where my monthly income was larger due to taking the equated option. 

This idea is that this would make up for the lower monthly income that I gave up 15 years before.  But the question is, what is the cutoff point where benefit to the stash/extra money early becomes more financially advantageous than getting a larger income later though social security. 

Regardless, it will be a fun problem to figure out once I get close to retirement and I don't have to make as many assumptions about stash amount, pension amount, health care costs, college costs, travel costs, etc.  I love crunching numbers, so it'll be a very enjoyable task! 

Thanks for reading my rambling:)

MrsPete

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Re: Public School Retirement System -- Help Me Understand
« Reply #17 on: October 17, 2017, 12:09:18 PM »
This is a great discussion, and I really appreciate the conversation.  I don't really have anyone to think out loud about this with in real life, because a) it come across as a huge rich person problem, and b) I don't think any other teachers I'm around are chewing on this question at all anyway. 

MrsPete, I see your point, and it seems like a good one. 

I haven't run the numbers out on my thoughts, but I will try to do so.  Here's my rationalization, which of course will force me to project a bunch of things that may or may not actually happen, but I'll give it my best guess: 

Step 1: examine what life could be like from age 48-53 for me...the first 5 years of retirement.
Assumptions about assets (in 2031 dollars):
- Stash at age 48 (year 2031):  2 million
- House paid off and worth about 400k
- Pensions if I don't take equated option:  45k for me and 50k for my wife: total: 95k/year
- Pensions if I take the equated option:  70k for me and 75k for my wife: total 145k/year

Assumptions(aka wild guesses) about spending:
- Normal expenses for my wife and I: 40k
- Health care from 2031-2036: 30k/year
- College for kids: 40k/year
- travel expenses: 15k/year
- taxes 20k
Total annual expenses for those 5 very unusually expensive years right after retiring:  145k/year

Suppose taking the equated option allows me to pay for all these expenses without dipping into my stash.  Over those 5 years, from age 48-53, that could save me about 250k that would have left the stash.  On top of that, I will have whatever that 250k earns over that half decade.  Let's say that's 350k by age 53. 

Step 2: What might life be like from age 53-62 for me:
Ok, now I'm 53 years old, my wife is 52, and we have this extra 350k in our stash what wouldn't have been there otherwise had we not chosen the equated option.  Kids are out of college and I'm now getting health care again.  From age 53 to age 62, I now have about a decade to enjoy two additional benefits:
1) that 350k has another 9 years to keep growing, and
2) I'm getting larger checks from age 53-62 due to still reaping benefits from equated options.  Our spending is far less than 145k/year now, and yet we keep getting these pension checks.  I never have to dip into my stashe unless I want to buy a big ticket item like a boat or something. 

Step 3: Ok, now I've finally hit 62 years old:
At this point I'm for the first time facing a negative consequence of my earlier choices.  I would have gotten a significant increase in monthly income with my pension, but since I chose the equated option, I'm still on the lower trajectory.  However:
1) Over those 9 years, my extra 350k from the stash has doubled to about 700k, and
2) I have money leftover from the 9 years where my monthly income was larger due to taking the equated option. 

This idea is that this would make up for the lower monthly income that I gave up 15 years before.  But the question is, what is the cutoff point where benefit to the stash/extra money early becomes more financially advantageous than getting a larger income later though social security. 

Regardless, it will be a fun problem to figure out once I get close to retirement and I don't have to make as many assumptions about stash amount, pension amount, health care costs, college costs, travel costs, etc.  I love crunching numbers, so it'll be a very enjoyable task! 

Thanks for reading my rambling:)
First, you say that your teachers friends aren't chewing on these problems yet -- maybe you're hanging with younger teachers.  The teachers like me -- those of us who are a couple years from becoming "Golden Apples" talk about it non-stop.  We attended the state's retirement seminar together last spring (well, it happened to be held at our school, so it wasn't exactly difficult).  We have discussed numbers multiple times and have covered the board with pension-math.  I am BY FAR the best informed in my immediate circle of friends; I'm helping the math teachers with their numbers -- not that they can't run the formula, but because a lot of people seem to have trouble remembering all the details (include your sick days, how long's your spouse likely to live?) and juggling multiple possibilities at once.

For what it's worth, I was interested in this topic when I was a young teacher, but no one wanted to talk to me about it then. 

Second, your figures look solid to me.  I like the way you're looking at retirement "in blocks of time" that correspond to your projected family circumstances -- and although our details vary widely, we're approaching things with a similar thought process -- do keep in mind that things don't always go as planned, but I suspect you're prepared to roll with the punches.  Though I still maintain that the SS Leveling option is a bad plan for the majority, I concede that you may be the exception to the rule. 
« Last Edit: October 17, 2017, 12:14:38 PM by MrsPete »

MrsPete

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Re: Public School Retirement System -- Help Me Understand
« Reply #18 on: October 19, 2017, 11:54:19 AM »
On the subject of Social Security Leveling:  I've been doing some math -- these are my real numbers. 

If I take the maximum teacher pension benefit, over 44 years (making me 100, which is realistic) I will collect $2353 /month ... $28,236 /year ... for a total of $1,242,384 /lifetime. 
If I then begin collecting Social Security at age 62, I would receive $1282 /month ... $15,384 /year ... $584,592 /lifetime ... in addition to the above-mentioned pension.
If I were to wait 'til full retirement age of 67, I would receive $1858 /month ... $22,296 /year ... $847,248 /lifetime ... in addition to the above-mentioned pension.
And if I began Social Security at 63,64,65 or 66, the numbers would fall somewhere in between. 

If I take the Social Security leveling option, I will collect $3128 /month (an extra $775) for six years.
After that, when I'm 62, my pension will be reduced to $1846 /month (of course, my actual income will remain the same because I'd start collecting Social Security. 
Assuming the same number of years, my total lifespan benefits would be $1,066,992. 

Maximum teacher pension + Social Security at 62:  $1,826,976 /lifetime.
Maximum teacher pension + Social Security at 67:  $2,089,632 /lifetime.
Social Security leveling teacher pension + Social Security at 62:  $1,344,576 /lifetime. 

So, the previous poster, who expects his investments to grow by -- was it something like $750,000? -- would be better off to stick to his plan ... but his plans include additional money not accounted for here in these figures. 
But the teacher who has little-to-no-savings would be better off working part-time to make up the $775 until Social Security kicks in.  For that teacher, taking the Social Security leveling option would cost $484,400 /lifetime.  The little-to-no-savings teacher cannot afford to give up that money.  The obvious answer is, start your pension when you reach your years, but work part time instead of giving away future benefits.   


Laura Ingalls

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Re: Public School Retirement System -- Help Me Understand
« Reply #19 on: October 22, 2017, 08:57:53 PM »
Mrs. Pete I thought your responses was good but I found several things that didnít seem accurate to me as a person that is vested in two states and pretty familiar with a third state. 

First, I think medical coverage is fairly unusual nationwide.  One of my pensions has none and the other lets you join the group of current state employees but pay 100% of the premium. 

I would argue that there is not as much of a penalty for working less than 25 years as you state.  It is a bad idea to have an ďorphanedĒ year or two in an unvested plan.  And while most plans penalized early retirement heavily but really only if you start collecting the pension early.  If you wait till 65 to collect most of that is mitigated.  I havenít worked in WI since 2012.  My monthly annuity amount at 55 is 20% higher than when I left. 

I would argue that changing states mid career could be bad.  I would also argue toggling between two states might actually allow you to have a larger pension.  If both states had high three style formula working in state A years 1 and 2, working in state B years 3-22, and back to state A for years 23-25 is likely to produce a higher payout than 25 years in a single system because of higher salaries years 19-25 than 1-5. 

I do agree that leveling for social security is generally not the best deal.  It is just like not waiting til 70 for SS is usually a poor idea for health folks.

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Re: Public School Retirement System -- Help Me Understand
« Reply #20 on: October 23, 2017, 06:22:23 AM »
My mother retired as a teacher in MO.  A few things you need to note:

They have changed how the payout increases with inflation - inflation must be over 2% now to get 2.5% raises each year then there is something else if its over 5% i believe

Inflation based raises stop after 15 years of beginning to receive benefits i believe - you may want to check that number of years. 

You should be able to look up these benefits in the system and understand how they look but this is worth looking into and factoring into your decision. 

Dee18

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Re: Public School Retirement System -- Help Me Understand
« Reply #21 on: October 23, 2017, 06:59:25 AM »
Mrs Pete mentioned,
" Because I am younger and in better health than my husband, I will almost certainly choose the Maximum Option, which means I'll get the largest amount for the rest of my life ... and when I'm gone, the payments stop."

Both my father and an uncle thought this way because both were younger and much healthier than their wives. My aunt has now outlived my uncle by 20+ years and had to work into her 70s because she did not have that pension.  My father died 10+ years ago in his 70s and my mother is going strong at 94. Fortunately she is financially secure from other resources.


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Re: Public School Retirement System -- Help Me Understand
« Reply #22 on: October 23, 2017, 09:38:48 AM »
My wife is also a Missouri teacher.  I am sure the direct contribution (DC) plans vary district to district but she has access to a 403b and 457 (36k in 2017) and the Roth equivalents.  Hers don't have a match (not 100% but I think this is the case, def not on the 457 and pretty sure there isn't one on the 403b) but they are very much legitimate vehicles in our retirement fleet.

If you are worried about your wife working for 20 more years as it pertains to interfering with FIRE, you could max the DC plans available in your wife's district and get the (partial?) refund on employee pension contributions (not earnings).  Then you can retire more on your terms instead of being dependent on pension benefits.

Personally, we don't plan on retiring early - at least not by the standards on this site - but we like having the ability to be FI as soon as possible* regardless of how long we work.  Teachers do not make a lot compared to other professions but they sure do have some flexibility in what you're able to consider.

*Our "problem" is that we have too much of an ability with tax-advantaged or Roth accounts at our disposal that we find it hard to save money for a house because we are putting a lot toward the future (admittedly combined with some spendypants traveling budgets).  Notice saving for a domicile is not in the MMM investment order.


MrsPete

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Re: Public School Retirement System -- Help Me Understand
« Reply #23 on: October 23, 2017, 01:03:26 PM »
Mrs. Pete I thought your responses was good but I found several things that didnít seem accurate to me as a person that is vested in two states and pretty familiar with a third state.

First, I think medical coverage is fairly unusual nationwide.  One of my pensions has none and the other lets you join the group of current state employees but pay 100% of the premium.   
I've only worked in one state, and I don't claim to be familiar with other states' policies, but I'm sure of what my own state offers. 

I would argue that there is not as much of a penalty for working less than 25 years as you state.  It is a bad idea to have an ďorphanedĒ year or two in an unvested plan.  And while most plans penalized early retirement heavily but really only if you start collecting the pension early.  If you wait till 65 to collect most of that is mitigated.  I havenít worked in WI since 2012.  My monthly annuity amount at 55 is 20% higher than when I left. 
On that subject, I'm repeating what my fellow teachers have said.  As I said, I myself have only taught in one state. 

My mother retired as a teacher in MO.  A few things you need to note:

They have changed how the payout increases with inflation - inflation must be over 2% now to get 2.5% raises each year then there is something else if its over 5% i believe

Inflation based raises stop after 15 years of beginning to receive benefits i believe - you may want to check that number of years. 

You should be able to look up these benefits in the system and understand how they look but this is worth looking into and factoring into your decision.
Interesting.  I'm going to look into those details in my own state.  To be perfectly honest, though, while I care about this topic, it's outside my control -- so it is what it is. 

Mrs Pete mentioned,
" Because I am younger and in better health than my husband, I will almost certainly choose the Maximum Option, which means I'll get the largest amount for the rest of my life ... and when I'm gone, the payments stop."

Both my father and an uncle thought this way because both were younger and much healthier than their wives. My aunt has now outlived my uncle by 20+ years and had to work into her 70s because she did not have that pension.  My father died 10+ years ago in his 70s and my mother is going strong at 94. Fortunately she is financially secure from other resources.
Your point is valid, and it's something we've talked about -- and we don't have all that many more years to make the decision.  I'm speaking from memory here, not looking at my actual numbers, but it would cost something like $125/month in pension to guarantee that my husband would have 50% of my pension if I die first ... something like $220/month to guarantee he'd have 100%. 

And, like your mother, we do have other significant assets. 
« Last Edit: October 23, 2017, 01:08:53 PM by MrsPete »

boarder42

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Re: Public School Retirement System -- Help Me Understand
« Reply #24 on: October 23, 2017, 02:24:00 PM »
Mrs. Pete .

would still be good to understand.  And also as with any pension public or private the rules for how the money comes to you can change on a simple vote.  Thats what happened to the MO system 3 years ago i believe.

http://news.stlpublicradio.org/post/cola-fizzles-retired-missouri-teachers-won-t-get-pension-increase-2017#stream/0

It wasnt a super terrible change as the old system could have had raises occur regardless of if inflation happened.  MO teachers used to get 2% if it was anywhere between 0-5% so they had been beating inflation over the past few years prior to the vote to say it must be at least 2% to get any inflation adjusted raise.

terrifictim

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Re: Public School Retirement System -- Help Me Understand
« Reply #25 on: October 23, 2017, 02:41:26 PM »
MrsPete,

Thank you so much for this information. My SO is 26 and has been in the CA system for just over 3 years. We just spent this past weekend taking a couple of hours and starting to understand CALSTRS as well as additional options to contribute to a 403B (luckily one more experienced teacher recommended putting a small amount aside each month) so even with a young teacher salary been slowly saving for retirement. Your explanation helped fill in a lot of missing pieces that I had (much different than the 401K / individual IRA that I am funding). I consider myself reasonably well-informed about finances and even with that I still had trouble understanding some of the material. Your explanation was great!

Laura Ingalls

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Re: Public School Retirement System -- Help Me Understand
« Reply #26 on: October 24, 2017, 01:26:28 PM »
This link is fairly old and somewhat outdated (I know for sure Iowa upped its vesting to 10 years)

https://www.cga.ct.gov/2000/rpt/2000-R-1110
But generally vesting is 10 or fewer years.

If you meet vesting you really usually donít get penalized you just canít necessarily afford to retire without other means.  My pet peeve is people who say they are not allowed to retire if they havenít worked 25 years or met the rule of 80, 85, 88, 90 whatever.  I have heard this in real life and read it up thread.  Its not North Korea and I have never heard of contracts longer than 3 years and 99% of them are just one year.  If you are burnt out like I was leave. 

MrsPete

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Re: Public School Retirement System -- Help Me Understand
« Reply #27 on: October 25, 2017, 02:59:48 PM »
would still be good to understand.  And also as with any pension public or private the rules for how the money comes to you can change on a simple vote.  Thats what happened to the MO system 3 years ago i believe.
You're totally right, and you and I have essentially no control over those votes.  My thoughts on that: 

- If you're retiring with a pension, you should not count on cost of living raises (ditto for Social Security).  If you get a raise, good.  But it's not a promise, so assume inflation will cut into your costs. 
- This is why you don't want to retire on a pension alone.  With multiple income sources, you're safer. 

Edited to add:  I just looked up cost of living changes on my state's retirement page.  Here's what it said:

You are not guaranteed to receive any increases in your monthly benefit; however, cost-of-living adjustments are sometimes granted based on factors which include the actuarial gains in the Retirement System. The increases are usually effective in July.
If granted, cost-of-living increases are usually calculated as a percentage increase in your monthly benefit. That percentage increase becomes a part of your monthly benefit, under all payment plans and the monthly benefit to be paid to your beneficiary, after your death, under Options 2, 3, and 6.
Under Option 4, any percentage increase you are granted before age 62 will be applied to the inflated benefit payments you are receiving at that time; however, upon reaching age 62 your benefit payments will be reduced to the original amount promised after age 62 plus the percentage increases (not the dollar amount of increases) granted before age 62.


So, yeah, they're being up front about "raises" being an option, not a promise of any kind.  The important thing is to know what's the rule in your own state.   

Your explanation was great!
Glad to be helpful.  Do, of course, filter everything I said through your own state's rules.  I know what's true for me, but we're on opposite sides of the country, and I don't have the slightest clue whether your rules are different or not. 

If you meet vesting you really usually donít get penalized you just canít necessarily afford to retire without other means.  My pet peeve is people who say they are not allowed to retire if they havenít worked 25 years or met the rule of 80, 85, 88, 90 whatever.  I have heard this in real life and read it up thread.  Its not North Korea and I have never heard of contracts longer than 3 years and 99% of them are just one year.  If you are burnt out like I was leave.
Similarly, I hate when people say, "I'm on a fixed budget."  Yeah, most of us are -- it's just that some of those budgets are "fixed" higher than others.  If you mean you're on a tight budget, say that! 

But, to the point, of course you can retire anytime you want!  It's just that working a certain number of years might be beneficial to your long-term financial stability.  For example, I've known a couple people who've burned out on teaching and were planning to leave -- I've said to them a couple times, "You're 8 years in -- you really should stay through year 10 so that you're vested and will get a small pension when you're older." 

Final thought:  When some people say "retire", they really mean "draw a pension".  Again, I wish these people would say what they actually mean! 
« Last Edit: October 26, 2017, 11:04:15 AM by MrsPete »

fuzzy math

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Re: Public School Retirement System -- Help Me Understand
« Reply #28 on: October 26, 2017, 02:12:48 PM »
Posting to follow as the spouse of a future MO teacher.

I still don't quite understand the SS windfall provision. If my spouse doesn't have enough credit hours to claim SS to begin with, and he never pays further into it due to his job not participating in SS, does he have any claim to get SS benefits?

Wilson Hall

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Re: Public School Retirement System -- Help Me Understand
« Reply #29 on: October 27, 2017, 04:32:23 PM »
Posting to follow.

I am also working in a state retirement system with a pension but am paying into Social Security as well. After taking a new position with a pay bump, Iím considering working another four years, give or take, to get my average highest five yearsí pay boosted. If I do that and left state employment to do something else for a decade, Iíd be receiving about $22k a year at age 62 with a small COLA each year (1.5-2%). Assuming my spouse and I will each be getting at least $12k a year from SS (in todayís dollars), thatís not too bad when combined with savings.