The Zettler Number: How much money do they need to retire?

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Personal finance expert Terry Savage wrote an excellent book a few years ago titled “The Savage Number: How Much Money Do You Need to Retire?” She opens her introduction asking a few questions:

  • “At what age do you want to retire?
  • How much money have you saved already?
  • How much money do you think you’ll need every month for living expenses?
  • What’s your estimate for the inflation rate during your retirement years?
  • What’s your risk tolerance of investments?
  • And by the way, how long do you think you’ll live?”

Savage then writes:

“If you knew those answers for sure, retirement planning would be easy. But life is filled with uncertainty. That’s no excuse for avoiding the issue.”

If you’re a public school administrator or public school teacher in Illinois, answering those questions isn’t all that important. For them, retirement planning is easy thanks to the political power they’ve wielded through their powerful special interest lobbies. Illinois politicians have bowed to their every whim so all their retirement security has been taken care of by the taxpayers.

Public school teachers and administrators can retire at age 55 and can expect a very comfortable retirement paid for in large part by people who don’t share such a luxury.

Bill Zettler has been chronicling the mess that is the Illinois state pension system for years, and much of his research and analysis is linked here. Bill’s most recent article is titled “Is A TRILLION Dollars Too Much for Illinois Taxpayers to Pay for Public Employees’ Retirement Benefits?

A trillion dollars – that’s the Zettler number. Not how much money you need in order to retire, but how much you’re on the hook for so others with political power can be taken care of nicely in their retirement. In the article are these facts:

  • The $1,000,000,000,000 number (actually $968 billion) could easily be a conservative number.
  • About half of the trillion is the undisclosed health care costs for retired public employees that is buried in 2 paragraphs of the 350 page Illinois 2006 CAFR (Comprehensive Annual Financial Report).

Here is what that $968 billion means:

1. $25 billion/yr average in new taxes over each of the next 39 years.

2. Over $5,000 in tax per year on every Illinois household for the next 39 years.

3. Over $200,000 in tax per household for the entire 39 year period.

If you’re expecting to read here how Illinois Republican legislators plan to address this problem, we’re sorry to tell you that we’ve yet to hear about any solutions. That’s not all that surprising, since Illinois Republican legislators have been helping create the problem.

While a small handful of GOP politicians have been warning the public about this boondoggle, they haven’t exactly been effective. To say the least, it’s going to take a lot more amps if their voices are going to be heard.

When we decry the state of our party’s leadership, this is the kind of thing we’re talking about.

We particularly like this point made by Bill Zettler (emphasis added):

“Strictly on a future pension actuarial cost basis, the 2007 result of $376 billion was $56 billion more than we projected in 2005. In other words the poor taxpayer owes $56 billion more for other peoples’ pensions and has two years less to pay for it. This limits his chance for a secure retirement because if he has to pay for someone else’s retirement that is money he doesn’t have for his own.

Why has the pension liability increased? Zettler predicted it last year:

1. Public employees’ salaries, especially teachers, were rising faster than actuaries projected.

2. Retirees were living longer than actuaries projected.

3. More public employees were retiring than actuaries projected.

We’ve got a lot of questions for our Republican leadership. One question is – why are we not reading about this kind of research from our taxpayer funded Republican legislative staff in Springfield? Why is it left up to a private citizen to delve into this mess and present it to the voters?

Bill Zettler’s got another question:

“Why does this problem only seem to get worse? Well, to paraphrase Abe Lincoln, God must have loved public employees because he made so many of them. For example here are the top 7 employers in Illinois:

1. Public schools outside of Chicago – 190,000
2. State of Illinois – 57,000
3. Chicago Public Schools – 44,000
4. City of Chicago – 40,000
5. Jewel Osco – 34,000
6. University of Illinois – 30,000
7. Cook County – 25,000

It is a safe bet that all of the public employees listed above have a better wage and retirement package than the employees of #5 ranked Jewel-Osco.”

Up next: The Zettler Number: A source of talking points for Republicans.

©2008 John Francis Biver

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