Editor’s note: Naperville Sun reporter Tim Waldorf recently spoke with state pension expert Bill Zettler about the Illinois pension mess. Waldorf’s article opens with this:
Much is made of the pensions Illinois teachers and administrators receive when they retire. Some who are fully vested in the Illinois Teacher Retirement System receive up to 75 percent of their career-ending salaries.
Some say that’s too much and that the state, which is facing a $23.7 billion unfunded teacher pension liability, should get out of the retirement planning business because it is too costly to taxpayers.
Here is the passage quoting Mr. Zettler:
According to the Illinois Teachers Retirement System, as of June 30, 2007, the average age at which its members retire is 58, and they do so with an average of 29 years of service. On average, their pensions paid them $3,344 a month, or $40,128 a year, meaning on average they earned roughly $63,000 a year when they retired.
Still, Zettler suggests these payouts to retired public school teachers are far better than most anyone can expect in the private sector.
“A good comparison would be at your employer,” Zettler said. “Do you have a 401(k)? If so, what is the percentage you contribute? Add that to the 6.2 percent you give to Social Security and that is your rate … but you cannot retire on anywhere near their retirement, nor can you retire before age 62 for Social Security.”
By Zettler’s calculations, the state will sink a total of $208 billion into the Illinois Teachers Retirement System during the next 37 years, which would complete its 50-year plan – but that’s only if the system’s investments provide an average 8.5 percent per year return. And, he said, if that average dips to 6.5 percent, which is higher than the system’s average rate of return on its investments during the past seven years, that total will climb to more than $300 billion.
“The difference in return is paid for by taxpayers, not teachers,” he said. “They get their money no matter what.”
This, Zettler said, is why solving its pension problems is “one of the most important issues facing Illinois in the coming years and decades.”
And how would he solve it?
“You have to get them on Social Security and 401(k) plans, just like the rest of us are,” he said. “Why should they get a special deal? They should be just like the rest of us.”
Click here to read the entire article on the Naperville Sun website.
Click here to read articles by Bill Zettler.