If Warren Buffet is Right: Average Investment Return Is 6.5% not 8.5%

Then Annuity Contribution Chart: Teacher 8.4% vs. Employer 46%
Prepared by Bill Zettler
  • Assumes 6.5% Return Compounded instead of TRS Actuarial Assumption of 8.5%
  • Assumes Starting Salary 34 Years Ago was $12,000 Increasing at 6.5%/yr
    (Teacher Retirement System Assumes 6.5%)
  • Annual Salaries Years 28 to 34 Are From Il. Dept. Education Electronic
  • “Cash Value of Pension At Retirement” = Prepaid Annuity Female, 56, Indexed
    for Inflation, Life Only (no Survivor Benefits)
  • Beginning Pension = sum of 4 highest Years, divided by 4 ,multiplied by 75%
    = 83,775
  • Cash Value of Pension at Retirement = Cost of Prepaid Annuity Providing
    $83,775/yr for Life = 1,954,161
  • Cash Value of Pension at Retirement If Teacher Pays 8.4% of Salary, Employer
    Pays 46% of Salary = 1,948,438
  • NOTE: Teachers pay 9.4% but 1 % is for survivor benefits which is not
    included in the PrePaid Annuity
  • NOTE: Teacher Contribution Rate was 7% prior to 1998 so these results are
    conservative since they assume 8.4% for all 34 years
  • Example From District 300 Teacher Who Retired in 2005

Bill Zettler is a free-lance writer and consultant specializing in public sector compensation. He can be contacted at this email address. Click here to read more by Mr. Zettler.