Wednesday, October 20, 2010

My Pension Is Unsustainable

Since becoming a teacher, I have not paid into social security. Instead, I've paid into the California State Teachers Retirement System, or CalSTRS ("kal-stirs"). According to this report, each working Californian pays $3,000 to keep STRS and PERS, the Public Employees Retirement System, afloat, but that $3,000 figure will balloon to $10,000 in less than 4 years.

The state's going to have to renege on its pension promises to me, the only question is by how much.

The report closes with this ominous warning:

But this Milken report is only the latest of four independent analyses that all reach the same conclusion, that California's pension system is in big trouble."
I was discussing this with another teacher at school today. It's clear that retirement ages are going to have to be raised, but he asked, do we really want a 70-year-old teacher in front of a class? Sure, we've probably all had one or two in our time, but given what teaching is like today, is it realistic to expect most teachers to stay in the classroom at that age? My answer is that perhaps we'll have to stop teaching and greet at Wal*Mart for a few years, and can start drawing our pensions at age 70. I don't know, I haven't given it enough thought to form a complete answer, but the knuckleheads in the big white building downtown are going to have to address this issue immediately.


Pomoprophet said...

I hope they have the decency to make changes as people enter the system, not punish those who are already in it. You're right, 70 is too old to teach. I think 60's is even pushing it. There are other options. Smaller benefits, contributing more from the employees and the school districts etc.

Its a sucky situation.

socalmike said...

I was talking to a colleague this morning in the hallway about this very thing - as much as we like our pension and what we're getting in a few years, we also know that our state is in the shape it's in because of it. Somehow, the system will change. I am 49, and when I retire in 2023, I probably won't have what I think I'm gonna have.

Polski3 said...

I think the problem is the contribution to the STRS from the districts (state). As most of us know, many "state" employees seem able to retire after 20 years on their job....police officers, deputy sheriffs, prison correctional workers. A guy I went to school with is already retired from a "career" with a county sheriffs department, is collecting his pension AND is working for the State Dept. of Corrections and earning twice what he made as a deputy sheriff. And when he "retires" from his latest law enforcement gig....$$$$$$$. He just hopes he lives long enough to enjoy it.
I really do hope that those of us heavily vested in the STRS system don't end up totally screwed by Sacramento. I do have my 40 quarters in for Soc. Security and at last notification, at the most, I might collect a couple hundred $$ per month....enough to live on the streets and buy bulk rice and beans.

State must develop a new pension plan for newer employees. IIRC, Safeway has such a system....longer term employees still under "old" plan, new employees under new plan.

Darren said...

Polski, you might remember that special election we had a couple years ago, the one in which the CTA poured millions of dollars--and even mortgaged its headquarters building in Burlingame--to influence. The propositions that Schwarzenegger championed, including one that did exactly what you described, went down in flames, while the CTA danced jigs on the dying embers. (It was then that Schwarzenegger changed from a moderate Republican governor to an idiot.)

We'll see if Brown can get them to buy off on your idea.

Anonymous said...

Some seem to think there will eventually be a federal bailout of state pension funds. California is not the only state with this kind of problem.

To add injury to insult, it is an open secret that the fictional rates of return that are used by CalSTRS (and CalPERS) in their projections are overstated.

I quote:
"Based on the 25% investment loss for the year ended June 30, 2009:

*If the 8% investment return assumption were retained, additional contributions of 14% of pay would be required, and the plan would have a funded ratio of 77.1%.

* If a 7.75% investment return assumption were used, additional contributions of 17% of pay would be required, and the plan would have a funded ratio of 74.7%.

* If a 7.5% investment return assumption were used, additional contributions of 20% of pay would be required, and the plan would have a funded ratio of 72.3%.

Put differently, for every 0.25% reduction in the investment return
assumption, the required contribution rate would be increased by
about three percentage points, and the expected funded ratio as of
June 30, 2009, would be reduced by about 2.4 percentage points."

ChrisA said...

I suggest you start protesting. I hear the French give excellent lessons.

I don't believe California is the only state with this problem, not to mention the whole United States entitlement system a house of cards waiting for China to stop buying our debt. Of course it isn't that simple but it's not a "stable system" as we would say in engineering.

Anonymous said...

This has been coming for years. The best decision I ever made was to contribute heavily to my 403b. It will provide another leg for retirement income. If my pension leg crumbles, and my 403b leg, and my social security leg (I too have 40 quarters), then I'll have a lot of company in the food line. Hell, it won't be begging, it will just be hanging with my buddies. And isn't that what one wants in retirement?