Pension-envy Strikes Hard and Heavy in South County

If you are self-employed, you pay 13.3 percent of your earnings into mandatory retirement, or social security.  If you work for someone, you pay half of that, an estimated 6.5 percent and your employer pays the other half.  

If you are a public school teacher, you do not pay anything into social security because you are excluded from this system.  Instead, teachers put 14.5 percent of their salary into the Public School Retirement System (better known as PSRS).  

That means that if you have a bachelors degree from college and get hired at Mehlville for a starting salary of $34,000, right off the bat, $4,930 of it goes to PSRS.  Before you pay any other taxes or benefits, you are already down to $29,000 in pay.

If you never got a raise or never spent another $20,000 on a Masters degree, you would contribute $150,000 of your salary to PSRS over 30 years.  Of course, that money doesn't just sit there. It's placed in safe market investments collecting compounding interest.

Assuming an incredibly conservative rate of 3 percent compounding interest over a 30-year period, that $150,000 magically becomes $245,000. Again, this is with no raises or increases in pay...so we are being incredibly conservative here in our projections.

But wait, there is more. Since your employer (the taxpayers) don't have to pay into social security for you, and since there are no other retirement plans other than what you might seek for yourself, they match your 14.5 percent contribution. That means, even with no compounding interest and no pay raises, the combined contribution to PSRS (and you are just one of 750 teachers in Mehlville) for you alone is $300,000 - half of which you paid, half of which your employer paid.

Poof! Just like that, at retirement, with no pay raises and with a conservative rate of growth at 3 percent, your retirement is now $490,000.

Where does that money go when you retire? The answer, well, you start paying yourself off of it; however, most of the money stays in the system, making even more money! And all the while, both you and your employer are freed from making any future contributions. How 'bout 'dem apples?

Side note: Real quick, what was the cost to the taxpayers of Mehlville?  $150,000 or about $2.50 a person. And I am not even going to get in to all of the ancillary benefits of your contribution to society for that incredibly low burden born by the taxpayers of the Mehlville School District.

So knowing all that you now know, if you are not a teacher in the Mehlville School District, does that make you jealous? Does the security this system provides our teachers make you envious of their pension? Does that make you wish you had gone to college to get a bachelors degree to clear $29,000 after mandatory retirement contributions?

For anyone who would propose that we replace Mehlville's retirement system with a 401k, please let me direct you to the following tidbit seen here:

"The effects of the current economic crisis have touched everyone. Even if you still have a good job and a paid up mortgage, chances are your monthly 401(k) statement will remind you that you've lost a good chunk of your savings.

Trillions of dollars have evaporated from those accounts that have become the prime source of retirement funds for a majority of American workers, affecting their psyche and their future. If you are still young enough, there's time to rebuild and recover, but if you are in your 50s, 60s or beyond the consequences can be dire, and its drawing attention to the shortcomings of a retirement system that has jeopardized the financial security of tens of millions of people."

We don't need more "sounds good on the air" sound bytes to fix retirement. We need intelligent solutions for complicated problems.  

I have to ask, what rock have you been hiding under Aaron Hilmer? Please join us in the real world.

And while you are at it... please explain to me, how is again that moving teachers to social security and 401k plans saves taxpayers money?  

The short answer, it doesn't. The long answer, it doesn't, and will probably cost us more in both up front costs, lost wages, and a dimmer future.

In closing, imagine a pig living in a windblown straw hut attacking his brother in the brick house for being more intelligent and better off than him as a result. Maybe instead of trying to tear down your brother's brick house, you should spend more time building your own. Let the wolf do his own bidding.