Manhattan Buckeye;620915 wrote: Forget whether teachers' salaries are too much, how in the world are we paying for the retirement obligations?
True of most government pensions. But govt pensions aren't alone in assuming too high of a rate of return (9% a year, typically, while historical rates averaged about 10%). But over the last 12 years (before the tech bubble burst in 2000), the annual compound rate of return has averaged just 1.8% and that's why these government pension have huge shortfalls. To put that in perspective, such a rate means the funds are 44% of the fund size with an expected return of 9%.
Some more fun math: Since most private sector jobs don't have pensions any more, how much do you have to put away for 30 years to retire with a 401k worth $900k? Given a 9% rate of return and a 5% company match...about $4-5k per year (with a good company match). And the medical benefits are probably worth another $1k per year.
So the retirement/pension benefit is worth $5-6k per year for a teacher. But the real kick in the nuts is the fact returns are what they are the last 12 years and Joe private sector's 401K is actually only worth about $400k while the govt worker's is guaranteed at $900k. So, ahhh, Joe, I'm sorry but we're going to have to raise your taxes to bail out these govt pensions.
It's those last 10 years of so before retirement when the power of compounding is really kicking in and a lot of people with nice nest eggs got crushed because the investment gain over that time is basically 0. Sad part is there has been no real safe place to put your money because historically uncorrelated assets all got destroyed - real estate, equities, bonds, even commodities are -6% over the last 5 years. Sure, you could have been in gold other than the fact it was one of the worst places you could have been the prior 20 years.