The Politicians are not telling the truth re: education budget! (calculation, income tax)

[TuborgP]

Originally Posted by capt chill

Damn right! But the dumb populace thinks teachers are taking all of their tax dollars and work only 10 months.

The Herald-Sun - Hue cry and hot air over cuts (http://www.heraldsun.com/view/full_story/12811450/article-Hue--cry-and-hot-air-over-cuts - broken link)

Not all but the majority of. Try 60%.

[wheelsup]

Originally Posted by TuborgP

There are districts that provide teachers the value of their compensation on a yearly basis measured by government contributions. The value of their pension long term is not included but the dollar amount of their government contribution is. Not to get off topic but on average 76% of teacher pension payout nationally is employee contribution and ROI(Return on Investment).

The straight up way of calculating it is:
Salary
Benenfits ( health, pension, insurance etc).

you can't ask someone to contribute 6% of their salary invest it and when they get that 6% back plus their ROI claim you gave them something.

Go back and re-read what I have been writing. Teachers earn a pension and the value of that pension is what I am trying to communicate.

For example. Wife and I went to the Dominican first class. Paid $120 each for us, almost all of that taxes. The "value" of those tickets were roughly $1,500 each IIRC. What we paid and the value received are two very different things.

Paralleling that to your average teacher in NC, using round numbers that I roughly remember. $3,000 a month state pension benefit (keep in mind it's indexed for inflation, we'll get to that in a bit, also it's much higher until you start receiving SS but we'll "forget" about that) earned after 30 years of service. Pay ranging from $35,000 to start to say a high of $65,000 so an average of $50k over those 30 years (todays dollars). $50k x 6% = $3,000 yearly pension contribution. Over 30 years you contribute $90,000 in todays dollars to your pension.

Now, let's talk about the non-government 401k average worker, the majority of which exist today including myself (the "dumb populace" as capt chill puts it so...eloquently). To obtain a $36,000 a year pension in todays dollars I would need approximately $750,000 in the bank (todays dollars) obtained by working over 30 years, which equals out to about $25,000 a year saved and invested and grown. This is the value of your pension annually.

In simple terms, the NC teacher saves $3,000 a year to get what I get by saving $25,000 a year, or a $22,000 a year difference. The NC teacher retirement is turn key, you don't even have to think about it. I have to perform calculations on whether I should save $x amount in my 401k, roth 401k, IRA, or roth IRA. In 2008 I lost 50% of my retirement, state teachers...lost nothing (we'll put that one under the "con" column for 401ks).

OK moving on. Let's talk about inflation. Your $36k state teacher pension is guaranteed to be indexed. My $36k is not. Over 30 years of saving, your $36k pension will rise to about $75,000 a year (2.5% CPI), so when you retire in 30 years you will actually have $75k coming in vs. the $36k it's calculated at now. I will have $36k by saving the $25k/yr vs. your $3k. To make the $75k you will have, I must save and have in my bank account the day I retire $1.5 million, over those 30 years. $50,000 a year, for 30 years, to receive in todays dollars what a NC teacher will receive guaranteed regardless of stock market performance.

Anyway you slice it, that is a hell of a deal for NC teachers, and anyone with a pension.

[cheapdad00]

Originally Posted by wheelsup

Go back and re-read what I have been writing. Teachers earn a pension and the value of that pension is what I am trying to communicate.

For example. Wife and I went to the Dominican first class. Paid $120 each for us, almost all of that taxes. The "value" of those tickets were roughly $1,500 each IIRC. What we paid and the value received are two very different things.

Paralleling that to your average teacher in NC, using round numbers that I roughly remember. $3,000 a month state pension benefit (keep in mind it's indexed for inflation, we'll get to that in a bit, also it's much higher until you start receiving SS but we'll "forget" about that) earned after 30 years of service. Pay ranging from $35,000 to start to say a high of $65,000 so an average of $50k over those 30 years (todays dollars). $50k x 6% = $3,000 yearly pension contribution. Over 30 years you contribute $90,000 in todays dollars to your pension.

Now, let's talk about the non-government 401k average worker, the majority of which exist today including myself (the "dumb populace" as capt chill puts it so...eloquently). To obtain a $36,000 a year pension in todays dollars I would need approximately $750,000 in the bank (todays dollars) obtained by working over 30 years, which equals out to about $25,000 a year saved and invested and grown. This is the value of your pension annually.

In simple terms, the NC teacher saves $3,000 a year to get what I get by saving $25,000 a year, or a $22,000 a year difference. The NC teacher retirement is turn key, you don't even have to think about it. I have to perform calculations on whether I should save $x amount in my 401k, roth 401k, IRA, or roth IRA. In 2008 I lost 50% of my retirement, state teachers...lost nothing (we'll put that one under the "con" column for 401ks).

OK moving on. Let's talk about inflation. Your $36k state teacher pension is guaranteed to be indexed. My $36k is not. Over 30 years of saving, your $36k pension will rise to about $75,000 a year (2.5% CPI), so when you retire in 30 years you will actually have $75k coming in vs. the $36k it's calculated at now. I will have $36k by saving the $25k/yr vs. your $3k. To make the $75k you will have, I must save and have in my bank account the day I retire $1.5 million, over those 30 years. $50,000 a year, for 30 years, to receive in todays dollars what a NC teacher will receive guaranteed regardless of stock market performance.

Anyway you slice it, that is a hell of a deal for NC teachers, and anyone with a pension.

Wheelsup, I think your calculations are ignoring compound interest for the 401K scenario. Both the government pension and 401K scenarios are based on investment growth and compound interest as the government pension funds are invested in many of the same stocks/bonds that our 401Ks are invested in.

Also, in the 401K scenario, there is the opportunity to leave a lump sum to your heirs. While you can assign pensions to heirs it is in exchange for a reduced benefit during the collection period.

[TuborgP]

Originally Posted by cheapdad00

Wheelsup, I think your calculations are ignoring compound interest for the 401K scenario. Both the government pension and 401K scenarios are based on investment growth and compound interest as the government pension funds are invested in many of the same stocks/bonds that our 401Ks are invested in.

Also, in the 401K scenario, there is the opportunity to leave a lump sum to your heirs. While you can assign pensions to heirs it is in exchange for a reduced benefit during the collection period.

Dada Bing

[capt chill]

Originally Posted by wheelsup

Go back and re-read what I have been writing. Teachers earn a pension and the value of that pension is what I am trying to communicate.

For example. Wife and I went to the Dominican first class. Paid $120 each for us, almost all of that taxes. The "value" of those tickets were roughly $1,500 each IIRC. What we paid and the value received are two very different things.

Paralleling that to your average teacher in NC, using round numbers that I roughly remember. $3,000 a month state pension benefit (keep in mind it's indexed for inflation, we'll get to that in a bit, also it's much higher until you start receiving SS but we'll "forget" about that) earned after 30 years of service. Pay ranging from $35,000 to start to say a high of $65,000 so an average of $50k over those 30 years (todays dollars). $50k x 6% = $3,000 yearly pension contribution. Over 30 years you contribute $90,000 in todays dollars to your pension.

Now, let's talk about the non-government 401k average worker, the majority of which exist today including myself (the "dumb populace" as capt chill puts it so...eloquently). To obtain a $36,000 a year pension in todays dollars I would need approximately $750,000 in the bank (todays dollars) obtained by working over 30 years, which equals out to about $25,000 a year saved and invested and grown. This is the value of your pension annually.

In simple terms, the NC teacher saves $3,000 a year to get what I get by saving $25,000 a year, or a $22,000 a year difference. The NC teacher retirement is turn key, you don't even have to think about it. I have to perform calculations on whether I should save $x amount in my 401k, roth 401k, IRA, or roth IRA. In 2008 I lost 50% of my retirement, state teachers...lost nothing (we'll put that one under the "con" column for 401ks).

OK moving on. Let's talk about inflation. Your $36k state teacher pension is guaranteed to be indexed. My $36k is not. Over 30 years of saving, your $36k pension will rise to about $75,000 a year (2.5% CPI), so when you retire in 30 years you will actually have $75k coming in vs. the $36k it's calculated at now. I will have $36k by saving the $25k/yr vs. your $3k. To make the $75k you will have, I must save and have in my bank account the day I retire $1.5 million, over those 30 years. $50,000 a year, for 30 years, to receive in todays dollars what a NC teacher will receive guaranteed regardless of stock market performance.

Anyway you slice it, that is a hell of a deal for NC teachers, and anyone with a pension.

COLA they are history for pensions.. See what NJ just passed last night in the heavily unionized state. All over the country CPI will be ended. It just did in NJ. It just did for probably all pensions in the public sector. It will happen here in NC a. See the Republicans and the next republican gov when he beats Perdue.

[wheelsup]

Originally Posted by cheapdad00

Wheelsup, I think your calculations are ignoring compound interest for the 401K scenario. Both the government pension and 401K scenarios are based on investment growth and compound interest as the government pension funds are invested in many of the same stocks/bonds that our 401Ks are invested in.

No I did not ignore it:

Originally Posted by wheelsup

Now, let's talk about the non-government 401k average worker...which equals out to about $25,000 a year saved and invested and grown. This is the value of your pension annually.

Funny you should mention that pension funds are invested in the same stocks and bonds our 401ks are in. If the stock market DOUBLED overnight, the NC pension fund would STILL be underfunded. Yet the pension money will still go out every month to those entitled to it regardless of lack of money, the State will make up the money. IL recently increased their state income tax by 2/3 in part to pay for the pensions of their public workers.

My 401k return, since inception, after all the downturns we've had, is around 3.5%. That is total return. Just barely positive, due to several large downturns we've had in the past few years. I cannot "raise taxes" in order to increase my payout - I have to contribute more.

Let's take it further. To keep comparing apples to apples we'll index it for inflation. In 30 years, the NC teacher will contribute approximately $131,000 of their money (total dollars indexed to inflation of 2.5%) to their pension. After 30 years, assuming an 8% YOY return (yeah, right) they're looking at a value of around $430,000. That is an annual payout of around $21,500. Keep in mind, in 30 years, the pension that they receive will actually cost the state around $75,000. After 8 years, the pensioner is ahead.

Also, in the 401K scenario, there is the opportunity to leave a lump sum to your heirs. While you can assign pensions to heirs it is in exchange for a reduced benefit during the collection period.

Put this under the "pro" column. You are trading guaranteed income for a chance you will have money left. The pension is like an extremely low cost annuity. For 401k retirees, the majority run a very high chance of completely running out of money before they die. The chance that you will have money leftover is actually a fairly small percentage.

Like I posted on the first or second page, I work with a guy whose wife left the WCPSS for a private school. No pension, but a $20k raise to $55k to start. She had 1 year of teaching experience. So, you can either take the money and run now, or forgo the higher paycheck for a guaranteed retirement plan. Both have costs, one is more noticeable than the other.

[wheelsup]

Originally Posted by capt chill

COLA they are history for pensions.. See what NJ just passed last night in the heavily unionized state. All over the country CPI will be ended. It just did in NJ. It just did for probably all pensions in the public sector. It will happen here in NC a. See the Republicans and the next republican gov when he beats Perdue.

They weren't eliminated completely, just until the funds become stable.

[TuborgP]

Originally Posted by capt chill

COLA they are history for pensions.. See what NJ just passed last night in the heavily unionized state. All over the country CPI will be ended. It just did in NJ. It just did for probably all pensions in the public sector. It will happen here in NC a. See the Republicans and the next republican gov when he beats Perdue.

Do you realize North Carolina has one of the best funded pension programs in the country

Dome: North Carolina ahead in pension funding - Under the Dome - NewsObserver.com

North Carolina's state pension is relatively well funded compared with that of other states, according to a new study by the Pew Center on the States.

The study found that, on average, state pension systems were slightly less than 78 percent funded in 2009, down 6 percentage points from 2008 as a result of the recession.

But North Carolina's pension fund was 97 percent funded. Pension funds only in New York, Wisconsin and Washington were better funded, according to the report.

The General Accounting Office advises states to have at least an 80 percent funding level; 31 states were below that level.

Read more: Dome: North Carolina ahead in pension funding - Under the Dome - NewsObserver.com

Just as your students are unique individuals and you recognize them for their specific strengths and weaknesses so are states individually different. The fiscal restraint you so dispise is one of the reasons the NC pension is so well funded unlike NJ.

[capt chill]

Originally Posted by wheelsup

They weren't eliminated completely, just until the funds become stable.

That will be the year 2040.... Yes that is when they anticipate stable funds.... I will be in my late 80s....

[capt chill]

Originally Posted by TuborgP

Do you realize North Carolina has one of the best funded pension programs in the country

Dome: North Carolina ahead in pension funding - Under the Dome - NewsObserver.com



Just as your students are unique individuals and you recognize them for their specific strengths and weaknesses so are states individually different. The fiscal restraint you so dispise is one of the reasons the NC pension is so well funded unlike NJ.

Because the politicians did not steal the pension funds.... For years bad politicians decided not to pay into the pension system that we did for the 30 years that we worked now to say oops its terribly underfunded. Hey it is all good.