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Are you ready to retire? A close up look at Teacher Retirement and Social Security

Are you ready to retire? A close up look at Teacher Retirement and Social Security. QUOTE: Old Age is a desirable option. The 3-legged stool for a comfortable retirement. Social Security Employer Pension Personal Savings. Common Characteristics: Social Security and TRS.

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Are you ready to retire? A close up look at Teacher Retirement and Social Security

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  1. Are you ready to retire? A close up look at Teacher Retirement and Social Security

  2. QUOTE: Old Age is a desirable option

  3. The 3-legged stool for a comfortable retirement. • Social Security • Employer Pension • Personal Savings

  4. Common Characteristics:Social Security and TRS • Defined Benefit vs. Defined Contribution • Monthly Annuity • Disability Payments • Survivor Benefits • Health Insurance Component

  5. Paying for TRS • Shared Cost: • 6% from the state • 6% from the employee

  6. Varied Benefits • Formula 80 (age + years of service) • Best 3 years pay-out • Minimum age 50 for full formula benefits • Retiree health insurance option (TRSCare)

  7. TRS Formula Step #1 - Total years of service x .022 (2.2%) = _____% Step #2 - Percent x best 3 yrs. Avg. = Annual Annuity Step #3 - Annual Annuity/12 mos. = Monthly Annuity

  8. Example Step #1 - 35 x .022 = .77 Step #2 - .77 x $54,104* = $41,660.08 Step #3 - $41,660.08/12 = $3,471.67 *1999/2000 average maximum teacher salary in 50,000 plus student school districts

  9. Problems with Teacher Retirement in Texas 1. No social security guarantee 2. No C.O.L.A. with TRS 3. Lowest state contribution percent (6) of any non-social security state 4. Lowest annuity multiplier (2.2%) of any non-social security state

  10. Paying for Social Security Shared Cost: • 7.65% Employer (to $72,600) • 7.65% Employee (to $72,600)

  11. Program Cost Components • Old Age Survivor’s Insurance…….5.26% • Disability Insurance………………. .94% • Hospital Insurance (Medicare)…….1.45% *For state and local governments, social security coverage is optional and only when employees vote in favor of coverage. In April, 1986 all newly hired state and local government employees working on March 31, 1986, were covered for Medicare.

  12. Varied Benefits • Best 35 years formula + COLA • Age 65+ for full formula benefits • Medicare

  13. Social Security Formula Step #1 35 years x 12 months = 420 months Step #2 Calculate your indexed earnings for your best 35 years

  14. Average Indexed Monthly Earnings 420 months Total earnings 35 years A I M E = P I A

  15. Example 3,723.12 420 $1,563,712.23

  16. Example BEND POINTS .90(%) * $ 531 = $ 477.90 .32(%) * $2,671 = $ 854.72 .15(%) * $ 521 = $ 78.15 $ 1,410.77 Annuity and COLA

  17. Problems with Social Security 1. Complex - Insurance and Social Program 2. Spousal Benefit Offset 3. Windfall Elimination Provision

  18. Spousal Benefit Offset Good News: You’re entitled to roughly half your spouse’s age 65 social security annuity Bad News: The dollar amount is reduced by 2/3 the dollar amount of your TRS annuity

  19. Example Non-Covered Spouse TRS Pension = $41,660.04 SBO (2/3 of $41,660.04) = $27,591.44 Covered Spouse S.S. Benefit = $16,929.24 Spousal Benefit (1/2 of $16,929.24) = $8,464.62 $8,464.62 - $27,591.44 = 0

  20. Windfall Elimination Provision Your bend point percentage is reduced from 90% to 40% on the first $4,068 of earnings, if you have 20 or less years of substantial Social Security earnings. Social Security Benefit Social Security Benefit for a Private Worker for a Public Worker 90% x $4,068 = $3,661 40% x $4,068 = $1,627 32% x $7,932 = $2,538 32% x $7,932 = $2,538 15% x $0,000 = $0,000 15% x $0,000 = $0,000 Total = $6,199 Total = $4,165 % of earnings: 52% % of earnings: 35% Note: Average Indexed Earnings Equal $12,000 in above example.

  21. TFT Agenda 1. Raise TRS Multiplier to parity with state employees, i.e. 2.25. 2. Begin an automatic COLA for TRS retirees. 3. Provide state paid major medical health insurance to all active and retired school employees.

  22. AFT Agenda 1. Maintain and strengthen the Social Security system. 2. Eliminate the Spousal Benefit Offset. 3. Reduce the Windfall Elimination Provision for part-time employees.

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