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 SecurityEmployer PensionPersonal Savings

Defined Benefit vs. Defined ContributionMonthly AnnuityDisability PaymentsSurvivor BenefitsHealth Insurance Component

Common Characteristics:Social Security and TRS

Shared Cost:

6% from the state6% from the employee

Paying for TRS

Varied Benefits

Formula 80 (age + years of service)Best 3 years pay-outMinimum age 50 for full formula benefitsRetiree health insurance option (TRSCare)

TRS FormulaStep #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

*1999/2000 average maximum teacher salary in 50,000 plus student school districts

Step #1 - 35 x .022 = .77

Step #2 - .77 x $54,104* = $41,660.08

Step #3 - $41,660.08/12 = $3,471.67

Example

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

Paying for Social Security

7.65% Employer (to

$72,600) 7.65% Employee (to $72,600)

Shared Cost:

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.

Varied Benefits

Best 35 years formula + COLAAge 65+ for full formula benefitsMedicare

Social Security Formula

Step #1 35 years x 12 months = 420 months

Step #2 Calculate your indexed earnings for your best 35 years

CALENDAR MAX TAXABLE YOUR TAXABLE INDEX INDEXED HIGH YRS EARNINGS REQ'D YEAR AMOUNT EARNINGS X FACTOR = EARNINGS FOR CREDIT

1967 6,600 4,950 5.53597 27,403.05 501968 7,800 5,850 5.17995 30,302.71 501969 7,800 5,850 4.89695 28,647.16 501970 7,800 5,850 4.66543 27,292.77 501971 7,800 5,850 4.44222 25,986.99 501972 9,000 6,750 4.04573 27,308.68 501973 10,800 8,100 3.80750 30,840.75 501974 13,200 9,900 3.59386 35,579.21 501975 14,100 10,575 3.34396 35,362.38 501976 15,300 11,475 3.12811 35,895.06 501977 16,500 12,375 2.95124 36,521.60 501978 17,700 13,275 2.73412 36,295.44 2501979 22,900 17,175 2.51418 43,181.04 2601980 25,900 19,425 2.30643 44,802.40 2901981 29,700 22,275 2.09549 46,677.04 3101982 32,400 24,300 1.98615 48,263.45 3401983 35,700 26,775 1.89389 50,708.90 3701984 37,800 28,350 1.78874 50,710.78 3901985 39,600 29,700 1.71564 50,954.51 4101986 42,000 31,500 1.66619 52,484.99 4401987 43,800 32,850 1.5663 51,452.96 4601988 45,000 33,750 1.49278 50,381.33 4701989 48,000 36,000 1.43592 51,693.12 5001990 51,300 38,475 1.37253 52,808.09 5201991 53,400 40,050 1.32322 52,994.96 5401992 55,500 41,625 1.25838 52,380.07 5701993 57,600 43,200 1.24765 53,898.48 5901994 60,600 45,450 1.21504 55,223.57 6201995 61,200 45,900 1.16821 53,620.84 6301996 62,700 47,025 1.1374 52,373.62 6401997 65,400 49,050 1.05234 51,617.28 6701998 68,400 51,300 1.00000 51,300.00 7001999 72,600 54,450 1.00000 54,450.00 7402000 76,200 57,150 1.00000 57,150.00 780

2001+ ****** 57,150 1.00000 57,150.00 *******

TOTAL 1,563,713.23

******To be determined

Average Indexed Monthly Earnings420 months Total earnings 35 years

A I M E = P I A

Example

3,723.12420 $1,563,712.23

Example

BEND POINTS

.90(%) * $ 531 = $ 477.90

.32(%) * $2,671 = $ 854.72

.15(%) * $ 521 = $ 78.15

$ 1,410.77 Annuity and COLA

Problems with Social Security

1. Complex - Insurance and Social Program

2. Spousal Benefit Offset

3. Windfall Elimination Provision

Good News:You’re entitled to roughly half yourspouse’s age 65 social security annuity

Bad News: The dollar amount is reduced by 2/3the dollar amount of your TRS annuity

Spousal Benefit Offset

Example

Covered SpouseS.S. Benefit = $16,929.24Spousal Benefit (1/2 of $16,929.24) = $8,464.62

$8,464.62 - $27,591.44 = 0

Non-Covered SpouseTRS Pension = $41,660.04SBO (2/3 of $41,660.04) = $27,591.44

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 = $1,62732% x $7,932 = $2,538 32% x $7,932 = $2,53815% 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.

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.

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.