DEFINED BENEFIT VS DEFINED CONTRIBUTION

DEFINED BENEFIT RETIREMENT PLAN Your Defined Benefit Retirement Plan is a retirement benefit, through the Teachers’ Retirement System, that pays a defined amount upon retirement.  The amount is based on length of service, final average salary and a retirement multiplier. TRS retirement eligibility is determined by the employee’s age and years of service. The service retirement benefit is a lifetime benefit and is guaranteed by TRS.

Defined Benefit calculations based on 27 years of service: Based on 7/1/1990 hire date, Rank 1 teacher 27 years, not 55 years old, 0 sick days = $3,263.34/month for life Average of high 5 salaries. 27 years, not 55 years old, 200 sick days = $3,476.94/month for life Average of high 5 salaries with sick leave pay added. $213.60 more per month, $64,000 over 25 years 27 years, 55 years old, 200 sick days = $3,636.17/month for life Average of high 3 salaries with sick leave pay added. $372.83 more per month, $112,000 over 25 years

Defined Benefit calculations for classified employees: Final Compensation X Benefit Factor X Years of Service=Annual Benefit Example: $18,000 X 2.2% X 27 years = $10,692 Annual Benefit for Life

DEFINED CONTRIBUTION PLAN A 401(k) is a defined contribution retirement savings plan that allows workers to save and invest a portion of their paycheck before taxes are taken out. Employer can match up to 6% of gross salary. Current average rate of return on investment is 6% annually. Taxes aren't paid until the money is withdrawn from the account. Cannot draw out funds until age 59 ½ without a 10% penalty.

$440,000 spread over a 25 year period is $17,600/year Defined Contribution to 401(k) calculations based on 27 years of service: Certified Employees Based on our current teacher salary schedule, an employee contribution rate of 6% and an employer contribution rate of 5% (max stated in PFM analysis), and an average rate of return of 6% compounded annually: after 27 years of service your 401(k) balance would be approximately $440,000. $440,000 spread over a 25 year period is $17,600/year $17,600/12= $1,466.67/month Which you can start drawing at age 59 ½

$150,000 spread over a 25 year period is $6,000/year Defined Contribution to 401(k) calculations based on 27 years of service: Classified Employees Based on our current classified salary schedule, an employee contribution rate of 6% and an employer contribution rate of 5% (max stated in PFM analysis), and an average rate of return of 6% compounded annually: after 27 years of service your 401(k) balance would be approximately $150,000. $150,000 spread over a 25 year period is $6,000/year $6,000/12= $500/month Which you can start drawing at age 59 ½

Social Security Social Security benefit estimates depend on your date of birth and on your earnings history. Earliest can draw is 62 years old. Draw larger benefit at 67 and largest benefit at 70. Search for “Social Security Quick Calculator” to get a basic estimate.

CONCLUSION Defined Benefit Plan Defined Contribution Plan Lifetime Monthly Benefit Benefit Until $ Runs Out