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

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

Shared Cost:  6% from the state  6% from the employee Paying for TRS

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)

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

*1999/2000 average maximum teacher salary in 50,000 plus student school districts Step # x.022 =.77 Step # x $54,104* = $41, Step #3 - $41,660.08/12 = $3, 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 + COLA  Age 65+ for full formula benefits  Medicare

Social Security Formula Step #135 years x 12 months = 420 months Step #2Calculate your indexed earnings for your best 35 years

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

Example 3, $1,563,712.23

Example BEND POINTS.90(%) * $ 531 = $ (%) * $2,671 = $ (%) * $ 521 = $ $ 1, 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 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 Spousal Benefit Offset

Example Covered Spouse S.S. Benefit = $16, Spousal Benefit (1/2 of $16,929.24) = $8, $8, $27, = 0 Non-Covered Spouse TRS Pension = $41, SBO (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 = $3,66140% x $4,068 = $1,62732% x $7,932 = $2,53815% 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 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.