So what's the cash value of that pension? $1.6 million
. If you wanted to retire with the same pension benefits as a Chicago teacher, you would need to have saved $1.6 million. That $1.6 million would then need to be invested so that it could grow over time to ensure you receive your monthly annuity check.
And remember: three-quarters of the pension contributions that Chicago teachers are required by law to make into the pension funds are picked up
by the taxpayer as a perk.
The average career Chicago teacher already retires as a millionaire pensioner. Taxpayers are tapped out. Everyone knows that taxpayers can't afford the immediate cost of hiking salaries 30 percent. But they can't afford the long-term pension costs of hiking salaries, either. That salary spike would boost the cash value of the average career teacher's pension by hundreds of thousands of dollars. And taxpayers would be left holding the bag.
When you're in a hole, you stop digging. It's time the taxpayers took away the shovel.
The cost of career teachers' pensions have soared
Calculation notes: Final average salary and starting pension data was provided by the Public School Teachers' Pension & Retirement Fund of Chicago. Total pension payouts reflect the payouts over the course of the annuitant's life, with mortality based upon the Social Security Administration's actuarial life tables for a 62-year-old retiree. Annual pension payouts were adjusted for a 3 percent compounded cost-of-living adjustment. Cash value reflects the present value of the total pension payouts, with an interest rate set according to the May-July average of Citigroup’s pension discount curve and liability index.
While Illinois public school teachers do not receive Social Security benefits, Social Security benefits have an annual cap of $30,156
. The average career teacher's starting pension is more than twice the maximum benefit a private sector worker could collect through Social Security upon retirement. Approximately 20 percent
of private sector workers have access to a defined benefit retirement plan, although many of them have seen their pension plans frozen
. In contrast, 58 percent
of private workers have access to a defined contribution retirement plan.