Posted by Rick Ackerman, Stock Analyst at?http://www.rickackerman.com/.
? Rick graduated Atlantic City High School in 1967.
I first aired this?commentary more than a year ago but am republishing it because the public-employee pension problem it describes has only grown more dire. Some of the best writing on this topic has been done by my colleague and fellow deflationist Mish Shedlock. (Click here to access his most recent work, which concerns the looming disaster in Illinois.)
The author of the guest essay below is a retired New Jersey teacher who considers her benefits package far too generous. Gov. Christie was right to confront the teachers? union immediately after taking office, she says, since teacher benefits could eventually bankrupt the state, and many others, if outlays needed to pay those benefits continue to outstrip revenues. ?I have withheld the author?s name to protect her from retaliation by her former colleagues. RA]
I watch with gratitude the commercial by Prudential that warns those who hope to retire to think about how much money they?ll need to do so comfortably. ?I am grateful because I need not worry so much about my money running out before my nest egg does. I am a retired New Jersey educator. ?My funds are as lengthy as my life. ?They will even continue to support my spouse after I am gone at a rate of 50%. ?His pension will additionally support me at a rate of 50% if he should pre-decease me.
I began teaching in 1972 at an annual salary of $7,700. ?It was not much. Incremental raises were small from year to year. ?I ended my career teaching after 30 years. ?I was 52 ? three years below full retirement age. I decided for personal reasons to retire early at a penalty of 3% per annum below the full retirement age, which was recently moved down to 55. ?I was not concerned because the 9% decrease in my pension benefits would be more than offset by three additional years of benefits.
Retiring Like a Millionaire
Although I am not well versed in the subject of finance, I am told that I would need to have amassed a nest egg substantially greater than a million dollars to provide as well for myself as New Jersey does. ?Since this is a near impossibility at my former pay scale, it is all the more amazing that New Jersey is so generously funding my golden years. Additionally, my healthcare benefits were covered by the state until Medicare kicked in.?After that, my secondary insurance was picked up by the N.J. State Health Benefits Plan.
This is a rather lengthy prelude to the point I wish to convey about the state of pensions both in New Jersey and other states that confer similar benefits on government workers.?It is clear that this level of pension funding cannot be sustained indefinitely.?Public servants must be part of the solution to burgeoning budget deficits in every state in which they occur. ?I am not an actuary, nor am I an economist, but I can see the anger growing in the public-at-large that continues to question the demands of those who receive generous packages during their employment and afterwards. ?Surely, the cris de coeur about the plight of educators cannot reflect the economic realities of many of the constituents who pay the educators? salaries.
Bergen County ?Tops? at $90K
To give you an idea of how very generous teachers? pensions are, I?ve appended average salaries for NJ districts in 2011-12 below. Benefits are calculated by taking the average salary of the last three years of employment multiplied by the number of years in New Jersey public education,?divided by 60 (full retirement age). ?Thus, if you worked as teacher in Bergen County for 30 years, your annual pension benefit could be as high as $45,114 ($90,228 x 30 divided by 60). When I retired early, I received 30 years divided by 55 (which was for a short time considered full retirement age. Gov.?Christie returned the full retirement age to 60 as a cost-saving measure). Tack on full health insurance until Medicare kicks in, plus, when you reach 65, the state picks up the supplemental costs. A pretty sweet deal, no?
Here are the salary averages, by county: 1. Northern Valley Regional (Bergen County) $90,228; 2. Ocean City (Cape May) $88,434; 3. Carlstadt-East Rutherford (Bergen) $87,502; 4. East Rutherford (Bergen) $86,624; 5. Edison (Middlesex) $84,159; 6. Margate (Atlantic) $83,820; 7. East Orange (Essex) $83,418; 8. Closter (Bergen) $82,558; 9. Wallkill Valley Regional (Sussex) $82,475; 10. High Point Regional (Sussex) $82,386; 11. Teaneck (Bergen) $82,116; 12. West Windsor-Plainsboro Regional (Mercer) $82,059; 13. Hackensack (Bergen) $81,900;14. Pascack Valley Regional (Bergen) $81,832;15. Mainland Regional (Atlantic) $81,100; 16. Trenton (Mercer) $80,886;17. Millburn (Essex) $80,774; 18. Pemberton (Burlington) $80,579; 19. River Dell Regional (Bergen) $79,564; 20. Freehold Regional (Monmouth) $79,185.
No Traitor
Often I feel like a traitor to my profession ? or I am made to feel so by the constant postings of my former colleagues who seek every opportunity to defame Gov. Christie for his hardline stance on unsustainable obligations to retired educators. ?I am not, however, traitorous. A paradox arises out of this situation. ?Taxes rise to cover increasing costs. ?Retirees who cannot afford some of the highest property taxes and state taxes take their pensions out of state and live in tax free zones. ?It is time for us to become responsible adults and change a system which is antiquated and inequitable for those who are left to pay the price.