Miss the lesson on compound interest?

Too bad Robert Melbye was asleep in his high school math class when everyone else was learning about the multiplying effects of compound interest.

The money taken from a teacher's salary is invested and compounded by the Teacher's Retirement System over the working life of the contributor. Using the compound interest formula, an annual contribution of, say, $7,000 invested at 5 percent and compounded quarterly over 30 years yields $518,781. If we increase the return to 10 percent, the yield becomes $1,468,468.

Both those returns are a far cry from Mr. Melbye's shortsighted calculation of $210,000. Additionally, a teacher retiring now at the more usual age of 62 when they would be eligible to receive full earned benefits, and living to a more actuarially realistic age of 78, would receive a 75 percent capped payout on their average earnings, or $52,500 annually for 16 years, or $840,000.

At the 5 percent interest rate the state would have to kick in a $322,822 differential. At the 10 percent rate the State would owe nothing. I don't see these numbers as nonsense, and any fleecing of the taxpayer results from the interest we will all have to pay on the bonds the state will have to issue to pay for the monies they have borrowed from retirement funds to finance the legislature's profligate deficit spending.

David Werdegar

Naperville