Blame state for financial distress

If you pay into Social Security, your employer is required by law to contribute a matching amount into the system on your behalf.

The state of Illinois is also required by law to contribute to the state retirement systems, including the system for teachers. Unfortunately, they have failed to hold up their end of the bargain by not making those required contributions. As a result of prolonged negligence by our legislators past and present, our systems are in financial distress.

What seems to be lost on many is that the current average pension for a retired teacher with 30 years of service is approximately $40,000. Looking more closely at a math problem introduced in a recent Fence Post article, if the teacher making an average of $70,000 per year contributes $7,000 into the pension fund and it is matched by the state, properly invested, that money grows significantly.

The Compound Annual Growth Rate of the S&P 500 during its history from 1871 to 2009 is 8.89 percent. Rounding down to 8 percent, that money grows to over $1.64 million, meaning that teacher could retire with an earned pension of over $130,000 per year, and never touch the principal ... leaving that to their heirs.

Don Young

Naperville