Do the math again on teacher pensions

Fence Post contributor Al Palash (Oct. 27) told another contributor — who wrote about teacher pensions — to “do the math.”

Palash should do his math again, but this time he should use the compound interest formula to find the amount accrued for the period of time they worked and contributed to their pension fund.

If Palash is going to write about pension funds, he should know this formula. Judging from his letter, he does not.

If a teacher starts teaching at the age of 22 and retires at 62, he will have taught for 40 years. If we multiply 40 by 12, we get the number of times the interest is computed, which is 480. For an interest rate of 6 percent, the monthly rate would be .005 (. 06 divided by 12).

Deposits to the pension fund will increase over the 40 years. At retirement age, for a salary of $60,000, $5,400 would go to the pension fund. This will be $450 per month. A conservative estimate of the average per month would be $300.

With these numbers, we can find the amount accrued over 40 years at 6 percent with a pay period of $300 per month. This amount would be $600,000.

Palash thinks that contributions are exhausted after a few years in retirement. How wrong he is. The $600,000 would not be exhausted in a few years. Palash did not do the math.

Chuck Coletta

Lombard