Unions, pensions, and tenure…oh my! (part two)

I remember when I interviewed. Towards the end of the hour or so we chatted, my boss pulled out the salary schedule and pointed out how much I would make.

She said, “Here’s your salary, but add in your pension pick-up and this is your total pay.”

Honestly, I didn’t think much about it. It wasn’t until later that I realized that getting a pension meant not paying into social security. It hit home when I saw my W2 the next year — big $0.00 for social security.

Um, what??!

I like getting the yearly social security statements. The unmistakable envelope with the green, italicized font “Social Security.” It’s like good tidings. My husband and I both save them in a binder. Looking over those statements is oddly comforting. I like seeing when I first started working in high school and made a whole $332 one year. It went up little by little every year, including my college years because I worked.

Well, those statements still arrive in my mailbox, but mine show zeroes. That lovely upward trend? It plummeted. In fact, at this point in time I haven’t contributed enough money to get social security. That’s a moot point because I wouldn’t be able to get social security with a teacher pension. You can’t “double dip.”

When I saw my first W2, I thought, “Well, I won’t do this forever. One day I’ll work at a social security job again.” That remains to be seen.

I know that social security and pensions are both unreliable. The government doesn’t have any money. But somehow in my mind, social security seems more secure. It’s probably because I have a family member who works in pensions and risk — funding is a big deal and many pension plans are underfunded. On the other hand, there’s no social security “lock box.” You know, I have a darn social security number and that’s got to mean something (insert laugh here).

With the governor of Wisconsin concerned over pension funding,, I have to take a step back. Being a young worker, I have lots of time because my best working years are ahead of me (I mean, hopefully…fingers crossed I’m still attractive to employers when I come out). Frankly, I’d consider opting out of the pension system and jumping back in to social security. I’m only speaking for myself here, but like I said, social security is what I know. That’s what I understand.

But what about my coworkers with 15, 20, 25 years in the system? No social security and only an underfunded pension? What’s going to happen to their retirement?

As with many complex problems in education (ahem, school lunch), there is no easy way out. I am just one person and I’m not an expert, but I think that pensions need to be funded properly — if not, then what’s the point of having a pension? Social security is not in great shape either. That’s why I try my best to contribute to my 403(b), which is a 401k for teachers. Regardless, I’ve figured out I’m going to be working for a long time.
Read part one about unions from last week and next week, I’ll tackle tenure…

Further reading:
Teacher salaries by state
The meaning of overpaid (The Economist) — good article
GM’s Pension: A Ticking Time Bomb for Taxpayers? (Time)
Social Security (Wikipedia)

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18 Responses to Unions, pensions, and tenure…oh my! (part two)

  1. Anonymous March 2, 2011 at 3:51 pm #

    Now I am not so educated about what is going on in Wisconsin. I know about the health care funding, but are pensions in jeopardy?

    Are Wisconsin teachers' pensions at risk? It doesn't seem fair that teachers could lose their pensions, especially if they have no retirement back up or even social security.

    Can you clarify??

  2. Anonymous March 2, 2011 at 4:54 pm #

    And do you know anything about other unions?? I know in the WI case, the teacher's union seemed to be singled out. Do cops and firemen pay into social security?? is this true for anyone on a government pension?
    This is really new info for me!

  3. Monica March 2, 2011 at 5:12 pm #

    When I student taught, I ended up getting paid as a sub for one day when the aide was out and they were short subs. As part of this, I was automatically enrolled in the district's alternate retirement plan. It wasn't a pension, it wasn't social security, it was its own special thing. I didn't even know about it until I got the statement at tax time. I had $12 in that account. It seemed like a lot for one day's work, but there were also fees: $3 or $4 dollars got deducted from the account as a management fee. I never bothered finding out how to cash it out, and I'm sure it's empty by now.

    I never ended up getting a teaching job, though, so I think I will end up qualifying for social security, if it still exists by the time my generation is ready to retire. My husband and I basically assume, though, that whatever we save via his 401(k) and our IRAs will be what we have. The most I feel we can hope for is for social security to stick around long enough for our parents, so we're not put in the poorhouse paying for their care. My generation has no delusions about the fiscal state of the country: we don't expect to have a comfortable retirement, if we have a retirement at all, unless we are frugal enough to save for it ourselves – and even then, it's iffy.

  4. Brandon March 2, 2011 at 5:37 pm #

    I'm no financial guru by any means but wouldn't the teacher's pension plan backed by the state/fed/government or at least an insurance company? Aside from the fact that the government has no money, it would seem that pensions and social security are in the same financial boat.

    Perhaps there may be some advantages to a pension plan over social security, i.e. the overall number of teachers either contributing or benefiting will stress the fund less than would be experienced through social security. Although pension plans are most likely under funded, the only way to remedy the situation would be to change contributions and benefits.

    As Monica mentions I too assume social security will not be around when I retire. If it is I will see it as an extra benefit.

    Just my 0.02.

  5. Marvin March 2, 2011 at 6:02 pm #

    I'm agreed with the other posters, Being in my early 20's I do not expect at all for SS to actually pay anything out to my generation. Have to do the saving on your own to take care of yourself.

  6. JT March 2, 2011 at 6:30 pm #

    The problem with most pension plans is that they're usually part of a bigger growth plan tied into the stock market. Great when the market is good but not so great lately. Also, the people who set them up look at the actuarial tables but never really plan for those who live longer. Therefore, the plans end up running in the red. That's when the problems begin, especially in Wisconsin.
    As I understand it, the money in the pension plan for public workers is totally put in by the state as part of their salary. Whoever did the actual planning, didn't do a good enough job of planning for living longer, nor did the ones doing the bargaining for the state do a good enough job. So the last few years, the taxpayer has had to put in the extra funds needed to come out of the red. The Governor is stating the case incorrectly there. He makes it sound like this is a gift on top of their salaries, which it isn't.
    The worst thing in all of this isn't that the public members of the union haven't agreed to a paycut by paying more into their pension funds and health insurance. It's that there is no need to cut out the collective bargaining. It doesn't save anything for the government. Their own people did the bargaining job that sucked for the government, yet you hear none of that. The Governor is being less than honest and way too forceful because it's a political power play, plain and simple.

    And that is all from someone who will never collect social security nor pension money since I will die before I hit the right age for either.

  7. Renee March 2, 2011 at 7:11 pm #

    Just a couple of comments:

    First, a 401k and a 403b are significantly different. In a 401k, your employer matches your contributions. In a 403b, the only contributions come from you –it's just a special savings account that is tied to the stock market.

    Second, here in Illinois, 8% of my salary goes toward my pension. So, when the state of Illinois can't fund my pension, are they going to give me that 8% back? In addition to that 8%, I pay taxes to the state that go into the system too –I'm actually funding a large part of my own pension.

    I think it's important to realize that the reason Mrs. Q's interviewer brought her attention to the pension benefit is because otherwise her salary would probably be laughably small for her education. This is how schools try to attract the best candidates –trying to mask how small the actual take-home pay is.

    Also, social security was never really intended to be the sole money a retiree had. In the private sector, with higher salaries per education level, people were expected to have enough money to save more. Pensions are actually intended to fund retirement, because the public-sector salaries are too small for that savings.

    Without pensions, schools will have to offer much higher salaries to attract the best people to teaching. Even with pensions right now, most people who are gifted in science and technology will go into private industry because their salary can be 3 to 5 times higher than a teacher's salary, even with the pension benefit added in.

  8. Sara March 2, 2011 at 7:12 pm #

    Stay with the pension! I know you are in IL and its pension program is probably a mess, but you probably have a better chance of getting benefits from it than from SSI.

    As for anonymous#1, I was under the impression that WI wasn't doing too poorly on the pension front especially when compared to other states.

  9. becboo84 March 2, 2011 at 9:52 pm #

    I don't say this critically, but I generally don't understand the argument that teachers don't get paid well. Here in downstate IL, I would guess that most teachers start around $32,000. Considering that they work about 8 months out of the year, that would equal $42,560 for a 12 month job.

    In downstate IL, to start out of college making over $40,000 is pretty good money. My husband and I are both barely over that, and we've been in the workforce for 3 years, and I have my Master's.

  10. Mel March 2, 2011 at 11:47 pm #

    Right on Renee! I am not a teacher, I don't have a pension and I don't expect to see a dime from social security, but I need my children to have amazing teachers in their public schools! Shaky pensions and amazing benefits serve to entice largely over qualified individuals to make earning sacrifices that effect their ability to save for retirement. Educating my children and my neighbors' children should not be a risky proposition…we, as citizens, have a responsibilty to care for our American teachers and ensure their collective voices continue to be heard. Our future depends on it.

  11. MamaDoodle March 2, 2011 at 11:58 pm #

    @becboo84-
    As a certificated school nurse, I'm paid on the teachers' pay scale. I'm at the highest point of the education pay scale (Master's). My starting hourly rate (I figured it out because that's how nurses are traditionally paid) was lower than what I made as a new grad working in the hospital fresh out of nursing school ten years ago. Before the Master's. This hourly rate does not including shift differentials and overtime pay that I would expect to earn working in the hospital. I took a SIGNIFICANT pay cut to go into education.

    Some would say that nurses are paid too much and that this comparison is invalid. What about flight attendants and auto mechanics? Not to mention other professionals who have similar level of education as I have (lawyers, physical therapists, engineers).

    It's true that many people make less money than teachers. And I'm not saying that a master's degree always guarantees a higher salary. But I can't think of another profession, where people go to college to train specifically for their career and are required to maintain current education, where the professional person is paid less than a teacher.

    These people are teaching the children who are our future! Shouldn't they be paid what they're worth?

  12. Renee March 3, 2011 at 12:12 am #

    @becboo84

    You've said you'd guess that teachers starting salaries are $32,000 in downstate IL. Maybe they are, but the starting salary in WI is $23,000. I think that's much more typical.

  13. Mrs. Q March 3, 2011 at 2:13 am #

    Thanks guys for helping me understand all of this stuff!

    I think $32,000 for a starting teacher is decent, but it doesn't translate to $42,000. That's not an appropriate comparison. I also work about 10 months a year.

  14. Jennifer March 3, 2011 at 4:01 am #

    I guess I am just mad at all of this, and on both sides. I am for teachers getting paid great to teach and educate. BUT. I am not in the union. And there are MANY slackers that work in the union because they… are in union contract. Get paid more then the tipical person (most of them) and have great benefits. I on the other hand work just as hard as they do, don't get raises, employer no longer matches 401k, had to lower my 401k contribution because insurance rates keep going up. Its not fair that they can take a day off work to complain about it and get paid for it. If I did that I would be fired. I dont like the fact that "unions" have that right. Everyone should have the right. Everyones job contributes to the public in some way, either your a mail man, waitress, bank teller, teacher, construction worker, or a janitor. We all work hard, and we all have slackers. What makes them so special. Tuff it out like the rest of us, that don't have the ablitly to go sit on steps and chant about our rights. Wouldnt that be nice if your employer told you that you have to take a pay cut or your not getting raise and all you had to do was take a bus to the state capital. Sorry doesnt work that way.

  15. Sara March 3, 2011 at 5:16 am #

    Social Security and pension programs are stark examples of why we shouldn't trust on government for our retirement. Safety net, yes, but as was previously stated SSI was never intended to be a retirement plan. Teachers should be allowed to put all of their pension funds into 403bs so that they have more control. More often than not, you are going make better decisions about your money than some bureaucrat.

  16. Anonymous March 4, 2011 at 12:39 pm #

    Mrs. Q, your fondness for social security is artificially created. As a new teacher, you would probably never see any of that even if you put into it. The pension is better…. but neither of these are future guarantees (even social security will be abolished someday when the worker to need ratio becomes impossible to fund)

  17. Cucipata March 4, 2011 at 9:21 pm #

    Death and taxes are a certainty, everything else has different degrees of likelihood attached to it. It should be noted, however, that in the history of humanity only within the past sixty years or so have some societies managed to set up a system where governments care for their elderly. Fair or not, whether this promise can be kept long term remains to be seen…

  18. Stacey March 5, 2011 at 6:17 am #

    I'm finishing up my special education credential, and I'm young (24). I look at retirement, and I know there's no way we'll get there other than saving on our own… social security won't be around when I retire, and I doubt the pensions will be as generous as they are now, either. šŸ™

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