A recent 370-page report by The Thomas B. Fordham institute lays out incredible amounts of data about how new teachers are disadvantaged by pension structures across the country. As a former educator, I was struck by the sheer amount of information in this report highlighting the ways that new teachers’ financial security is put at risk by this outdated system – and found several key points that resonated with me from (unfortunate) personal experience.
And while the details of this report should be concerning to all taxpayers, young Colorado educators – in particular those who anticipate any change in employment over the course of their careers – should be aware of the acute disadvantages they face in Colorado PERA:
- Most public pensions, including PERA, are built to require 20 to 30 years of work in the same system to receive a retirement benefit worth as must as what teachers contribute. While many teachers in Colorado certainly plan to teach the majority of their careers, the structure of our society is such that that is very unlikely. I moved to Colorado to teach in my early 20s and as happens to many, my life changed in ways that led me to continue my career in the public sector outside of schools. This meant during the time I spent contributing to PERA I was not contributing to social security, and leaving my school meant I was ending the “segments” required to vest in PERA’s defined benefit plan – negatively impacting my retirement savings in both systems. Many teachers in Colorado started or build their careers in other states and for those in their 20s, life’s next steps aren’t always anticipated.
- When teachers leave a particular pension before this 20- or 30-year mark, they are losing the money that their school has contributed for them. This report uses the term “crossover point” to describe when the value of one’s retirement account is greater than what the individual themselves has put in. If a teacher doesn’t reach this crossover point, they are not collecting any of the funds that their school has contributed for them. What this meant for me is that the thousands of dollars in funds my school contributed on my behalf are not a part of my retirement savings, but rather, contributing to paying down the massive funding shortfall PERA currently has. (Read more on that shortfall here.) After seeing a large line item on my paycheck for years labeled “PERA,” I anticipated having a great start on my retirement savings – what I ended up with was a deficiency on my path toward financial security.
- As the report outlines, the simple fact is that 72 percent of teachers will leave before twenty years of service. While many have plans to continue teaching, the data is clear that very few teachers continue in the same profession for their entire careers. In fact, a LinkedIn study from last year found over the last 20 years, the number of companies people worked for in the five years after they graduated from college has nearly doubled. This isn’t a dig at Millennials – this is simply the new normal for how people build their professional portfolio. I know from my experience and from my peers that the vast majority of Millennials do not have a 30 year plan for how their lives will go. In our 20s and 30s, we are building families, making decisions about where we want to live, caring for loved ones, and reacting to the ups and downs of life. Public pension systems simply have not modified their structures to fit how lives ebb and flow in the current day and age.
All of these report’s findings are of particular note for those of us who have been or plan to be classroom teachers. Even when one plans to stay in the classroom for their career, their fellow math teachers would point out that, statistically speaking, it is quite unlikely that will be the case.