As I stated upstream, time will vary. Both my parents were teachers as well. Factoring in the nightly grading they were probably pushing 65 -70. My Father was also a coach so he got to grade after workouts/games/scrimmages were done. He often tipped into the 80's.
I'm going to guess you think it has something to do with the funding amount needed to cover the future annual payments of $53K to a teacher although I'm not sure. So let's see...
If I assume a rate of return of 4% annually and I calculate the present value of annuity of $53,000 for 25 years I come up with a present value of $922,896.83. That seems pretty close to what this guy is saying so I don't think it's too far out there.
His first mistake is far more fundamental, but you are on the right track.
Actually a 4% return assumption would result in a NPV of $827,970.24. I think I used 3% originally.
Your calculation is also wrong. Re-check your math.
You did.
Here is the first stupidity.
How much savings/capital is needed to fund a single life annuity for $53,000 (106% of $50,000) in the private sector, for a male, at the age of 58? The answer: $873,000.00.
873000/53000=16.47
Why is 16.47 important?
Hint: 58+16.47=???
Setting aside the fact that he doesn't know what the time value of money is... he was looking at "average life expectancy"
He went somewhere like wiki and got a number to figure how much money he thinks would be necessary.
http://en.wikipedia.org/wiki/List_of...ife_expectancy
Currently, if you lookup the value for a US male, it is... 76.12
In 2006, it was revised, but care to guess what the widely available 2000 stat was?
You guessed it 74 and some change.
Why is this wrong?
(hint read the column heading at the wiki page)
The heading of the column is:
"Male life expectancy at birth"
A 58 year old man is not an infant.
2007 actuarial tables:
http://www.ssa.gov/oact/STATS/table4c6.html
Currently a 58 year old man will probably live another 22 years. Not 16.
Aside from the stupidity of not knowing the time value of money, Mr. Op-Ed does not know how to find life expectancy.
Life expectancy at birth?
I'm afraid your analysis is incorrect. You are neglecting the fact that the $873,000 you cited a few posts above is in fact earning interest itself. You cannot simply divide that number by $53K and come up with the expected number of years. You are earning interest on a declining sum of money each year. I'm not sure what rate the dude is applying to it though.
All in all it's irrelevant though. The state has not funded its future obligations at a level that is reasonable. This is because of the PERS program that guarantees public employees to earn annual pay greater than any annual income they received during their working career.
To be fair:
Mr. Starkey's assumptions are based on his assertion that long-term:
He could very well be calculating based on his preferred narrative.PERS will tell you that the 8% return per year is guaranteed. That is a half-truth at best, but they also guarantee a 2% Cost of Living, exclusion from paying State Income Taxes, Medical Benefits, and no Administrative or Insurance costs.[10] This means, in reality, an annuity rate of 11% to 16% and sometimes higher.
If you actually look up the rolling averages since 2006 in the financials available from the Oregon treasurer, they do indeed stick to their guns, and their long term returns haven't varied much from that norm, even with the financial crisis.
Their $563,368.00 figure is, if you back engineer it, based on an assumption of about 7.8% return.
I know that. I am assuming he made a rather bad mistake.
In that, I could be wrong, as I just noted.
Our problem in figuring out what HE bases his figure on is that he didn't show his math.
That is the crux of the problem.
Here is where the principles of intellectual honesty force me to go back and re-read the thing. Further, I feel compelled to admit:
Going back through, and re-reading it a bit more carefully, once one gets past the hand waving it doesn't read quite so badly. Had to take a crash course in the PERS finances, though.
The tone of the piece though makes me VERY wary of accepting his conclusions though, without some good critical thinking. He seems far to eager to reach a certain conclusion. I smell confirmation bias.
I will be big enough to admit after reading a whole lot more may have jumped the gun here. The tone of the first part of the piece seems like pointless hysteronics.
If you thumb through PERS most recent finances, even with the financial crash, their rolling averages don't deviate much from that 8%
Gotta go digging:
http://www.oregon.gov/pers/Pages/sec...l_studies.aspx
from there to here:
http://www.oregon.gov/treasury/Divis...ment-Fund.aspx
Most recent year-end, 2012:
http://www.oregon.gov/treasury/Divis...OPERF_1212.pdf
Their 5 year average sucks monkey balls, but the last few years equities performance is good.
Remember that they get to invest LONG term, so they can lock in buy and hold strategies that smooth out hiccups, even ones as large as 2008-2009.
(edit: FWIW their year end 2012 performance was 17%-- I would guess apple stock... but that is a guess.)
http://www.oregon.gov/treasury/Repor...ent%20Fund.pdf
Equity listing. Funds galore. No Apple. :P
Actually earned them a pretty darn good return.
http://www.oregon.gov/treasury/Repor...s/1994_001.pdf
Looks like a long history of socking money away. Dollar cost averaging FTW.
Going back to this:
Sort of. The guy was way too hand wavy.
PERS is underfunded, per their most recent 2011 lookback. In 2006, it was more than adequately funded though.
For that kind of thing you need to look at the actuarial report by Milliman (great firm, BTW, if you ever need actuarial guns for hire, they are THE go to firm)
http://www.oregon.gov/pers/docs/fina...uation_rpt.pdf
Page 4 says what you need to know.
The orange is the 6% employee contribution. Seems capped. The employees need to contribute more.
The higher the bar, the more money needs to go into it. as of 2011, things sucked though. The green part is the part you need to pay attention to, that is the shortfall that will need to be made up by the contributions that Mr. Starkey is so worried about.
I am going to guess that the year end for 2013 will see that next bar down more than a bit, based on the 2012 returns.
teachers & cops (as well as most so-called public servants) have been paid too much for too long. they also live in the same cruel world we all live in and when there's a crisis in our economy, i don't see no reason why they should be sheltered from the whole mess, though i respect those people as much as everyone does.
Some offenses under the STAAR test.. also, not being trained and certified to restrain a child who is out of control in the classroom...
i will contribute to this thread later
OP what field you in?
ur wife should come down here and teach, they get paid around 60-80k + bonuses +10k if you achieve govt standards, heck go t each in rural areas or countryside you get paid more money then public school teachers
I believe PERS has a guaranteed 8% rate on the fund at the expense of the future tax payers. They have changed it enough over the years, hard to keep up with how the tax payers keep getting screwed.
Last edited by Wild Cobra; 05-23-2013 at 03:52 AM.
OK, not incompetent. The teachers must be ing stupid to take a job that requires them to work that many hours.
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