Tuesday, April 22, 2008


I have been very worried about the status of whether or not teachers will vote to go back to the old retirment system.  I am looking at a HUGE increase if we vote to go back to the old (TRS) as opposed to staying in the new (TDC).  I want to make sure people are as educated as they can POSSIBLY BE before they decide.

One of the biggest sticking points I am hearing is people saying "I don't have the money to buy back my years."  I am right there with you on that, because the least I would have to pay would be $6700 and the most would be $11000.  I am a teacher, and I do not have that kind of money either!  A dear friend of mine also brought up a good point... "why give the state more of my money by taking the loan out through them?"  I agree with that too, because I was one of the ones that were not given a choice and simply dumped in this fiasco of a system.

I had an idea and researched it out a little bit.  Think about this.

Let's pretend that you are going to have to pay 11,000 to buy back your years of service.  You have five years to pay that off.  If you use the Quicken calculator on REALTOR.COM and put in $11,000 for a five year term borrowing at 7% interest, your monthly payments will be $217 dollars.  So your repayment of that $11,000 is going to be $217 a month. 

Scenario 1
If you were to purchase an annuity or something else on your own, and put in $217 a month to that annuity, you could benefit off of your OWN money. Don't buy back your years, but put that monthly payment towards something for your OWN retirement.

Here is what could happen.

If you are 40, and continue to pay 217 a month until age 62, and you get a 3% interest rate on that annuity (or roth or whatever), you will have $96,569 in that account!  (check it out at this site...http://www.econedlink.org/interactives/interest.html )  You can adjust your beginning age but the calculator takes it all the way to 62.  You cannot adjust the ending age.


Let's say you cannot put away $217 a month UNTIL AGE 62.  Let's say you want to be more realistic and you are willing to pay $217 a month for the five years you would pay normally if you decided to go back.  But remember, you do not want to give the state any more money than you already have!  So get an annuity that will allow you to deposit that $11,000 you would paying back to the state and then simply draw interest until you are ready to touch it.  If you were to put $11,000 in the bank and collect interest off of it,  You would end up with $17,600 in 20 years!  You can check this out at http://www.econedlink.org/lessons/em377/popupActivity.html


Now... when entering the website where you can actually look at your retirement calculations.. https://www.benefitmodeling.com/wv/chooseyourplan

Click on MODELING on the left hand side menu.  You can adjust your retirement age.  Your annual increase in pay is estimated to be around 3%.  YOUR RATE OF RETURN WILL PROBABLY BE AVERAGE AT 2 to 2.5%.  YOU MUST CHANGE this default before you can go on. Click the agreement button at the bottom of the screen and then click on GENERATE ESTIMATE RESULTS.





You can play with the numbers, but you will see that you will always come up with MORE MONEY IN THE END if you go back to the old system!  I encourage you to change the rate of return...  PLEASE!!!

YOU DO NOT HAVE TO DECIDE TO BUY BACK FOR ANOTHER YEAR!!!!  However, you DO have to decide to go back now. PLEASE GO BACK!!!!

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