Sadly, Michigan teachers will have their pensions phased out. As you can see here, Senate Bill 1040 (H-3) was was just passed by the House and amended by the Senate yesterday. You can read the House Democrats take on what happened here, and if the GOP has a response it will probably be posted here. The bottom line is that I feel terrible for Michigan teachers, and Michigan is not alone. Pages 99-113 of the National Council on Teacher Quality provides an overview of the pension status of each state. You can read the report here and for some states it is not a pretty picture.
Teachers in some states are also counting on Social Security and Medicare. As you can see from the charts above and below, our Federal Government is facing real entitlement problems. As Andrew Sorkin pointed out in a recent tweet, like him or not the Ryan pick for VP may finally bring to the forefront entitlement reform.
There will be a lot of discussion about who has a better plan. Quite frankly, nobody can craft a plan that delivers the same kind of Medicare we receive today. There is not enough money. Representative Ryan's plan is essentially a voucher, and President Obama will tell us it is cruel because it leaves seniors to pay the difference. Unfortunately, we are either paying the difference directly or through tax dollars, the money has to come from somewhere.
The purpose of my post is to bring to light that the days of putting in 35 years and retiring with comfortable benefits may be coming to an end. This is tragic, as our low salaries were always justified by our benefits. What saddens me the most is that teachers are paying for a financial crisis caused by bankers, politicians, central bankers, and economists. As you can read here, many of them are doing quite well right now. Did I mention that nobody who had a hand in our collapse went to jail?
Every state has a retirement package that is a little bit different, hopefully your state is in great shape. Contact your state teacher retirement system to find out where your retirement stands. We need to prepare for the worst, and hope for the best.