Does the current Teacher Retirement system of Texas need reform? Apparently some politicians, journalists and other inquiring minds think so. The main purpose of this blog is to discuss the two main reform suggested: moving from the current defined benefit plan to a defined contribution plan and moving the retired teacher system into social security.
The Current TRS defined benefit Plan
The current retirement plan for Texas Retired Teachers is a defined benefits plan. www.investopedia.com/terms/d/definedbenefitspensionplan.asp The defined benefit plans are a promise of a defined amount of pension for life based on a predetermined formula. In the case of the Texas retirement system the formula is to multiply the number of years paid into the system by 2.3 and then multiplying the average of the three highest salaries by that number. Lets say a teacher had taught for thirty years ; multiply thirty by 2.3 and you get 69; lets further suppose this retired teacher had an average of $ 50,000 for their three highest years; multiply that number by .69 and you get $34,000 for our fictional teachers lifetime pension. You probably already know the average retired Texas teacher makes quite a bit less. Though the purpose of this blog is descriptive and not persuasive I will reveal that this current TRS defined benefit plan, with some tweaking, is my choice. Now, onward to the proposed alternatives.
The Defined Contribution Alternative
Some state legislators and political commentators such as Bill King, Houston business man and occasional Houston Chronicle columnist. www.billkingblog.com have suggested that future the TRS be changed from a defined benefits plan to a defined contribution plan. What would that mean? Well, rather than a guaranteed lifetime amount, the retired teacher's final retirement amount would be based on the amount of contributions made by the teacher( with possible contribution from their school district) and how well or ,how poorly, these investments chosen by the retired teacher or at least those choices allowed by their district, perform over their active career in education, very much like the 403B plan most of us are familiar with. Obviously the investor ( teacher) would need to educate themselves about investing, which would require not only an interest in investing, but probably some aptitude for investing as well. My speculation is that under this system, some retirees would be better off, some about the same and some worse off, maybe a lot worse off.
Moving To Social Security
A second reform mentioned is that Texas would move all the teachers out of the TRS and join the social security system. www.ssa.edu. Would this be good for future teacher retirees? Probably not. The average social security recipient receives $18,000 while the average TRS annuitant makes $ 32,000, so although I was not a math major, I think I know enough math to recognize a bad deal when I see it. However, if retired teachers go another decade without a cost of living adjustment then the Social Security option might start looking better. I also think a case could be made for changing Social Security into a true retirement system by requiring that all Americans including members of Congress join the system and assuring that all American workers receive a pension worth 80 % of their working salary. However that's a topic for a future blog.
Your Turn
I would really love to have your opinion on:
1. Do you favor keeping the current defined benefit TRS system or one of the reforms.
2. Is there another reform you would favor?
3. Another comment you would care to make?
Just scroll to the bottom, click on comments and a space will magically appear for your comment Thanks for reading.
The Current TRS defined benefit Plan
The current retirement plan for Texas Retired Teachers is a defined benefits plan. www.investopedia.com/terms/d/definedbenefitspensionplan.asp The defined benefit plans are a promise of a defined amount of pension for life based on a predetermined formula. In the case of the Texas retirement system the formula is to multiply the number of years paid into the system by 2.3 and then multiplying the average of the three highest salaries by that number. Lets say a teacher had taught for thirty years ; multiply thirty by 2.3 and you get 69; lets further suppose this retired teacher had an average of $ 50,000 for their three highest years; multiply that number by .69 and you get $34,000 for our fictional teachers lifetime pension. You probably already know the average retired Texas teacher makes quite a bit less. Though the purpose of this blog is descriptive and not persuasive I will reveal that this current TRS defined benefit plan, with some tweaking, is my choice. Now, onward to the proposed alternatives.
The Defined Contribution Alternative
Some state legislators and political commentators such as Bill King, Houston business man and occasional Houston Chronicle columnist. www.billkingblog.com have suggested that future the TRS be changed from a defined benefits plan to a defined contribution plan. What would that mean? Well, rather than a guaranteed lifetime amount, the retired teacher's final retirement amount would be based on the amount of contributions made by the teacher( with possible contribution from their school district) and how well or ,how poorly, these investments chosen by the retired teacher or at least those choices allowed by their district, perform over their active career in education, very much like the 403B plan most of us are familiar with. Obviously the investor ( teacher) would need to educate themselves about investing, which would require not only an interest in investing, but probably some aptitude for investing as well. My speculation is that under this system, some retirees would be better off, some about the same and some worse off, maybe a lot worse off.
Moving To Social Security
A second reform mentioned is that Texas would move all the teachers out of the TRS and join the social security system. www.ssa.edu. Would this be good for future teacher retirees? Probably not. The average social security recipient receives $18,000 while the average TRS annuitant makes $ 32,000, so although I was not a math major, I think I know enough math to recognize a bad deal when I see it. However, if retired teachers go another decade without a cost of living adjustment then the Social Security option might start looking better. I also think a case could be made for changing Social Security into a true retirement system by requiring that all Americans including members of Congress join the system and assuring that all American workers receive a pension worth 80 % of their working salary. However that's a topic for a future blog.
Your Turn
I would really love to have your opinion on:
1. Do you favor keeping the current defined benefit TRS system or one of the reforms.
2. Is there another reform you would favor?
3. Another comment you would care to make?
Just scroll to the bottom, click on comments and a space will magically appear for your comment Thanks for reading.
the best place to start is by visiting the TRS website. 
as you could choose to sleep over night in a rattlesnake den but neither would be a wise choice! If you are a “seasoned” citizen and have reached the age of 65 you will need to apply for Medicare. If you are eligible or receiving social security, Medicare will contact you; however if you are only with TRS you will need to contact Medicare at least three months before you turn 65 to sign up. If you are retiring before 65 you will probably want to sign up for the health insurance option for retired teachers: TRS Care. You can also sign up your spouse for TRS Care if she is no longer working. TRS Care has two options with different deductibles and premiums; make certain you reflect carefully on these options as TRS will not allow changes When you turn 65 ,TRS Care will become your secondary policy and will pay most of what Medicare does not pay. Also if your spouse is still working you could find out the cost of the coverage for you and compare this to your Medicare and TRS Care options.
can work in a public school or college to 50 percent of what is considered full time for that month. For example in the 
, a retiree may teach for a half day or two weeks of a month. Adjunct professors at a community college could teach two classes in the spring and fall semester since five classes are considered a full load and one semester in the summer since two classes are considered a full load. So what happens if you exceed this limit? You will receive a nice little letters from TRS saying you must return your annuity for that month; I know because I once received one of those “ nice little letters”. There is no limit on the amount a retiree can work in a private school and no limit on substituting, except your desire to go fishing that day.
or keeping your investment with your districts plan. If the thought of investing is about as appealing as translating ancient hieroglyphics ,you might want to consider finding a financial advisor or better yet educating yourself. Allow me to make one suggestion: there is a wonderful website called 
and Washington. You will also be able to avail yourself of many discounts such as dental insurance and you will have an opportunity to meet a lot of nice folks in your local chapter.
, which is under 5 dollars and will add up your number of steps each day. Take 9,000 steps and you’ll have those numbers heading in the direction you want.
your money wisely is another necessity for financial health. Let me repeat again I am most assuredly no financial advisor but I do have a suggestion. Learn as much as you can about investing even if you later decide to hire a financial advisor. I have a further unsolicited piece of advise ; my greatest teacher on investing is a website called http://www.bogleheads.org ,a group of successful investors who follow the philosophy of the founder of Vanguard, John Bogle. That philosophy includes asset allocation investing in low cost index funds and avoiding attempts to beat the market. Visit the site, read for yourself and I think you’ll find yourself much better informed even if you don’t accept the 
advice on the best route to reach financial health.
, the ability to understand our emotions ( Am I feeling gluttonous or do I really need that second piece of cheesecake) and managing those emotions so they help us meet our goals whether physical, financial or mental health.
. Many of us find that meaning best through religion, but there are other ways of reaching spiritual health including volunteering in such activities as Habitat For Humanity or Wounded Warriors, or some passionate hobby whether gardening or golf , or best a combination of all these.
will give retired teachers back the tax loss are slim and none and slim just left town, the TRTA suggestion is undoubtedly still worthwhile just to plant in our Congressman’s mind the problems we face as Texas retired teachers ,especially with no cost of living adjustment . I do have one other suggestion though, and that is we ask our Congressman to vote to pass the proposed legislation that would tax us only on the income after our 
is deducted. In other words if a retiree has an annuity of 3000 dollars a month and pays 300 dollars a month in TRS premiums the retiree would be taxed each month on 2700 dollars rather than the full $3000. This would at least offset the new tax increase. I have more discussion of this in my earlier blog The Texas Legislature And TRS Hold That Line.
is shorter than usual today, mercifully so some might say. LOL! I would be greatly pleased to hear from you on the following and anything else you would like to comment on
who, signed the Medicare bill into law in 1965 ,was a 
and a former Texas teacher. Another bit of historical info is that the first Medicare card was given to former president Harry Truman who was present at the signing ceremony and had been a committed supporter of the idea of health insurance for the elderly. The purpose of Medicare was to provide health insurance to the elderly( senior citizens was not yet widely used ,so we were still just ‘‘the elderly”) Most retired Texas teachers will, at least at some point in their lives, be a beneficiary of Medicare; so the purpose of today’s bog is to look at some questions tra retirees might have about Medicare and it’s relationship to TRS Care, and hopefully provide some answers.
e and though paid for by Medicare is administered by private insurance companies , usually as HMO’S or PPO’S. Medicare Part D IS The Medicare prescription plan enacted in the 2003 Medicare Reform Act. This program is again paid for by Medicare but administered by private companies. TRS Care already has a prescription drug program administered by Caremark and advises their retirees on Medicare that they are usually better off staying with the TRS prescription drug plan. 
when she became eligible would find TRS assumed Medicare had paid 80 percent and would pay only $8000 leaving the retiree to pay the other $32,000!
wrote a book called There’s’ No Such Thing As A Free Lunch. This is certainly true of Medicare. Start off with the fact that Medicare will pay only 80 percent of your total medical bill. In addition Medicare has premiums ; most Medicare recipients will not pay a premium for part A because they have paid into the system for their 40 quarters, but the premium for part B is currently $110.50. Medicare part A has a deductible of $1,100
policy.
