Thursday, March 22, 2012

The "Newbie Teacher" And The Inferior "Tier VI Pension Plan". Why The Teaching Profession Is Becoming A Tempoary Job, Thanks To The Mayor & Governor.











Well, another nail is being hammered in the NYC teaching profession as a long-term career choice with the new "Tier VI" pension plan. For those aspiring teachers come April 1st (yes April fools day), any teacher hired for the NYC schools will no longer be able to retire at age 55/57 with 30 years of service. Instead, these teachers will need to wait until age 63 if they are to receive a full pension. What is even worse is that if a "Tier VI affected teacher" wants to retire at, lets say 57 with 34 years of service, he/she would see their pension reduced by 37%. That is right, 37%! By contrast, a "Tier V affected teacher" would get 100% of his/her pension.


"Tier V Teacher"...................................."Tier VI Teacher".

34 year service............................................. 34 year service

Age Retires 57.............................................. Age Retires 57

Final 3-year FAS $100,000.................. Final 5 year FAS $100,000

Pension = $66,000..................................... Pension = $38,430

The difference is an astounding $27,570 annually. This is the difference between living well or struggling to make ends meet in retirement. Even if you look at the 25 year teacher who reaches full retirement age, the difference is significant.


"Tier V Teacher"...................................."Tier VI Teacher".

25 year service............................................. 25 year service

Retires at age 62..........................................Retires at age 63

Final 3-year FAS $100,000.................. Final 5 year FAS $95,000

Pension = $50,000.................................... Pension = $41,563

The difference between the two pension is $8,437 annually and the "Tier VI teacher" will need to work an extra year just to achieve that difference. Otherwise, if the "Tier VI affected teacher" retires at 62, his or her pension will be $38,861 or a difference of $11,139 annually.

Realistically, most " Tier VI affected newbie teachers" will not last 25 years, more like ten years or less. What will their pension be and how does it compare to a Tier IV pension which 90% of the teachers are under?

"Tier IV Teacher"...................................."Tier VI Teacher".

10 year service............................................. 10 year service

Retires at age 55..........................................Retires at age 55

Final 3-year FAS $70,000.................. Final 5 year FAS $65,000

Pension = $8,534......................................... Pension = $5,428


Furthermore, the "Tier VI affected teacher" will be almost doubling their contribution compared to the "Tier V affected teacher" and four times the contribution that the "Tier IV affected teacher" pays which 90% of the teachers fall under. The "newbie teacher" contribution to the pension will be 3.5% and rise to 6% as the teacher reaches the $100,000 mark. Finally, the "Tier VI affected teacher" will only get 55% of the final 5 year average salary, assuming they reach the age of 63 compared to 60% for the "Tier V affected teacher" who only needs to reach the age of 62 or 57 with 30 years of service.

The NYC classroom is becoming an increasingly hostile environment and the Bloomberg Administration continues to scapegoat teachers as he refuses to treat teachers like other city employees by not offering a contract without outrageous "givebacks". Now, the Governor has weakened the pension to a point that future retires will have a hard time reaching the age of 63 and with reduced pension benefits. The only one smiling is the Mayor as he is achieving his goal to make teaching in the NYC classroom a temporary position. As the economy slowly recovers who would want to be a teacher considering the deteriorating working conditions and now an inferior pension to boot.

26 comments:

Anonymous said...

Hello Chaz. What are your thoughts on the 25/55 deal for teachers? I'll have 27 years of service in when I retire in 14 years. (I'm about to finish my 13th year of teaching for the DOE) Even though it is 14 years away, I want to "get out" at 55. I gotta say that I feel bad for any new teachers that want to make life long career out of teaching in NYC. Take care. -TL.

Chaz said...

Thank your lucky stars that you can get out with a 50% pension at 55. The "newbies" will not be as lucky as you can see by my post.

Anonymous said...

Yes indeed Chaz, I do thank my lucky stars for sure as I know that the new teachers will not have the same 25/55 deal as myself. One last question if that is ok: When NYC teachers retire under the 25/55 deal, how does COLA work? In other words, is your monthly pension payment that you receive in your first year of retirement pretty much the same until you die? (I know this question sounds strange but I have been told a hundred different answers to this question) Thanks again and keep up the great blog. -TL

Chaz said...

My understanding is that you would not get a COLA until 62, or 5 years after you retire, whichever is greater. In your case 62 years old.

The COLA only applies to the first $18,000 of your pension and cannot exceed 3%, regardless of the inflation rate.

NY_I said...

Why do the city and state knock themselves out over the pensions issue?
It is really moot, for the following reasons:
-roughly half a new cohort of teachers will fail to make tenure.
-probably a remaining fourth will get socked with a weak class of students, and BINGO!, the new teacher evaluation algorhythm will declare them ineffective, and out they go.
-one eighth will just burn out (25 years of enduring teacher-blaming, a revolving door of patronizing Leadership Academy principals who couldn't classroom manage if their lives depended on it? And the data work?)
-AND ONLY a remaining eighth at best will eke it out and make it to pension age. --Oh yes, and they'll prematurely age.

Chaz said...

NY1:

I did try to say that. However, you articulate it so much better.

The bottom line is that the new breed of teachers will notg be around to collect their inferior Tier VI pension.

Anonymous said...

Hi Chaz, thanks for the informative comparison between tiers. I am curious, about the formula you're using, as I think I've been calculating my potential pension incorrectly.

To determine yearly pension payment, I've been using:

3yr FAS X .0166 X Years of Service

Also, do you know if the formula changes for those who contribute extra payments to be part of 25/55. For example if I don't make it to 25 years (I have 10) were the extra payments a waste of my time or does the .0166 increase as extra payments were made?

Thanks!

Traveling ATR said...
This comment has been removed by the author.
Chaz said...

Anon 11:58

You are Tier IV, therefore omce you complete 20 full years. The a.67% changes to 2% for all the 20 years of service.

FAS x 0.02 x 20 yrs = 40%

If you do not complete the 25 years than 50% of the additional 1.85% contribution will be refunded to you at age 62.

Chaz said...

oops, sorry about the typo in the second line. It should read 1.67%

veteran teacher said...

If you're 22 and an education major in college, switch ASAP! you won't get tenure, a pension, and will be out within 5 years and have wasted a college tuition and build up loans

Anonymous said...

If you're still in this dead end profession, start contributing 25% to your TDA. The 7% interest is the best return in the world currently, but Bloomberg and Cuomo are going to go into the State Constitution and change that someday.
I annuitized my TDA at retirement, and I'm going to get 22K a year for the rest of my life.
Even though I only lasted 16 years, I'm still going to get about 40K a year
when you add my measely pension to my TDA.
It sure beats waiting out four more years of idiot principals and APs (my braindead AP was a special ed teacher with connections, that was responsible for THREE entirely different subjects that he knew nothing about!!
And he gave an ineffective rating to someone who the kids loved, had a masters, worked in the field all his life, had the highest laudatory statements in his file for 15 years- not one bad letter in the file- until the last semester when I was written up for trying to tell the ignoramous principal that because we were kicked out of our room, we had no materials to work with, and the response I got was "That's youre problem!"
Well, now in June when they kick this oaf out of school, (it's one of the 33) I hope the principal gets the same comment from Tweed that she gave to me; That"s your problem!!!!!!!!!!!!!!!!!!

Anonymous said...

I am a tier IV teacher with 25 years. I have bought into the 25/55 program and am seriously considering retiring ASAP.... I don't think I can do this anymore.. my 3year average salary is about 94,000 BTW I am 50 years old.

Anonymous said...

Anonymous...so from your calculations on tier 1V with 25 years...how much would your pension be? I will have 28 years. I was tier 111 but will sign out on tier 1V

Anonymous said...

Should i buy back time to get back into Tier IV or stay into Tier VI. Buying back 8 years would cost me $39,000 if i pay a lum sum or $74000 if i do it in a installment. Is there a big difference in TierIV from Tier VI?

Chaz said...

If you can buy back to Tier IV then do it, no matter what the cost. If you read my blog you would see a great deal of difference.

Christopher Abrahams said...

What would be the difference monetary between Tier IV and Tier VI?

Christopher Abrahams said...

What would be the difference monetary between Tier IV and Tier VI?

Anonymous said...

What would be the difference between Tier IV and Tier VI?

Anonymous said...

Hi
Thank you for your site
I have 16 years at the age of 35. I'm having a baby this year and would like to know my retirement options. My yearly salary is approx. $75,000. I did not opt in to 25/55.
Thank you

Unknown said...

So Tier IV, 16 years, FAS $100,243 - retire age 55 = $26,784 Pension? Thank you so much for info!

Teacher life said...

This is my sixth year as a teacher and my first year in the DOE and the burn out is serious. I'm 33 just got married but I don't see how I could start a family with such a demanding job. I'm already in six figure loan debt and I don't know if going to get my building leadership license is worth achieving. I have to questions prior to teaching I worked for the city for 5 years will that count toward my teacher retirement system? Is there another career path that I could choose that aligns with my credentials that has decent pay?

Time to go! said...

Hello, I have 17 years in and looking to leave with 20 years, but i will only be 41. What can i expect for a pension, and can i receive it at 55.

Anonymous said...

Can I opt out of 25/55 because it doesn't apply to me?

Anonymous said...

Can i opt out of the 25/55 program?

Yesenia Tamayo said...

Im in tier 6 i have taught for 5 years already i'm 30 years old. If I choose to retire at 55 I will have completed 30 years of teaching but what will be my pension approximately? Also if i stay till 63 what will be my pension thank you.