If you are a teacher, your pension is in a precarious place.
Decades of mismanagement and underfunding have led to debt levels that look increasingly unsustainable. Experts have long felt that a catastrophic economic event could spell the undoing of teacher pensions as we know them. As we’ve seen this year, economic catastrophe can come at any time.
WHAT IS THE PROBLEM?
The funding structures for many teacher pension plans assume high levels of annual yields, up to 7% returns to finance current and future retirement benefits. Yet year after year these funds fail to perform at such high levels, leading governments to borrow just to pay off their current obligations to retired educators. In effect, they take from the future pension budget in order to pay current bills. Since defined benefit payouts are only expected to increase as more teachers retire, this leaves pre-retirement teachers with less certainty about the reliability of their pension programs. Even under normal circumstances, the situation is perilous.
But these are not normal circumstances.
The COVID-19 pandemic has thrown markets into an unprecedented era of uncertainty. Many teacher pension funds struggle to manage even their current obligations, and an economic recession may finally put too much pressure on over-burdened systems. If these systems collapse, the immediate impact is obvious and profound for the livelihoods of millions of public servants, but the ripple effects would hit broadly across the economy.
IF YOU’RE AN EDUCATOR,
working or retired, that fragile system represents your decades of contributions. It could be all you have saved up for your future. That precarious, top-heavy, and ill-funded reserve could be your retirement, your future, and how even your basic bills are paid.
WHAT CAN YOU DO?
Your money appears locked in a faulty system, but you do have other options.
Your money seems vulnerable to market whims and recession, but it can be protected.
Your money might be ill-managed and poorly invested, but expert management and advice is available to you.
Don’t stand by and wait to see what happens. If you are rightly worried about the state of your government-managed pension plan, speak with someone who can help you protect your money.
