I may have bitten off more than I can chew here. This is more complex than I thought and thus I am sure it has been for our public officials who are negotiating the public employee contracts. In this Blog, I am using the 2006 mortality tables for the USA by male and female.
The life expectancy is the first number people look at. This is the age year where 50% of those born on year zero are dead. Expection in math is normally the 50% 50% point. For males, the expected age is 79 while the age is 84 for females. It is shorter for blacks and higher for whites. This chart combines the two. When it comes to compensation, we need to know how long the people who we hire age going to live and you would expect that if we hire people at age 30, some have already died. This means that the average for the ones we hire is longer than the expected age above. You can calculate this new number with a little 4th grade math. When I make the adjustment I find that our retired people will live to 82 for males and 87 for females.
Now let's assume that our male and female work from age 30 to age 65 and we, together, put 1% of their pay into a bank account paying 3% interest for the full time that they work, which is 35 years. For the male, he will collect for an average of 17 years and the female for 22 years. Since no new money will go into the bank after they retiree, what they will get during retirement will have to come out of that accumulated amount. Now here is the big number that you were waiting for.
The male will be able to get 4.589 times the amount that he paid in each year so paid in $1.00/yr, he could take out $4.59/yr. For the female it would be lower since she is expected to live longer. She could only take out 3.79 times or $3.79/yr. Since I have show this example in terms of a single dollar, we could easily convert it to percentage of their annual pay. If they wanted to get their "full" pay while retired, they would have to put in a lot more. For males it would be 21.8% and for females 26.4%.
Now, many of our teachers are expecting 80% or 90% of their last years pay while retired and we know they have not come close to putting in the approximately 25% of their pay for all those years. Are you starting to see the problem?
Notice that, now, women get the same retirement as men while the live longer. Per my numbers, that is clearly not fair and it is a big difference. What do you think would happen if we required women to put in more or accept less? What if we required women to work 5 years longer than males? I think you can see we have problems with our current systems. If I were to bring in Blacks, on this same basis, they should get more on retirement and should be allowed to retire earlier. It is interesting isn't when you look deeper into the numbers? Notice that we don't seem to have similar problems with life insurance. Insurance companies charge "more" for males, but they market it on the basis that they charge "less" for females. Interesting.
I am not thru with this topic and will have more Blogs. One thing that you could do to help me is to find out what the mortality table is for the school teachers who work in your school district and what tables they use for retirement payments. You might also ask about what "actuary service" they used? These are the math and computer people who figure the odd out for the insurance companies like the bookies do in Las Vegas for the sporting games. If they don't have these figures, you will know that they don't know what they are going and you tax money is at even greater risk than you might have thought.
