71 Comments - Robert the Bruce - Tuesday, Jun 5, 18 @ 9:25 am: Even IPI is using the phrase “constitutionally guaranteed.” - Hottot - Tuesday, Jun 5, 18 @ 9:25 am: Rich, can you find an actual dollar amount scenario to describe how this would work? I’m a tier-one active pensioner, and I’m curious about that 70%. - Gimmix - Tuesday, Jun 5, 18 @ 9:30 am: =Rich, can you find an actual dollar amount scenario to describe how this would work? I’m a tier-one active pensioner, and I’m curious about that 70%.= I think there is an organization that takes care of these types of requests, it’s called SERS. - Cubs in '16 - Tuesday, Jun 5, 18 @ 9:34 am: I think Rep. Batinick may be right. A six figure check will be awfully hard to turn down for many folks, even if it means reducing future benefits. It’s an immediate gratification world we live in. - Phil King - Tuesday, Jun 5, 18 @ 9:37 am: The pension buyout may be a good concept and it certainly doesn’t hurt to try. That doesn’t mean it’s realistic to count on those savings to balance your budget. - wondering - Tuesday, Jun 5, 18 @ 9:38 am: As a tier-one retiree…thanks, but no thanks. Pay up and get off of it. - LTSW - Tuesday, Jun 5, 18 @ 9:40 am: The first option is only likely good for someone in a financial distress situation. But the second option would benefit a retiree that is older, 67 and up for instance, who would not get as much benefit from the 3% AAI. - Put the fun in unfunded - Tuesday, Jun 5, 18 @ 9:43 am: I assume the buyout gets paid on actuarial life expectancy based on your age. This could result in adverse selection. If you are healthy, like wondering, you don’t take the buyout. But say you are 68 and have terminal illness - take the buyout based on the theoretical 20 year life expectancy of a 68 year old, not your personal expectancy. That would end up costing the plans MORE money. - Flat Bed Ford - Tuesday, Jun 5, 18 @ 9:44 am: IPI sphere of influence is now down to Ives, MkSweeney and Skilicorn. Three of the least effective legislators and one of them is leaving. - wondering - Tuesday, Jun 5, 18 @ 9:45 am: LTSW, a 67 or more would also be giving up their surviving spouse’s future benefits. - Political Animal - Tuesday, Jun 5, 18 @ 9:55 am: Also, didn’t Batinick vote against the budget? Is he now trying to claim it actually is balanced? - Jibba - Tuesday, Jun 5, 18 @ 10:00 am: “70 percent of the net value of their future increases under the higher formula”. The devil is in the details. Put the Fun is probably right, that this needs to be done on an actuarial basis, so it will apply to the employee population at large, and your mileage may vary. I did this for my own expected life range, using different percentages of interest to calculate the future value of today’s payout, and the results varied buy a factor of 20. Want to bet where the state’s offer comes down? Smart money will be on lowest payouts. Put the Fun is right that I suspect this will actually cost the state money, since most sick folks will take the offer, and perhaps they should, after advice from a professional. Healthy people should stay clear unless they have a need of some sort, like college costs, not a speed boat. - Not It - Tuesday, Jun 5, 18 @ 10:03 am: IPI just wants to stir the pot and advocate for something they know is unconstitutional, but they don’t care about such thorny details. - Thomas Paine - Tuesday, Jun 5, 18 @ 10:07 am: They are both correct. Batanick is right to point out that the IPI is being duplicitous. On Monday the IPI complains it is raining. On Wednesday they complain there is no way to pay for all of the umbrellas you have promised everyone. On Friday they complain higher taxes are driving everyone to Sunbelt states. The IPI is also making a safe bet: the benefits of other GOP pension fixes have been exagerrated or oversold, and this one will likely be the same. My bet is that somewhere within state government is a special subset of highly connected insiders that will benefit greatly from this specific language. Probably folks who were wanting to leave early anyhow and now get a little extra parachute. - Not a Billionaire - Tuesday, Jun 5, 18 @ 10:14 am: I agree with unfunded . I suspect the real hope is some people will just make a bad decision. - Perrid - Tuesday, Jun 5, 18 @ 10:18 am: Like it says, the budget tells the actuaries to calculate the “current value” of the pension under the compounding COLA, the current value of the 1.5% simple interest COLA, and then you get 70% of the difference. I want to know what assumptions are going into the calculation of the current value, what assumptions it makes. One lump sum up front could actually be better for some people, especially if they don’t blow it all in one place so to speak, but man I’d be nervous making that call. - wordslinger - Tuesday, Jun 5, 18 @ 10:27 am: Woof, that’s a heavy lift, with the cipherin’ and the analyzin’ and the writin’, coming from IPI. They tried so hard, they almost seemed to make sense, for a while. Sugar Daddy Dick must have thrown in a Box-O-64 Crayolas (with built-in sharpener) with the last round of puddin’-pop participation treats. I wonder how that crew would perform if they ever had real jobs with responsibilities and accountability? Maybe Rauner should give them a chance. And I’m still not Steve Brown. - My Button is Broke... - Tuesday, Jun 5, 18 @ 10:30 am: One thing that hasn’t been focused on much is the new COLA. Currently, these people would generally see their first COLA between a year and two of retirement. Under the lower COLA (if you take the buyout), you wouldn’t receive first COLA until you turned 67. If you retire at 55, waiting 12 years before your pension increases seems like an awful long time. Obviously you still have the fat check, but still… - RNUG - Tuesday, Jun 5, 18 @ 10:38 am: First, I wish everyone would get the language right. It is not a Cost Of Living Adjustment (COLA), it is an Automatic Annual Increase (AAI). COLA’s are tied to dome measurable statistic such as the Urban Consumer Price Index (CPI-U) and vary annually. AAI’s are fixed increases that do not vary. - A Jack - Tuesday, Jun 5, 18 @ 10:50 am: I am waiting to see what the actuarial assumptions will be. If you think you are going to live a long time and would just put your lump sum into an account earning less than 1% interest, then you should not choose this option. However, if you can find an investment, such as tax free muni’s paying 5%, you could end up ahead in the long run. It all depends on your risk tolerance and the return on the investments available to you. - RNUG - Tuesday, Jun 5, 18 @ 10:55 am: Second, trying to calculate which would be the better deal is going to be guess work, pure and simple. Stop and think about this for a second. If your plan is to take the cash buyout now and invest it to make up for what you will lose in reduced future payments, basically you have to guess the interest rates for the rest of your life. Professionals can’t do that with any certainty. You also have to guess if the 3% compunded AAI will keep up with inflation over the rest if your life or if the 1.5% simple AAI will keep up with inflation. If we use history as a guide, for almost every 10 year or longer period, CPI (inflation) has averaged between 2.9% and 3.2%. The recent period of low CPI is not normal. Each individual will have to run their own numbers. But, as -Perrid- pointed out, the assumptions the State and you make are critical to the results … and you won’t know if you made the right assumptions for 20 or 30 years. You have to take a lifetime view of things. You are starting out with net present value, which is the State guessing the economy over the next 30 years. Then the State reduces that amount by 30%. So you are starting out 30% in the hole. You have to invest the 70% just to make up the 30% “loss” before you ever break even. And that doesn’t even factor in the effect on the spousal benefit. Personally, I wouldn’t take the deal. - RNUG - Tuesday, Jun 5, 18 @ 11:04 am: == Obviously you still have the fat check, but still… == The average pension is about $32,000. I wouldn’t call that fat. - Telly - Tuesday, Jun 5, 18 @ 11:23 am: I guess it’s pension revisionist history day on the right. McQueary is at too, calling on the legislature and unions to work together on a constitutionally acceptable compromise, as was done in Arizona. Yeah, that was tried here by the state senate a few years ago — and the Tribune and Speaker Madigan teamed up to shoot it down. - VanillaMan - Tuesday, Jun 5, 18 @ 11:48 am: This issue will go unresolved as long as Rauner is involved in it somehow. He blew any credibility he had via bad faith and lies, so no one would want to cut any deals involving him. Rauner has to go ASAP to even begin resolving this. - Lucky Pierre - Tuesday, Jun 5, 18 @ 12:07 pm: Really V Man, blaming the Governor for ditching his own pension reform plan and agreeing with Senator Cullerton;s pension consideration reform plan? Don’t blame Speaker Madigan for just ignoring the pension crisis the agrees is unsustainable. - The Woods - Tuesday, Jun 5, 18 @ 12:07 pm: Rep Batinick. In plain English how will net present value be calculated? You may be on to something here!! - Arthur Andersen - Tuesday, Jun 5, 18 @ 12:11 pm: RNUG, I wouldn’t either. We all also need to remember that you don’t get the buyout proceeds free and clear to buy a new Corvette, but subject to Federal rollover rules, meaning the cash has to go in a Roth IRA-type account and be withdrawn over time. - Oswego Willy - Tuesday, Jun 5, 18 @ 12:24 pm: ===Don’t blame Speaker Madigan for just ignoring the pension crisis the agrees is unsustainable.=== For the 9,587th time. Rauner doesn’t have 60/71 in the House. Had Rauner had that 60/71 in the House, he woulda made them stand on the steps and they all woulda railed on the Speaker. Bruce Rauner failed to cobble his needed votes. - TinyDancer(FKASue) - Tuesday, Jun 5, 18 @ 12:34 pm: =However, if you can find an investment, such as tax free muni’s paying 5%, you could end up ahead in the long run.= Unless there’s run-away inflation (remember the 70’s?) which is why even a 3% compounded AAI is really not ideal. Looks great when inflation is low, but a (fairly calculated) compounded cost-of-living increase would be the best. - Anonymous - Tuesday, Jun 5, 18 @ 12:38 pm: RE: the AAI. A portion of every deduction from employees’ paychecks go toward the AAI. It isn’t magic money from someone else. - RNUG - Tuesday, Jun 5, 18 @ 12:42 pm: == I guess it’s pension revisionist history day on the right. McQueary is at too, calling on the legislature and unions to work together on a constitutionally acceptable compromise, as was done in Arizona. == Almost all the changes in AZ were for new hires. That was done here in 2011. AZ did NOT remove their Constitutional protection of the State pensions. In fact, they now have a requirement the State contributions must be paid in every year. The only real change to existing AZ members was the adoption of a COLA and a contribution increase. Prior to the reform, there was no COLA or AAI. They had a Permanent Benefit Increase that was just the distribution of excess earnings and it was not guaranteed to be annually. Sometimes they went many years between increases, kind of like Illinois’ before the adoption of the AAI. (If you want all the details, see their manuals on their web site.) With the reforms, they actually got a (kind of, see later remarks)guaranteed annual COLA based on the CPI in Phoenix, but it is capped at 2%. So, to summarize, most the reforms were for new hires, and the change to existing workers was a COLA in retirement (something the union wanted) in exchange for additional contributions. Not quite the same as any of the proposed Illinois’ “reforms”. And even that COLA is questionable. This year AZ’s retirement system earned 18.6% but is saying the formula may not result in an increase. - wordslinger - Tuesday, Jun 5, 18 @ 12:45 pm: –We all also need to remember that you don’t get buyout proceeds free and clear to buy a new Corvette, but subject to Federal rollover rules, meaning the cash has to go in a Roth IRA-type account and be withdrawn over time.– Basically, if you’re relatively young, know you’re going to croak in the next few months and want to leave a package for your family, it might make sense. What’s the realistic over/under on the actual “savings” in FY19? $25 million? - City Zen - Tuesday, Jun 5, 18 @ 12:55 pm: ==The average pension is about $32,000. I wouldn’t call that fat.== For pensions, girth is measured by years of service. Did that person work 25 years for a $32,000 pension or 40? In TRS, the typical $32,000 pension translates to 22 years of service. To work 22 years then receive a $32,000 per year for life in retirement is not a bad deal. - City Zen - Tuesday, Jun 5, 18 @ 1:00 pm: ==A portion of every deduction from employees’ paychecks go toward the AAI. It isn’t magic money from someone else.== True, but the original deal was 0.5% of salary for 1.5% simple annual increase, which is what this buyout plan is offering. The increases to get AAI to the current 3% compounded formula were pension enhancements. - Arthur Andersen - Tuesday, Jun 5, 18 @ 1:01 pm: Anon 12:38, to be clear, SERS members don’t contribute to their AAI. 3% for retirement and 1% for survivor benefits-that’s it. Word, I can’t hazard a guess about potential savings because I’m not even sure if the “Dead Man Walking” scenario you outline would call for taking the buyout. Losing survivor benefits could be a big hit for some families. What I do know is that I’m glad I’m not one of the folks at the pension systems who are gonna have to make calculations, rewrite systems, and explain all this to tens of thousands of eligible members. I wish them well, as they are all capable people. - RNUG - Tuesday, Jun 5, 18 @ 1:04 pm: -AA-, if I had that kind of money, I’d rather buy a 1969 or 1970 Boss 302 Cougar Eliminator. Be more fun to drive a piece of history … not that I don’t already have a different piece of history to drive. - Person 8 - Tuesday, Jun 5, 18 @ 1:05 pm: A few things of note when I was researching the TRS side of things(for the AAI): This program only runs for 3 years and is only offered for those retiring in that span. “TRS must ask every Tier 1 member upon retirement”"program will exist until June 30, 2021″ “alternative 1.5 percent Tier 1 AAI takes effect on the January 1 following age 67″ This is an uptick of 5 years(kind of) for TRS tier 1 employees. They start their AAI at 62 (even if they retire at 55). However at age 62 they get 3% for every year they did not get the AAI. Meaning they could get a 21% increase at age 62 after being held flat for 7 years. Like RNUG said, every situation will be different, but a simple excel spreadsheet will show that unless you have a JG Wentworth situation, my guess is your holding onto your current AAI. - Lucky Pierre - Tuesday, Jun 5, 18 @ 1:05 pm: For the for the 9,587th time, the Speaker has continued to ignore the pension crisis for the past 3 1/2 years and did not call the Cullerton bill for a vote for purely political reasons. And you say this is the Governor’s fault pension reform has not passed? Perhaps you can explain to your fans how exactly a bill the Speaker opposes leaves the rules committee? And while you are at it you can explain how it works out for the Democratic members of the GA who cross the Speaker? This is the kind of ridiculous spin you have perfected OW, blaming Governor Rauner for supporting a bipartisan bill but not the Speaker for ignoring it - Oswego Willy - Tuesday, Jun 5, 18 @ 1:15 pm: ===For the for the 9,587th time, the Speaker has continued to ignore the pension crisis for the past 3 1/2 years and did not call the Cullerton bill for a vote for purely political reasons.=== “Lucky Pierre” 1) Is there 60/71 votes to pass the Cullerton pension plan? 2) Who are these 60/71? Otherwise, stop. You have nothing. If Rauner wanted to embarrass Madigan he woulda found those votes. They don’t exist. - Oswego Willy - Tuesday, Jun 5, 18 @ 1:18 pm: ===This is the kind of ridiculous spin… blaming Governor Rauner for supporting a bipartisan bill but not the Speaker for ignoring it=== It’s only spin if there are 60/71 votes that the Speaker is ignoring. There aren’t 60/71 votes. ===And you say this is the Governor’s fault pension reform has not passed?=== lol A budget passed 153-20, forcing Rauner to sign that budget with the 32% tax increase and zero reforms. If Rauner wanted to return the favor he’d find 60/71 votes to embarrass Madigan. Keep up. - Joe M - Tuesday, Jun 5, 18 @ 1:20 pm: ==and unions to work together on a constitutionally acceptable compromise,== Not all SERS, SURS and TRS participants are members of unions. Especially with SURS, there are a large number of employees at state universities and community colleges who are not part of unions. Furthermore, the pension benefits are not part of any union contract. It is my understanding that the “contractual relationship” that the Illinois Constitution talks about - is between an individual and their pension plan. I am a proud union member. But the unions do not have the right to negotiate my pension. - RNUG - Tuesday, Jun 5, 18 @ 1:22 pm: The Cullerton pension bill as modified to satisfy Rauner was a unconstitutional forced choice, not a valid offer / acceptance model. Better not to pass a bad bill that the courts could use to further restrict your options. - Arthur Andersen - Tuesday, Jun 5, 18 @ 1:28 pm: RNUG, between my brother and me, we’ve owned every Vette except a C1. We’re both ambivalent over the C7, though, even though it’s arguably the most well-sorted model to date. The Cougar is an excellent choice; you had me at “sequential turn signals.” I would try to find a nice 1969 Z-28 Camaro if I fell into some dough. #CarGeeks To the Post, pardon my typo above. SERS member contributions (coordinatinated) are 3.5% retirement and 0.5% survivor benefit. - Joe M - Tuesday, Jun 5, 18 @ 1:34 pm: What I meant to say was: But the unions do not have the right to negotiate REDUCTIONS to my pension. And as mentioned, the pensions have not been part of union contracts to begin with. - Demoralized - Tuesday, Jun 5, 18 @ 1:53 pm: ==This is the kind of ridiculous spin you have perfected == That’s pretty rich coming from the spin master. - My Button is Broke... - Tuesday, Jun 5, 18 @ 1:59 pm: As to the systems, they have a lot of work to do. They still haven’t implemented Tier III which was passed last year, and then now this… - thoughts matter - Tuesday, Jun 5, 18 @ 2:00 pm: ==For pensions, girth is measured by years of service. Did that person work 25 years for a $32,000 pension or 40? In TRS, the typical $32,000 pension translates to 22 years of service. To work 22 years then receive a $32,000 per year for life in retirement is not a bad deal. == it is when they will not get their social security AT ALL because they taught for 22 years. it wouldn’t be a bad deal if they also got the social security benefits for the years they paid into social security. - Markus - Tuesday, Jun 5, 18 @ 2:05 pm: –We all also need to remember that you don’t get buyout proceeds free and clear to buy a new Corvette, but subject to Federal rollover rules, meaning the cash has to go in a Roth IRA-type account and be withdrawn over time.– I don’t think a Roth is allowed without immediately paying the tax on the lump sum; pensions are federally taxable distributions so a regular tax-deferred IRA would be required for the rollover account. - Anonymous - Tuesday, Jun 5, 18 @ 2:28 pm: ==A large amount of our employees will be able to keep their base annuity and get a six figure check simply for taking a reduced COLA== That would have to be every bit of six figures (and then some) for me to consider it. If it’s enough to pay for my kids’ colleges and have some left over, I’d have to think about it seriously. I’m supporting a family of four on a single income, and if I can get the money now instead of in my 70’s I can’t take that lightly. - Perrid - Tuesday, Jun 5, 18 @ 3:42 pm: Anonymous@2:28, only you know your own situation but spending your future to pay for something now is generally not a good idea. - Nieva - Tuesday, Jun 5, 18 @ 3:46 pm: Where do I sign up? I could use a new camper and pickup truck. - Arthur Andersen - Tuesday, Jun 5, 18 @ 3:47 pm: Markus-good catch on your part. I am guilty of some imprecision in my comment. The point remains, though, that for many eligible members the rollover requirement kills the desirability of this option, which the sponsors refuse to acknowledge. - Mama - Tuesday, Jun 5, 18 @ 4:02 pm: Rich, I have 2 questions: 1.) Is this new pension law for current employees only, or does it include retirees? 2.) Which pensions (SERS, TRS, etc.) does this new law affect? - RNUG - Tuesday, Jun 5, 18 @ 5:52 pm: -Mama- The inactive buyout applies to SERS, SURS, and TRS at 60% present net value. The active partial buyout / AAI downgrade applies to only Tier 1 members and is a 70% present net value. But as I’m reading it, all you will get is 70% of present net value of the *difference* between the compounded 3% AAI and the delayed / non-compounded 1.5% Tier 2 AAI. Unless you are retiring young, you may find that is not as big a number as you might think. Keep in mind present net value is already discounted from the total dollars you would receive in total based on a guess about future inflation. We don’t know the assumptions the State will use, but I may try to SWAG an example later tonight if I can’t sleep. If I do, it will probably be for a 65 year old with a starting retirement of $40K and figure the life expectancy to 85. I would assume 3% inflation for figuring present net value. And don’t forget the buyout person won’t get their first AAI until age 67. Any of you wanting to play at home, Excel has all the formula you need. Be sure to post all your assumptions along with the results. You can’t compare answers if the assumptions are different. - RNUG - Tuesday, Jun 5, 18 @ 5:54 pm: Clarification …. only applies to active (employed) Tier 1 members - Mama - Tuesday, Jun 5, 18 @ 7:49 pm: RNUG, thank you for the clarification. - Anonymous - Tuesday, Jun 5, 18 @ 7:49 pm: RNUG I could be doing this all wrong but I come up with approximately 14,000. I hope that I am not embarrassing myself. Before I did this, I thought that it would be a lot more. I am shocked at my number. If I am wrong, I hope that it is a big under the amount calculation. - RNUG - Tuesday, Jun 5, 18 @ 8:22 pm: -Anonymous- -AA- is better at the financials than I am, but I’ll try after the grandkids go home. - Jibba - Tuesday, Jun 5, 18 @ 8:45 pm: Anon at 7:49…I used an online financial services calculator and came up with about 35K present value using the most conservative interest rates and my actuarial lifespan for a person my age. I bet you are not far off. On the other hand, I calculated my pension both ways, using 3% and 1.5% AAI, and the total pension payment differences were in the high six figures using a longer lifespan that I would be silly not to consider in my financial planning. Thanks, but no thanks. I’ll take 100% of my money. - M - Tuesday, Jun 5, 18 @ 9:50 pm: What is the PA number on this new pension law? - Anon - Tuesday, Jun 5, 18 @ 10:11 pm: The state keeps wondering down the wrong path. Incentives to keep employees working longer is the right choice - RNUG - Tuesday, Jun 5, 18 @ 10:59 pm: First off, a disclaimer. I am not a financial or spreadsheet wiz, so I may have made multiple mistakes calculating this. But I think I got it right. Notes: (1) Other than the Net Present Value (NPV) calculation on the different pension payments due to the AAI difference, there is no adjustment for loss of buying power of a dollar due to inflation. (2) I calculated things on an annual, not monthly basis because I was lazy and doing a quick and dirty analysis. Actual results calculated monthly will vary from this example. Assumed retirement December 2018 at age 65 with a January 2019 initial pension of $40,000. That $40K pension with the 3% compounded AAI would have total payments of $1,147,059 through age 85. Using 1.5% non-compounded AAI starting at age 67, it totals $954,000. That is a difference of $193,059 less. Or to put it in other terms, at age 85 you will be receiving about $21,000 a year less pension. Using the NPV function over that 20 years and a 3% discount rate, the net present value is assumed to be $86,235. Further discount that to 70% and the payment would be $60,364 pre-tax, roughly the price of a new entry level Corvette. (Hey, -AA- and I are both car guys, so we think in those terms.) So, in this example, you are trading about $193,000 spread over 20 years (mostly back end loaded the last 10 years) for $60,000 today. That’s about $133,000 you gave the State in this example. Change any of the assumptions in the above example, and the results will vary greatly. For example, just using a 4% discount rate (likely if inflation returns) lowers the payout to $49,398 (about a $20,000 drop). Or shorten the life expectancy to age 83 and the payout drops to $45,035. Do both, and it is only $36,816. If you really want to have fun, use something like a 7% discount rate (the earnings level the pension funds assume) … the payout drops to only $25,513. As I said earlier, the assumptions used are going to be extremely important. And I highly doubt, under this administration, the State will use assumptions favorable to the employee. - Whatever - Wednesday, Jun 6, 18 @ 7:38 am: RNUG == If you really want to have fun, use something like a 7% discount rate (the earnings level the pension funds assume) … the payout drops to only $25,513. == First, I think that is the proper discount rate to be used, because that is the assumed return on investment for the system. Second, this shows how wrong are the people who claim defined benefit plans (especially those with some kind of inflation adjustments built in) are unsustainable. Over the years, the stock market (and the investment earnings of the pension funds) support an assumed return in the 7% range and, with that rate of return, the present cost of funding the Tier 1 pensions is easy to fund. If you fall behind, though, it’s like running up a credit card debt at 7% interest, compounding, and it doesn’t take too many years before that compound interest becomes a real burden. It wasn’t the unions or the generosity of the pension plans, it was the failure to currently fund the plans that caused the problems we now face. - SI Native - Wednesday, Jun 6, 18 @ 7:54 am: I’m vested and inactive Tier 1 in both Missouri and Illinois. I haven’t looked at MOSERs numbers, but I’d question the wisdom of trying their idea here. MOSER has taken two runs at me to get me to bite down on their lousy offer. I know a lot of people who are also inactive Missouri Tier 1 and no one I know has lept to Missouri’s rescue. And, since the benefits are even sweeter in Illinois, SERs is going to be out of luck here too. These systems can’t count on that many people who are unable to do math, or who need the money for current large bills….. - jibba - Wednesday, Jun 6, 18 @ 9:01 am: And no one is talking about the social insurance value of the pension and the AA in addition to the actuarial valueI. No one wants to run out of money in their old age, and the pension will keep coming as long as you are alive, and the 3% AAI might keep you out of the poor house. Too valuable to trade away for a Corvette today. - Curiosity - Wednesday, Jun 6, 18 @ 9:02 am: I am far from a financial wizard. I understand that the COLA reduction buyout is a great deal for the state, otherwise they wouldn’t offer it. I am trying to figure out what the difference would be between the two figures (knowing full well the 70% and 1.5 AAI will be substantially less), but I can’t find a good online calculator that factors in everything. What have you all been using? - Jibba - Wednesday, Jun 6, 18 @ 9:31 am: I made my own Excel spreadsheet to calculate what my total pension payout would be using 1.5 simple vs 3% compound, and entered that value in an online financial planning calculator to determine present value. Sorry if that doesn’t help much. - Streamwood Retiree - Wednesday, Jun 6, 18 @ 9:49 am: “First, I wish everyone would get the language right. It is not a Cost Of Living Adjustment (COLA), it is an Automatic Annual Increase (AAI). COLA’s are tied to dome measurable statistic such as the Urban Consumer Price Index (CPI-U) and vary annually. AAI’s are fixed increases that do not vary. ” Thank you, RNUG. It’s the crux of the problem. If high inflation returns, the State is ahead with AAI. If low inflation prevails, the employees are ahead. IMHO, AAI should be replaced with a true COLA based on Federal CPI-E. - Peaceonearth - Thursday, Jun 7, 18 @ 3:36 pm: Is this a tax free buyout? If not, how much taxes would someone have to pay on their lump sum? - Lost - Monday, Jun 11, 18 @ 12:24 pm: I have problem with the average salary or pension. For a $32000 pension and 22 years of service the average salary in the last 4 years has to be $82,644. Are really that good the salaries? who makes this amount of money? a secretary? a janitor? or is this the average of 4 low pensions and one fat pension? - Streamwood Retiree - Monday, Jun 11, 18 @ 12:36 pm: $82K is high? Sounds like a typical professional salary to me. The state can’t hire H1-B’s can they. So, engineers, teachers, managers, upper-grade police and firefighters, auto mechanics. How about plumbers and electricians? Although I would expect more like $60K for the last two. Sounds normal. Not every job pays $15 an hour. “Do you want fries with that?” Sorry, comments for this post are now closed.