Making a pension back-up plan

Nearly half of all Americans now say they’re worried they’ll outlive their money, or won’t be able to save enough to ever retire. Whether you work in the public or private sectors, WGN’s Steve Sanders reports one thing is clear; the retirement landscape is changing.

Adriana Caballero is a former social worker turned bi-lingual education teacher at Piper Elementary in Berwyn. And with pension reform in Illinois, her career change has left her feeling far less secure.

“The uncertainty is very stressful. I think it’s also very taxing on teachers. There’s so much that we need to worry about that this is one more thing,” she said.

Matt Guritz is a coach and the social studies department chair at Hinsdale South. With more than 20 years of teaching experience, he’s one of those mid-career teachers caught in the middle of a changing pension system.

“Everybody’s working longer. But to go from you know a 34 year teacher requirement to a 40, or 45 year teacher requirement as the new teachers are being asked, I don’t know do we really want 70 year old football coaches?” he said.

Mike Moretti is also a teacher and coach at Hinsdale South who invested in a masters degree from the University of Chicago. Now, with a stay-at-home wife and four kids, he says contributing to their Roth IRA on top of the almost 10 percent they pay into the teacher retirement system, is almost impossible.

“We went into teaching knowing that we’re not going to make a lot of money but we would be able to sustain a family and have a middle class lifestyle. And the pension was kind of part of that deal. And now the deal changes,” Moretti said.

“No one’s gonna care more about your money than you do,” says Mary Deshong Kinkelaar. She is certified financial planner who helps families figure out their new reality.

“I see a lot of people who are looking at the investment piece and are losing track of how much should we be saving? How much do we forfeit today of our lifestyle today for a future when we don’t really know what we’re aiming at? So have a target. Understand what that target should be,” she said.

But the trouble is, it’s a moving target. Over the past two decades, responsibility for retirement planning has been shifting from the employer to the employee. While no changes have yet been made to the Chicago Teachers Union contract, many teachers like 16 year veteran Angela Davis, are making Pension Plan “B.” Davis takes advantage of a 403 (b), the teachers equivalent of a 401 (k) that allows savings with tax benefits.

“Before I was just kinda doing it on my own. And that’s when I felt like I needed to get some kind of specific advice from financial adviser. I’m putting $400 a paycheck into my 403(b). But, am I putting it into the right investments? Like I want to not only just save it but save it smartly,” Davis said.

“So it’s a challenge to make sure people are aware of the plans themselves,” says Curt May, a National Sales Manager for AXA, currently the nation’s number one provider of K-12 pension planning. “I think a great start to begin would be to go to your employer. When you look at these types of retirement vehicles, having a tax break is key; The ability to set money aside on a pre-tax basis is probably more important than anything at this point.”

Both financial planners stress the positive; It’s never too late to start saving. Automate your savings, it’s less painful. Spend less. Stay on top of tax laws and fees that can erode your nest egg.

And like the teachers we interviewed, have a back up plan, just in case the pension you were expecting falls short.

“My back up plan is just to keep working, “ says Adrianna Caballero. “I don’t think retirement is an option for me.”

Matt Guritz isn’t sure how to handle his lifestyle right now, “because I don’t know what’s gonna be there for me 10-15 years from now when I might be able to retire.”

“I do envision myself working probably 10 years longer than I thought I would,” says Mike Moretti, who also worries about relating to teenagers as he gets older.

And Angela Davis says she tells younger teachers all the time, not to rely on their pensions alone: “Don’t expect the pension to be there in the form that we assumed it was gonna be in. And try to save as much early on. I wish I would have done it sooner.” ”

Though you can certainly do your own financial planning, many people feel overwhelmed, and ill-equipped to handle such important financial decisions. We’ve assembled a number of resources that may help you decide whether to go it alone, or hire a financial planner. Start clicking here.

Producer Pam Grimes and Photojournalists Mike D’Angelo, Steve Scheuer, Carlos Cortez, Clark Gray, and Ike Isaac, contributed to this report.

https://www.sec.gov/investor/pubs/invadvisers.htm

Hourly fee financial planning: http://garrettplanningnetwork.com

Mary Kinkelaar’s website: https://kinkelaar.com

Mary Kinkelaar’s blog: http://www.speakofmoney.com/

AXA Advisers: http://www.axa.com

IRA’s for Teachers: http://403bwise.com/

IRA’s for Government Workers: http:/457bwise.com

RECOMMENDED BOOKS:

“Know your options before investing in a financial adviser” by Gail Marx Jarvis at Chicago Tribune

“Control Your Retirement Destiny: Achieving Financial Security Before the Big Transition” by Dana Anspach

“Personal Finance Workbook for Dummies” by Sheryl Garrett

“Second-Act Careers:  50+ Ways to Profit from your Passions During Semi-Retirement: by Nancy Collamer

“Social Security, Medicare & Government Pensions; Get the Most of Your Retirement and Medical Benefits” by Dorothy Matthews Berman and Joseph Matthew

“An IRA’s Owner Manual” by Jim Blankenship

 

 

 

 

3 comments

  • carlyt

    For the best chance to retire on your terms you should start planning and investing early in life and do it consistently (with every paycheck). If at all possible develop multiple streams of income for retirement (social security, pensions, dividends, part time work, etc.) and not depend on ss benefits as the sole source of income. I found that the site Retirement And Good Living provides good information on planning and finances as well as many other topics including health, retirement locations, part time jobs, volunteering and more. And it has a great blog of posts by guests from around the globe.

  • Eric

    Just watched your story on backup plan for teachers pension. Have a hard time feeling sorry for people that are making 100k & 80K. Must be nice to have a job that your wife can stay home to raise the kids. Next time why don't you profile some teachers that don't get paid extremely high salary. 100k is just middle class?
    http://www.suntimes.com/news/education/5679128-41

    • Mark

      Not to mention that these teachers will be receiving pensions of 75% of their salaries for the rest of their lives. Yes, they will not be getting their $1800 a month Social Security checks. But how about $8000 a month? Who couldn't live off that. Our insanely high property taxes are why these people are paid so well. Teachers need to stop complaining about wages for the half of the year that they work!

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