Taxpayer Education Foundation has published the top 200 Illinois pensions as of 2/1/2015. There are 12,154 state pensioners collecting more than $100,000 per year and 85,893 state pensioners collecting more than $50,000 per year. http://www.taxpayersunitedofamerica.org/wp-content/uploads/2015-Top-200-grids1.pdf
Many of these people will receive more in retirement than they did while working. The system is unsustainable.
To understand how pensions work, see: pensions-explained/
I played with excel, (start with 100, but this makes no difference)
- Assume 9% taken towards pension + employer matches.
- Assume (simple annual compounding) 8.5% each year for return on investment
- Assume our employee works 30 year and
- the pension starts at 75% of the average pay for the last 4 years then has a 3% COLA each subsequent year.
- If the employee received 5% raise every year while working the money runs out in 21 years.
- Make it 4% raises and it runs out in the 28rh year.
- With 3.5% raises it will last 34 years (This works)
- Assume a 20% raise in the last year, and the money runs out 3 years earlier.
- Reducing the return on investment to 8% (with 3.5% career raise, no spike) runs out in year 26.
The effects of compounding are huge. End of career raises make a big difference because they greatly affect the amount taken out with little affect on the amount invested. Big raises early in the career with small end of career raises would allow the investment time to grow.