Bob Buerkle's speech to STRS Board February 16, 2023

Setting the Record Straight 

STRS Speech by Bob Buerkle 02/16/2023

On "Groundhog Day" I received an STRS E-update claiming that there were social media groups spreading misinformation about the STRS Pension benefits that members are paying for. This reminded me of two things. I have heard this before from STRS about misinformation, and I have heard STRS claim how great they are doing, over and over and over again. This occurs at virtually every Board meeting, every presentation by our hired consultants and actuaries, every group presentation by STRS and in most STRS Newsletters. Every day I wake up with the same feeling, like it's never going to end! I will attempt to set the record straight today by presenting two scenarios; the current STRS pension plan and a self-directed investment plan.

Here's the self-directed account value you would accumulate if you invested $7000 annually for 35 straight years and earned a 7% annual investment return average.

I chose a 35-year investment period because STRS currently requires teachers to work for 35-years. I also chose an average 7% return because that is the investment return assumption STRS currently uses. In this scenario the total of $245,000 dollars invested, will more than quadruple in value over the 35-year period. Also, assuming a 7% continuing return average thereafter, without ever touching your $1,042,394 of principal, this account will generate an annual income of over $70,000 per year, forever. Upon death, the entire $1,042,394 of principal will belong to the teacher's heirs.

Now let's compare this scenario to an STRS Pension. I used a $60,000 salary average for all 35-years and a $70,000 Final Average Salary. And how much was contributed by the STRS Employee? Well, 14% of $60,000 = $8400 per year and the employer contributed another $8400 per year. That's $16,800 per year, or $588,000 in contributions based on a total career earnings of $2,100,000. After 35 years of service, STRS would then provide a pension of $53,900. (35yrs x 2.2% = 77% of $70,000 = $53,900)

When you &/or spouse die, the pension stops and STRS keeps all of the remaining principal. In fact, a 35-year career retiree will also receive 5 fewer years of pension payments than a 30-year retiree. Five years of pension payments = $269,500 less in lifetime income.

Can you now see why STRS Management is writing mass E-UPDATE Newsletters to our membership, scrambling to overcome the storm that they have created?