Retirement vs. Layoffs

Once again an educational tsunami has wreaked havoc on the California Public School system.  All the small, incremental, yet significant gains that have been made in student achievement growth during the last few years will be summarily erased due to the state’s budget crisis and resultant reduction of revenue flowing to school districts.

What a very sad commentary for a state that enrolls 11 percent of all K-12 public school students in the United States, and was known to be the model for excellence in public education in the 1950s and 1960s.

Increasing class sizes, furlough days, and decreases in teacher pay are not answers to an already worn-down system. However, encouraging the number of teachers near retirement to retire is an appropriate response.

By last Friday, March 13, more than 26,000 reduction-in-force (layoff) notices were sent out to teachers, counselors and librarians, not to mention administrators, in California. According to the SJ Mercury News 1,000 of those laid off were teachers in classrooms today in Silicon Valley. Many of these letters were mailed to smart, energetic and highly qualified new teachers. This is not a good prescription for a healthy public education system.

I urge teachers with 30 or more years of experience, at 58-plus years of age, to look closely at the retirement facts.

Here’s the scoop…many teachers nearing retirement who stay on for one more year are working for pennies on the dollar, and taking a job away from the newer colleague. Even though teacher retirement, CalSTRS, is not as good as police, fire, or CalPERS retirement systems, it is certainly good enough. Let me illustrate.

If a teacher makes $80,000 after 30 years of teaching at age 61.5 years of age he/she can retire at 72 percent of his/her current annual income, plus an additional longevity bonus of $200 per month. So for this example the annual retirement income is $60,000. 
The longevity bonus will sunset on December 31, 2010 if you are not retired before then. The longevity bonus maxes out at $400 per month at 32 years of service.

As a current employee a teacher has 8 percent of their monthly income subtracted for CalSTRS in one of many payroll deductions. When one retires, that 8 percent is not deducted. When you compute 8 percent not deducted from earnings any longer, the reductions in income taxes for making a lower amount, as well as gas, vehicle, and clothing costs you will probably discover you are working for pennies on the dollar if not working for less than you would make in retirement. Your retirement will be a win-win for everyone.

If one is still hankering for more than playing golf, reading cooking, gardening, or volunteering, districts always need substitute teachers and are more than happy to process retired teachers to substitute in classrooms. The retiree can choose the day, grade level and school in which to sub. Districts pay retirees to substitute at various rates of pay, but according to my calculations for one day per week of subbing one can earn $600-$750 dollars more per month—vacation money.  You can teach summer school, adult education classes, or just volunteer, predicated on income needs.

Currently, teachers do not have to declare they are going to retire until after the school year is over, and most wait until the end to divulge their intent. This practice causes districts to send out more layoff notices than necessary. I exhort all teachers close to retirement who can afford its benefits to declare their intent to retire to their human resource department by the end of April. The information can be kept confidential until June. Reducing the need for layoffs should be our most important priority this spring.

One mitigating factor in my exuberance to hire all 1,000 Silicon Valley teachers back by the end of April is health care. One must ensure prior to qualifying for Medicare that your health care needs are covered. Some districts do the bridge coverage if you have taught for them for a specified number of years, however it is something important to consider.

With good personal planning and guidance (hand-holding from HR departments) we can ameliorate the tragic result of layoffs that devastate public education.

Lastly, according to many actuaries earlier retirement adds to the longevity of life. The earlier you retire the more money you collect from CalSTRS. If you wait too long you might not get much return on your investment.

Joseph Di Salvo is a member of the Santa Clara County Office of Education’s Board of Trustees. He is a San Jose native. His columns reflect his personal opinion.


  1. Great points Joseph.

    I have a few friends that are new teachers which are actively looking for jobs.  With this economy and the layoffs in CA, many seem demoralized at the obstacles facing them for employment.

    The economy is crap and jobs are slim… I’m going back to school for a couple years and hopefully things will be back on top when I get out – sort of like hibernating!

  2. I don’t follow the argument that “retirement is a win/win for everyone” financially.

    If, as you describe, retirement means little decrease in a teacher’s pay, then it also means little decrease in school expenditures. 

    In that case, there are two checks to be cut post retirement: one for the retiring teacher, and one for the new hire.  ( In your example, a single $80K check is replaced by a $72K and a $50K.  This is a net increase of $42K. )

    One check is for CALSTRS, but CALSTRS is ultimately fuded by school districts, so it’s still comming out of the schools’ budgets, and net reduces funds available for other school needs.

  3. cut district staffs, multiple asst. principals; or even merge districts and get rid of multiple overlays of $150k administrators who add no value to education.

    Keep teachers.

  4. JMO,

    Agreed, the great number of districts we have, some as small as one school (!!!), is a complete abomination. 


    When the education czars get serious about rectifying this situation, I’ll get serious about listening to pleas for more funding.

  5. Greg #3 re: Di Salvo #4,
    You see, Greg. There IS a free lunch. You CAN get something for nothing. 2+2 DOES equal 5. THIS is how our children are being taught to think? Un Be Lievable.
    I also like the way Joseph casually mentions that an $80,000/yr. teacher retiring at age 61.5 will get retirement pay of $60,000/yr.
    You or I would get less than half that amount from a Social Security System retirement based on similar figures.
    Somebody explain to me again why we think California’s teachers are undercompensated.

  6. Greg Perry,
    STRS payments come out of an entirely different pot of money reserved for retirement. The win-win comes from having fewer new teachers laid off and the retiree enjoying the fruits of their career while earning nearly the same in their encore career. There is also the distinct probability that the district will save a few percent in salary costs based on the differential pay between between newer teachers retained and the 30+ year career teacher.

    Joseph Di Salvo

  7. #4-

    I know that STRS payments comes from the CALSTRS pension fund.

    If you increase payments out of STRS, you have to increase future payments into STRS.  The money doesn’t fall from the sky.

    So what fills up the CALSTRS pension fund?  Contributions from local school districts.  When pensions payments go up, schools have to contribute more in the future, and those extra payments cut into future school budgets.

    It turns into borrowing from future school budgets, but borrowing at a very bad interest rate.  (because you borrow 30K and pay back 72K, plus interest.)

  8. I am not familiar with CalSTRS.  I am a member of CALPERS in mid-30s.  I wouldn’t retire early if I am in those teacher’s shoe because of fear of inflation.

    Like most pension system, CalSTRS cap the COLA adjustment at some rate.  Based on this website: CalSTRS/fastfacts.aspx
    The purchase power protection adjustment (COLA) is caped at 2.5% annually.(Which is better than some CalPERS plan that’s capped at 2% annually.)

    So once retired, the income stream can only grow at 2.5% annually regardless of actual rate of inflation.  Having heard so many stories from 70s, that’s not very comforting.

    It seems to me, the Federal Reserve’s plan is to use inflation as a solution to all those bad loans/toxic assets problem.  With enough inflation, all the people with underwater mortgages will be rescued.  The one who will pay the price will be savers and retirees. This is nothing new.

    It’s not like working teachers won’t see their purchase power being eroded by inflation.  But if inflation is 10% and working teachers only get 6% COLA, that’s still better than the 2.5% for the retired teachers.

  9. I would like to correct the comment that the longevity bonus will “sunset” if not retired before 12/31/2010.  Although not a teacher, in looking up info for my wife, who is contemplating retirement and will be eligible for said bonus, I believe the law provides that so long as you are eligible for and have qualified for the bonus (i.e. 32 plus years) as of 1/1/2011, you can receive it, even if you retire AFTER 1/1/2011 (i.e. if you retire as of 7/1/2011).  You MUST have qualified for it by 1/1/2011…time worked after that date will not make one eligible, but you will not lose eligibility.