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By: Mark Glennon*


Mr. Average was a Chicago firefighter who retired last year. His wife worked outside the home, as in most families today. Ms. Average taught in a Chicago suburban school and she retired last year, too, when both of them were 58 years old. Mr. Average worked 30 1/2  years as a firefighter and Ms. Average worked 33 years as a teacher.


What is their combined pension? How much money would a couple without a pension need to be in the same financial position as Mr. and Ms. Average?


Here’s the analysis based on pension and salary numbers from the most recent publications of the Chicago firefighters’ pension and TRS, the pension for Illinois teachers outside of Chicago. These are, in fact, the average salaries and pensions in each of those systems for last year’s retirees who had the years of service assumed above:


Mr. Average:

Salary when he retired: $110,000

Annual pension amount: $78,000


Ms. Average:

Salary when she retired: $94,500

Annual pension amount: $67,000



Salary at retirement: $209,000

Annual pension amount: $145,000


Pensions for both of them will increase three percent each year irrespective of inflation.


What are the current cash values of those pensions? That’s no mystery. Anybody can buy an annuity providing comparable payments for the remainder of their life, though the prices vary a bit depending on who is backing up the promise to pay.


To duplicate Mr. and Ms. Average’s pension, you would have to pay about $3.5 million in cash today.


To get that, I asked a retirement specialist for a quote on two annuities for payments comparable to Mr. and Ms. Average’s pensions, at their age. Answer: $3.7 million. You can also get quotes online yourself at sites for annuities, like the one linked here for Fidelity Investments. Use the same numbers as Mr. and Ms. Average there and you get a total cost of about $3.4 million (but that’s with just a 2% annual COLA). Those quotes do not include survivor benefits — the annuity for one spouse would terminate entirely upon death. In contrast, public pensions do have survivor benefits for dependents, which would boost the cost of a comparable annuity substantially. Nor do those annuity prices include healthcare benefits.


Keep two things in mind:


  • Since Mr. Average worked 30.5 years before retiring at age 58, he probably worked at least four years in a prior job, so he should have additional benefits from that.
  • As a teacher, Ms. Average worked 165 days per year so she, too, may have other benefits from work during the summer. In any event, she did not work a full-time equivalent of a career in the private sector. To really compare her compensation to most other jobs you would need to mark her’s up by 33%.


If you’re shocked by how large those numbers are, that’s perhaps because your are regularly misled by “average pension” numbers. The average pension paid by any particular plan includes those who worked only part of their careers in a job covered by that pension, early retirees and part-timers. For example, the average TRS pension is only $46,500, mainly because of teachers who taught only part of their career in a school in that system. Instead, you really have to look at the average paid for a person retiring recently who worked their whole career in that system.


The average pension and salary numbers above are from the most recent actuary report (page 40) for the Chicago firefighters pension and from TRS’s annual financial report (p. 108).


How do those pensions compare to Social Security benefits and retirement accounts in the private sector? This year’s maximum benefit at 66, or full retirement age (which is the benchmark the agency uses), is $31,956 a year. The present value of an annuity for that amount at that age would be about $570,000 (disregarding survivor benefits, as done above). But the average Social Security benefit is less than half that —  $15,444 per year. And the median near-retirement household retirement account (for those who even have such an account) is about $104,000. So, the total value of those two Social Security payments for husband and wife, assuming the maximum, plus two retirement accounts of that size would be about $1,350,000, which is under 40% of the value of Mr. and Ms. Average’s pension.


One objection to the average pension numbers I used might be that they include high paid administrators. I don’t think that distorts the numbers materially, for two reasons. First, there just aren’t that many administrators compared to rank and file pensioners. Second, “spiking” is a major problem throughout Illinois, particularly in TRS, as widely reported. Spiking is moving rank and file workers into those high paid administrator positions as they approach retirement in order to increase the pension. Distinguishing spikers from true administrators would be difficult and it’s fairer, anyway, to keep them in the averages.


I used the Chicago firefighter and TRS pensions as the examples here because they are particularly important. The Chicago firefighter pension is among the most underfunded of the major pensions in the state (24% funded), making it a major element in Chicago’s crisis. TRS has by far the state’s largest unfunded liability ($58 billion). Other pensions have salary and pension levels that may be higher or lower. Chicago police salaries and pensions, for example, are somewhat lower than for firefighters. Judicial pensions are much higher.


Beyond that, the numbers should speak for themselves.


*Mark Glennon is founder of WirePoints. Opinions expressed are his own.




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The pensions cited above seem appropriate in light of the salaries they’re based on and the years of service. We have to remember that the pensions paid are part of the public employees total compensation package. We must also remember that the employees have been paying into their retirement systems from day one. If that money had been invested privately it would have grown into a considerable amount over the 30 plus years. I don’t know about firefighters, but teachers don’t receive any social security.

As for teachers only working nine months; it’s simply not true. Teachers work more hours per year than anyone.


With regards to underfunded pensions and public safety workers, I feel that if the politicians don’t deliver on their pension promises, the term “Blue Flu” might become more popular here in Illinois:

Tough Love

Let them and then pull a Ronald Regan …. FIRE THEM ALL like regan did with the striking Air Traffic Controllers.

And a BIG side benefit ….. once terminated, there is zero growth in their pensions.

A BIG PLUS for the Taxpayers.

mark glennon

Yes, that and worse are probably inevitable and a major concern.


Anon: The only way the legislators could deliver on their pension promises, would be to raise taxes on the private sector to even more astronomical levels. And the increases would have to be breathtakingly large, economy-killing large, home-value-killing large…….and would result in “flight” out of Chicago. How’s that sound to you Anon ?



Respectfully, I was just bringing this story to light, and not condoning this practice.

Rex the Wonder Dog!
“The Chicago firefighter pension is among the most underfunded of the major pensions in the state (24% funded), making it a major element in Chicago’s crisis.” Mr. Glennon, at a funded level of just 25% I would imagine the firewhiner pension will be 100% depleted in 5-7 years. Is that correct? Have you done the math on it? If I were ANY pubic employee ANYWHERE in IL, especially Chicago, I would be wetting my pants with the highest anxiety life can deliver. It is shameful, it is criminal, and as much as I would like to stick it to the greedy public employees who certainly deserve this,… Read more »
mark glennon
Rex, it looks to me like the firefighter pension wouldn’t completely run dry for about 10 years at the most recent burn rate, depending on what happens with tax increases and additional contributions. But there’s actually not that much importance in that date. Better to think of it as a continuum where the pension is gradually burning down to a pay-as-you-go system. As assets deplete earnings also diminish, so contributions must increase. For that reason a pay-go plan is 3-4 times more expensive to run than a normal healthy one. Think of it as a gradual slide towards that. But your ultimate point is entirely correct —… Read more »
Peter Quilici
It would be interesting to see the almost 700 Illinois government employee pension plans produce computer print outs of payouts to current retirees in tranches at $5000.00 increments. Of course this would require outmoded digital data systems which government lacks. Forget about modern systems. Computerization is government’s enemy because it enables transparency and easy data access. I’ve been following this issue since the non-reform enacted during the Gov. Edgar administration. In Illinois we have a full blown union oligarchy or plutocracy (I can’t decide which term is more appropriate). Maybe unionocracy will have to do. What I think most people are in denial of is that Illinois… Read more »
mark glennon

Yup, it’s an oligaplutunionocracy. Hate to be pessimistic, but you’re probably right that only a massive shock would be needed for appropriate action. Tribune was right that a hurricane-like disaster would be needed and NO, they weren’t “wishing” for that. Seems that tax increases are the only thing that wake voters up, but since this is an accrual problem the shock from tax increases will come too late.

Great article Mark ! The subtitle could be: “Why the private sector must be financially raped (taxed to death) — AND kept in the dark” Shame on the newspapers and TV reporters for never having looked into this and never pound home lead stories about this travesty of largesse. You’d think reporters would look into this at least a LITTLE bit, and get appalled at the vast difference between the net worth accumulation possible in their profession, compared with the multi-millions that aren’t just possible working for the govt — they’re a fait accompli for being an average fireman or teacher. The pay levels are even excessive… Read more »
The “average pension is low” argument needs to be put to rest. I ran the #’s a while back on TRS pensions and discovered that, of the 23,000 TRS pensions under $20,000 in 2014 (or 1/5 of the total amount of TRS pensions), only 8% of those pensions are educators with 20 or more years of service and 40% of those pensions are educators with less than 10 years of service. I’m not sure what kind of retirement folks are expecting from a 10-20 year stint in the public sector or anywhere, but it shouldn’t be much. Survivor benefits are a touchy subject but should be scrutinized… Read more »
mark glennon

Yes, the “average pension” thing is among the worst myths that plague the debate. I thought most people paying reasonable attention to the pension crisis figured that out a few years ago. There were articles then about it, including here. But it really never sunk in, based on lots of conversations and feedback I have had here. Similarly, the ignorance about the cash value of true average pensions is the rule. Plenty of people who defend pensions in these amounts really think they are reasonable and in line with the private sector. Reporters remain out to lunch, forever repeating phony averages and seemingly unaware of the cost.

When I began teaching my salary was $5,000. per year. When I retired after thirty years I was making $41,000. per year, but in retirement with STRS, I received $1,500. per month, and of course paid a portion of my health insurance as well. The part the state paid is valued at $2500. on which I pay taxes. Do you pay taxes on the amount your employer pays for your health insurance annually? BTW did you know railroad workers were granted an ongoing exemption from federal income taxes a long while ago. Today after 19 years of retirement, my income is $3,000. per month. We used to… Read more »
J. Herzrent
The average pension of an elected judge is likely to be more than the figures ;you cite if he or she “served” for a full career. Legal theories aside, it is not surprising that judges do not wish to set precedents that put their own retirement “security” at risk. The only apparent way to put an end to this fiscal disaster is to elect legislators who will stop raising taxes and/or appropriating funds to these pension systems. Let the actives and the retirees fight over the 30% or 40% that has already been funded, cut off the retiree health benefits and pay for Affordable Care under the… Read more »

Excellent article, Mark! We need more real-world examples like this in the pension discussion. This is the type of story that can be taken back and easily explained by folks who don’t understand the financial complexities. The normalization of public sector pension data against actual private sector retirements is the only way we’re going to have honest conversations about this.

I did math analysis on this a few years ago for teachers., How Much Do Teachers Really Make? The thing to remember is their pensions are risk free since they are guaranteed benefits, and escalating benefits at that. For most teachers, I found that they work from age 21-31, then leave teaching. I showed all my math and checked it out with a U of C economist. I discounted the cash flows back, using a 4% discount rate. It really is amazing how much teachers actually make-since they only work 9 months out of the year and get a lot of days off.

Good points Pittrader, but it doesn’t seem currently possible that 1/2 the govt teachers who start working after college will work about 10 years then get out of the govt-run school system. The economy over the past 7 yrs just doesn’t support this degree of mobility and ‘other choices’. Not for the usual K-12 teachers over the last 7 yrs. Cannot still be true…….maybe was before recession that’s never seemed to end for U.S. workers