Show Me the Money!

By Bob Moeller, CFP,
WEAC's Member Benefits Manager

June 2001

Financial Planning Seminars
Achieving Financial Independence

It is time to talk about the best investment money-wise you can make as a member. I’m talking about a return of a much higher percent on your dollars, plus a real attractive wage rate for your time. I’m talking about advanced graduate level credits ... even if you are already thinking about retirement.

Forget about the fact that these credits will help you become a better teacher or a more rounded counselor or a more knowledgeable librarian. That’s very important. But for now, let’s just talk money.

Young or old, you can make money by investing time in graduate- level classes. The dollar returns are frequently much better than the stock market or your TSA.

Younger members: The typical contract includes additional pay after you get +12 or +15 extra credits, and after you get +24 or +30 extra credits or your M.A. Then you get even more pay with M.A. +12 or +15, and more yet with M.A. +24 or +30. Each school district is a little different, but you get the picture. Check out your contract! Your investment is perhaps $369.50 in tuition per credit (UW spring 2001 graduate degree rates) x 30 hours to get an M.A., and also perhaps 1,000 hours of your time. You will get some tuition reimbursement from your district, and/or income tax deductions.

With an M.A., if you earn only $4,000 more per year for 20 years and invest that in a good TSA earning 7% per year, your value at retirement will be $175,000 (age 57), and $422,000 when you have to start withdrawing at age 70½. But, of course after you read the section below on older members you’ll want to immediately start on credits above the M.A. Then you will have even more per year coming in.

Older members: If you have an M.A. (just as an example), and from age 48 to 52 or so you get the M.A. +30, you will not only earn a good deal more annual salary, but also increase your pension dramatically for the rest of your life! Need I remind you that if you increase your pay by 10% the last three years you work, your pension will increase also by 10% for the rest of your life if you are on the formula benefit? For the typical career member, your formula pension will increase by $200+ per month for the rest of your life.

That means you may well retire at 57, earn $2,000+ per year more in pension for the rest of your 25-year retirement, increased each year, for a total of perhaps $100,000 extra because you spent 500 additional hours in a classroom, another 500 hours on homework (maybe), and say $160.15 x 30 hours on UW special student tuition rates, or about $5,000. In addition, of course, you got paid more each year for working and perhaps had some of your tuition reimbursed or at least deducted on your income taxes. So, for $5,000 invested, and maybe 1,000 hours, you’ll get more pay now and $100,000 over the first 25 years of your retirement. If you choose a survivor option, your spouse may also benefit through his/her life.

Show you the money? I’ll be happy to. I picked out some contracts in small, middle-sized, and larger school districts to show you what it could mean to you financially. These are random selections from our files.

Assumptions: Professional member will work a total of 30 years, and then retire at age 57. He or she will collect pension for 25 years, and pension increases an average of 5% per year. The member follows a program to move a lane by end of first five years and second five years (resulting in M.A. by end of 10 years), M.A.+ lane by end of third 5 years, and M.A.++ (top of non-PH.D. possibility) by end of 20th year.

*How to read this chart, using Spencer as an example since this district least rewards advanced study: If a Spencer career teacher starts with a B.A., and gets an M.A. by the end of the 10th year, then gets an M.A.+ lane by the end of the 15th year, and an M.A.++ (top of schedule) by the end of the 20th year: A: She will earn $25,670 more in pay than if she stopped at the M.A. B: She will earn $77 more in monthly pension to begin, and if the pension increases by 5% average a year (lower than it has in the past), she will earn a total of $44,102 extra pension. Her grand total is an extra $69,772 for investing about $5,000 in tuition after the M.A., and maybe 1,000 hours of time. Or, look at LaCrosse. After the M.A., the member will spend the same $5,000 in tuition and 1,000 hours, but pick up $96,600 in extra pay the last 15 years of his career, and extra retirement totaling $96,224 for a total of almost $200,000 more than if he stopped at the M.A.

Posted June 5, 2001