Looking for a safe place to invest in these tough economic times? Teach in New York City.
It?s well known, though the subject of much debate, that the teaching profession provides more generous pensions than almost any other profession--both in dollars and the number of years one has to serve to be eligible to draw from a pension. What's gets a lot less attention are other retirement perks available to teachers, such as supplemental 403(b) plans, the nonprofit counterpart to the 401(k).
A recent column in the Times Union of Albany reveals that teachers in the Big Apple who choose to invest part of their salary in one of the funds available under the teachers' 403(b) plan appear to be getting an unusually sweet deal. They are literally guaranteed an 8.25 percent annual return upon their retirement, a rate that is 3 to 5 percent higher than other guaranteed-return investments are paying. Who is the guarantor? The New York City taxpayer. It?s a deal worked out by the New York state legislature two years ago and which received little public attention.
Making the option a greater potential liability for the city, the same legislature approved another deal earlier this year moving the required length of service up to 25 years, when it had been 30.
The only downside is that teachers do not get any additional income from these plans, should they exceed 8.25 percent in earnings. In that event, the city of New York gets to pocket the money.