One of the most intriguing comments to me was the notion that paying into Social Security and an educator pension was somehow double paying into retirement. I guess I can somewhat see that point of view, but I want to back up and explain how the corporate world works versus the government/educational world in terms of retirement.
Corporate Retirement - Most corporations did away with pensions 20+ years ago since a "defined benefit plan" (i.e. pension) could potentially be much more expensive than a "defined contribution plan" (i.e. 401K or similar plan). Businesses set up 401(k) plans to entice employees to contribute to their retirement with "matching" contributions and possibly "discretionary" profit sharing contributions. Depending on the plan, the company's matching and contributions "vest" over a set timeframe between immediate and 6 years. The benefit of this type of plan for employees was that they could "see" their retirement accounts, and if they left the company, they could roll the vested balance to an IRA. The bad part is that the employee is responsible for their own retirement.
Essentially, the company has made their contribution to the employee and left it up to them to figure it out. There may be some educational aspect of what they are doing, but the burden of responsibility has shifted. The company is only a contributor and not responsible. Also, if the employee has not contributed enough, it is on the employee...
As a rule of thumb, an employee should be contributing around 15% of their gross income to a retirement plan, so if an employee is putting 10% in the 401(k) and has a 4% match, then they are at 14%... pretty close to what we hope our clients are doing. Then you add on Social Security. The employee still has to contribute to an additional 6.2% (up to the current income limit) to Social Security (the employer does too).
We can all do that math for the employee - 10% to the 401(k), 6.2% to Social Security... 16.2% total, AND the employee is still on the hook for making sure the 401(k) is enough to fund their retirement.
Government/Educational Retirement - Most of the people reading this post will know about their own pensions contributions, so I will try to make this section brief.
In Georgia, educators have the Teachers Retirement System of Georgia (TRS). Currently, employees contribute 6.0% of their salary with employers contributing and additional 13.15%. These contributions are the foundation of your future TRS pension. Think about though - 19.15% of your salary is being contributed to a fund that ultimately helps to pay for your pension.
If the school system does participate in Social Security, then the employee contributes 6.2% (and so does the school system). In total, the employee will have contributed 12.2% of their salary.
If the school system does not participate in Social Security, then the educator does not contribute anything else. The TRS contribution of 6.0% is the total contribution by the educator. While I understand that this amount is not zero, it is also worth noting that corporate employees contribute 10.2% more of their salaries and educators in Social Security contribute 6.2% more.
For the educators that do not contribute to Social Security, the discrepancy between those that do contribute and potentially the lack of any retirement funds outside of TRS are the reasons why I have preached over and over about starting a 403(b) and making contributions. Even contributing only an additional 4% (10% total) to a 403(b) will make your potential retirement income substantially more. Additionally, if/when you are effected by the WEP, these additional funds will help to offset the reduction of Social Security.
In conclusion, corporate and educational/government retirements are quite different in how and by whom they are funded, but in both cases, it is the employee's responsibility to know and understand what their potential retirement looks like. If they do not work to make sure that their retirement is secure early in their careers, employees may end up scrambling at the end to make up for any shortfalls.