Illinois Pension Reform - Some Sample Numbers

Defined benefit retirement plans depend on both the employee and employer making regular payments into a fund that is then invested to increase the money available in retirement. The goal is to have enough money in the fund at retirement to pay for a lifetime annuity.  Below is your opportunity to enter variables into a sample retirement plan to see first-hand how the plan will function. Fill in the variables, compute the results and see how your plan works.

In recent years, the median age of first hires was, 36 for both men and women.


  per year

In recent years, the median starting salary for men was $28,901 and for women was $33,541. Plan rules cap the amount of salary that can be counted towards a pension at $106,800. Once that salary level is reached, future increases may not exceed 3% per year.


Salary increases usually vary from year to year but, for purposes of this model, what average percent increase would you assign each of the years worked until retirement. The average percent salary increase in recent years was 3.7% for men and 3.5% for women.


  of salary

The State of Illinois offers this plan in place of Social Security. If these employees were covered by Social Security, the State would be required to pay 6.2% of employee salary.  Also, in addition to Social Security, most private sector employers offer their workers a 401K plan. According to the 401khelpcenter.com, "The average company contribution in 401k plans is 2.5% of pay."


An employee/retiree may be in the plan for 40 or more years - 20 working and 20 in retirement. Investment returns vary from year to year but it is the long-term performance that counts. Between 1972 and 2014 (a 43-year period) the average net earnings of this plan has been a positive 9.36%.


In recent years, the median age at retirement for women was 62 and for men was 61.


An unpleasant "fact of life" is we all will die - and the pension annuity ends. In recent years, the median retiree age at death was 83 for women and 81 for men.

There are some problems with the values you entered:

The following table shows the growth of $10,000 invested in 1971:

Fiscal Year Net % Earnings Fund Value This Year
1972 12.6% $11,260
1973 0.1% $11,271
1974 -15.3% $9,547
1975 16.8% $11,151
1976 17.8% $13,135
1977 3.8% $13,635
1978 5.1% $14,330
1979 5.9% $15,175
1980 1.3% $15,373
1981 1.2% $15,557
1982 0.9% $15,697
1983 41.9% $22,274
1984 -5.1% $21,138
1985 25.3% $26,486
1986 26.7% $33,558
1987 16.1% $38,961
1988 2.2% $39,818
1989 17.0% $46,587
1990 9.6% $51,060
1991 5.4% $53,817
1992 10.2% $59,306
1993 11.2% $65,948
1994 0.7% $66,410
1995 16.5% $77,368
1996 18.5% $91,681
1997 21.4% $111,300
1998 17.8% $131,112
1999 11.5% $146,190
2000 14.0% $166,656
2001 -8.8% $151,990
2002 -6.1% $142,719
2003 2.9% $146,858
2004 17.0% $171,824
2005 10.4% $189,693
2006 11.7% $211,888
2007 18.3% $250,663
2008 -4.5% $239,383
2009 -19.7% $192,225
2010 15.0% $221,058
2011 23.8% $273,670
2012 0.5% $275,039
2013 12.5% $309,418
2014 18.2% $365,732
9.36% Average all years

$10,000 invested in this plan in 1971 would have grown to $365,732 by 2014.

The following table shows the history of state contributions:

Fiscal Year State Contribution
as % of Required
1994 25.5
1995 23.1
1996 24.9
1997 42.0
1998 78.4
1999 80.3
2000 74.1
2001 75.7
2002 58.8
2003 47.7
2004 254.4
2005 47.0
2006 27.2
2007 37.0
2008 48.8
2009 51.7
2010 69.4
2011 61.3
2012 69.0