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Teachers are in a unique position when it comes to saving for retirement. Many public-school teachers automatically contribute toward a state teacher’s pension, and many assume that, because of this, retirement planning is essentially done for them. However, this is often not the case, and most teachers will need to supplement their retirement plan to ensure they are ready for retirement.

The Best Retirement Plans for Teachers

Although the pension is something that teachers contribute to automatically through their contracts with the school board, the best retirement plan for teachers is more comprehensive than that. Ideally, the best retirement plan for teachers is their pension combined with another retirement account, started as early as possible. Many financial planners suggest that teachers consider retirement savings an additional “bill” to budget for every month. Teachers often don’t have as high earnings as other professions, so maximizing their savings, as well as starting early, is key. In addition, look at the paperwork for when your pension matures. Many pensions have two thresholds, one for years of service, and another for retirement age. Although many teachers will meet the years of service (30 is typical) before they turn 60, they can often gain a large increase in their monthly payment by waiting to collect until the maximum age (70 in many cases). Understanding the pension is important to understanding what else you’ll need to do for your best retirement plan.take-the-quiz

What are Some Additional Retirement Options for Teachers?

Most teachers are steered toward a 403(b) plan, a retirement savings plan like a 401(k) but intended for public employees. Many companies offering these plans provide seminars and retirement workshops for teachers. Many teachers set up these accounts and have money invested directly from their paychecks. However, these plans are not regulated in terms of fees, and high fees make a dent in any profit from the investment. These plans often have higher than usual fees for early withdrawal. In many cases, an IRA or traditional 401(k) set up through an independent financial planner may be a better idea.

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Deciding What the Right Plan is for You

The first thing you’ll want to do is understand your pension. Look at the paperwork from the retirement board and, with the help of a financial planner, calculate what your pension payments will be. After getting an idea of how much income you’re working with from your pension, you’ll have an idea of how much you’ll need to make up from your own investments and savings. Then a financial advisor can help you compare several different options to find one that fits your life circumstance best.

As with all professions, having a savings account for emergencies is of primary importance, but retirement saving is a close second. It’s important for teachers to realize that their pension alone doesn’t constitute a complete retirement plan, and speaking with a financial advisor early in their career can get them on the right path for a comfortable retirement. We know the ins and outs of your options as a teacher saving for retirement. Contact us today to learn more about what you can do to prepare yourself and your family for a financially stress-free future.

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