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As a teacher, you’re in a position of having some of your retirement planning done for you. You’re most likely paying a percentage of your salary into your pension, and when you retire from teaching, that will be your income. The question most teachers need to ask themselves at the beginning of their career is: will that be enough?

Understanding Your Pension

As a new, young, teacher, you may consider your pension just another piece of paperwork that needs to be signed, and then a deduction on your paychecks. It’s important that teachers take the time to understand their pensions. You need to know how much you’re contributing, how long it will take before you are fully vested, how long before your benefits max out, and what your pension income will be at retirement. For most teachers, they’re contributing 8%, they’ll become fully vested at 25-30 years, and they’ll max out a few years after that, taking home an income of 75% of the average of their last four years of salary. Then you can look at the salary schedule, and how many years you’ll put into the system, and you can come up with an estimate of your retirement income.

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Understanding Your Retirement Needs

Once you understand what your pension will provide, look at your retirement goals. When would you want to retire? How much do you want to have saved at retirement? Are you eligible to collect social security as well? Does your spouse have a retirement plan? Are you anticipating any inheritance? Do you anticipate teaching for your entire career? Are you planning to take time off to start a family? These are big questions to ask a young teacher, and the answers may change throughout your career. However, the earlier you start saving, the easier it will be to set aside money for retirement. Talking to a financial professional can help you find the answers to these questions and give you some suggestions that will fit your needs.

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What is the Best Retirement Plan for Teachers?

The best retirement plan for teachers is one that balances what their pension will be worth with savings to make up the difference. Many teachers are advised to invest in a 403(b) plan. For some teachers, this is the right choice, although it can come with higher than usual fees and tax penalties for early withdrawal. For many teachers, an IRA is a better choice. Talking to a financial professional can help you determine what plan will work best for your situation.

Most of us should be saving 15% of our income for retirement, assuming we start at the beginning of our careers. For teachers, that means that 8% of your saving is decided for you, but 7% - almost half – is up to you. Your teacher’s pension is definitely worth something, but adding your own savings can make for a much less stressful retirement. We can help you understand your pension and offer solid, proven saving solutions to help you plan for a stress-free retirement. Contact us today to schedule a consultation.

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