Whether you’re a college professor or work in public schools, you’re a teacher through and through. You educate the future of the world and care for students day in and day out.
Unfortunately, retirement for teachers doesn't seem to reflect the same kind of care you put into your work. It is undervalued and plans aren’t funded as well as they should be.
It can be a messy pool to wade through when trying to decide what you can do to make up for holes in your financial future.
The prevailing wisdom is to set aside a certain percentage of your income to plan ahead. But, in reality, you can start to crunch numbers today to get an accurate percentage.
You might be surprised that the typical suggested 10% may be more than you need to set aside. It all depends on your current financial status, your state’s funding, and options your school district provides to you.
Teachers used to rely on a well-earned pension for income after retirement, but with recent cuts, teachers are forced to consider supplemental plans.
Pensions May Not Cut It
When planning ahead, you should figure out approximately how much you will receive from your pension plan. Each state is different, and the number of years you work may also come into play.
Refer to your annual benefits statement to find out about other variables, like the ability of your payments to adjust to the cost of living.
Once you know what your pension may look like, consider whether you are paying into social security or not. Your pension and your social security will give you a good overview of what your finances may look like in retirement.
If this figure doesn’t cut it for you, you may have to start saving independently—like many teachers have begun doing.
Educators are Saving Independently
If you're among the many teachers who find that supplementing their income is necessary, you can consider looking to your district’s options.
Many teachers are turning to 403(b), which is similar to a 401k. The difference is that contributions are not taxed when deducted, and tax is deferred until retirement.
If you’re lucky, your school district may even match your contributions.
This can all sound rather appealing, but when it comes to investing, it can be quite confusing, and investment fees can cut into savings dramatically.
What’s worse, is the bailout fees if you decide to leave the plan. So do your research beforehand.
Another option, if you are a young teacher, is to start a ROTH IRA. The tax implications may not be as severe since new teachers are often in a lower tax bracket anyway.
Don’t Rely on Pension
To protect your future, it’s wise to make sure you're saving enough to close the gaps in your pension plan. Have a backup plan in place in case your state’s pension plan fails you in the future.
State financial cuts make the future of retirement for teachers difficult to predict. Planning ahead, while often confusing and frustrating for teachers, is imperative.
Peace of Mind for Retiring Teachers
Teachers work hard and deserve to rest during retirement without money worries. The unknowns surrounding teacher retirement plans are exhausting and stressful, to say the least.
It can take a lot of self-control to save on the side, for your retirement. But knowing you are taking some control over your future is empowering, and can decrease stressors today.
If you are confident about your ability to support yourself beyond a pension plan, you can focus on teaching, and doing the job you love to do day in and day. You can have peace of mind knowing you are setting yourself up for a comfortable retirement.
Connecting with an advisor can also take some of the weight off your shoulders as you look to the future. An advisor can help you understand all of your options, and help you review your current trajectory.
Having a plan in place can help put your mind at ease knowing you are working toward something and not an unknown financial future. Working closely with an advisor can help lighten the load, set a plan for the journey ahead, and allow you to enjoy your students today.