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Retirement Planning For Teachers & Educators: A Guide Thumbnail

Retirement Planning For Teachers & Educators: A Guide

We have been working with Connecticut public school teachers for over 15 years.  We understand the complexities of the Connecticut Teachers Retirement System Pension, the social security offsets and retiree health insurance options and costs.  If you're a Connecticut public school teacher who wants to get serious about your retirement planning, read this article then schedule a meeting.  We would welcome the opportunity to answer your questions and clearly outline your pension, social security, retiree health insurance and investment income plan.

Click here to schedule your meeting

As a teacher, you always give 110 percent. You put in long-hours, work on the weekends and contribute the extra effort needed to get every student involved and excited about what they’re learning.

But when it comes to preparing for retirement, it’s not unlikely for teachers to put off the important decisions or neglect to ask questions. Educators face unique financial concerns when it comes to their retirement, but that doesn’t mean they deserve anything less than a relaxing and well-funded retirement. Below are the top three concerns we see educators face when it comes to their retirement - and what you can do to face them head on.

Understanding Your 403(b) Plan

At a surface level, a 403(b) plan works similarly to a 401(k). Money is withdrawn from a teacher’s paycheck pre-tax and grows in a retirement savings account until retirement.

But a major difference is that a 403(b) plan is typically a tax-sheltered annuity (although nowadays they often offer some mutual funds as well).  Similar to a 401(k), funds placed in a 403(b) plan aren’t taxed until withdrawn, and employers can choose to make matching contributions.

It’s important to note that, unlike a 401(k) plan, investment options for a 403(b) are limited to annuities and mutual funds.

When selecting a 403(b) plan from your employer, you’ll likely be presented with low, medium and high-risk plan options - or a mix of the three. It’s not uncommon for teachers to have questions about the differences between these options, and you will likely benefit from working with a financial professional to take a look at your options as well. Choosing the wrong option for your unique retirement needs could greatly impact your future withdrawals.

The Realities of Your Pension Plan

Approximately 91 percent of teachers are enrolled in a defined benefits pension plan.1 While this is an opportunity few professionals are offered anymore, the realities of what your payouts may look like in retirement shouldn’t be ignored.

Remember that just because you are enrolled in a pension plan upon employment, does not mean you will meet the vesting requirements. In Connecticut, you need a minimum of 10 years of Connecticut service to receive a benefit. If you leave before this time, you will not be eligible to receive your pension payouts.

You may be able to purchase addition time into your pension system, however you need to qualify to do so.

Additionally, how much you receive in retirement through your pension will depend on a variety of factors, including your salary, years of service and the age at which you begin receiving your benefit.  Lastly, you'll need to decide if you want to elect Plan N, C or D and understand the implications of each option.

Social Security Benefits (Or Lack Thereof)

Did you know that not all teachers will be eligible to receive Social Security benefits in retirement? Approximately 40 percent of K-12 teachers do not pay Social Security taxes, and therefore will not receive Social Security benefits in retirement.2

This accounts for about a million educators in 15 states including:2

  • Alaska
  • California
  • Colorado
  • Connecticut
  • Georgia
  • Illinois
  • Kentucky
  • Louisiana
  • Maine
  • Massachusetts
  • Missouri
  • Nevada
  • Ohio
  • Rhode Island
  • Texas

For millions of retirees, Social Security offers a steady, reliable income source in retirement. While it is not meant to cover all expenses, it can help serve as the foundation of a secure retirement plan. If you are a teacher in a state that does not have you pay into Social Security, it’s important to prepare a plan that can help you address this lack of income in retirement.

Preparing for retirement as a teacher can come with its own unique challenges, but that doesn’t mean it should be put off or ignored altogether. Working alongside your school’s human resources department and your own financial advisor can help you feel confident and comfortable with your plan for retirement. Because you give your all today, it’s imperative that you let your money care for you when you need it most.

Just as you tell your students to understand the information and study well before a test, you too should gather your information and make sure your understand what your income may look like well before your retirement!  

When you work with Reed Financial Planning Services, we follow a well defined planning process:

1) First Meeting: Click on the link below to schedule your first phone meeting.  There is no charge for this meeting. It's an opportunity for us to better understand your needs and for you to ask your questions of us.  If you decide you want to work with the firm, we then schedule your Planning Meeting (currently conducted using Zoom) where we will provide our estimates, guidance and advice.  The fee for the Planning Meeting is $250.

2) Electronic Intake:  Once your planning meeting is scheduled, we send you our intake form along with a list of supporting documents that we will need in advance of the Planning Meeting in order to properly prepare for our discussion.

3) Planning Meeting:  During our Zoom call, we will go through your questions, outline your pension, it's various payment options, retirement dates and deadlines, estimate your social security benefits after any applicable offsets, outline retiree health insurance options, deadlines and costs and discuss your overall income plan.  We will also discuss the basics of planning for care as you age and your legacy planning.  At the end of the meeting, you are free to take our thoughts and recommendations to implement as you see fit.  If you decide that you want our help in implementing them, we then discuss the various ways in which we can work together.

What are you waiting for?  Schedule your First Meeting today by clicking on the link below.  We look forward to speaking with you!

Click here to schedule your meeting

  1. https://www.bls.gov/ncs/ebs/benefits/2019/ownership/govt/table02a.pdf
  2. https://www.npr.org/sections/ed/2018/04/20/602846417/why-more-than-a-million-teachers-cant-use-social-security#:~:text=Walkouts%20And%20Teacher%20Pay%3A%20How,the%20workforce%20is%20not%20covered.%22

This content is developed from sources believed to be providing accurate information, and provided by Twenty Over Ten. It may not be used for the purpose of avoiding any federal tax penalties. Please consult legal or tax professionals for specific information regarding your individual situation. The opinions expressed and material provided are for general information, and should not be considered a solicitation for the purchase or sale of any security.