Finance Blog for Teachers

5 Ways for Kentucky Teachers to Prepare for the Pension Decision

 

 

Have A Retirement Plan

 

Teachers are wonderful planners by nature. I mean it seems my wife has lesson plans for 2019 already. Use that skill to your advantage and start to plan for your retirement. The days of working and relying solely on the pension for retirement appear to be changing. Teachers may have to be more diligent in planning especially in their early years of the profession. Questions to ask yourself when creating this plan: When can I retire?; How much will it take to live in retirement?; Have I saved enough to meet those goals? As unfortunate as the changing pension is for our families, it forces teacher families to PLAN, to decide the outcome of their retirement.

 

 

Plan As a Family

 

Just as spouses file their taxes together, they should also be thinking of their retirement planning together. We are stronger in teams and working together allows for stronger plans to be built. An important thing about this communication is a couple may have different expectations about retirement. I may have a client who wants to travel to Paris every year while the only kind of traveling her husband wants to do is back and forth to the fridge. Combining expectations and goals will improve one's chances of creating the retirement they want. Also, planning together let's you or an advisor understand how a teacher's pension relates to your spouses' retirement (401k, IRA, Roth IRA, etc.) Each different retirement plan, investment, or savings vehicle needs to be looked at as a whole to create your ideal plan.

 

 

Think Before You Pick Your Pension Benefit

Once the Pension is altered in some form or fashion, you are likely going to have more questions than answers. An important thing we've stressed to all our clients in education is to think before making a decision about retirement. Take your time to understand the changes and how they may affect you. Some questions to ask yourself after the changes:

 

  • Do I want a pension benefit where my spouse continues to get my pension when I pass away?
  • Are there deadlines in which I can use my sick days or when I stop accumulating years of service?
  • What age will I get to retire under the pension plan v.s. any new proposal?  

Currently these questions are somewhat unknowns until a decision is made on the pension. My main warning is to not rush to a decision or get caught up in the frustration of the change. Think about you and your families' needs, not what the teacher across the hall does!

 

 

Save Alongside Your Pension

 

I can't stress enough how important these four words are. Teachers who save in addition to their pension truly get to dictate the lifestyle they want to live in retirement. It is no secret that your coworker across the hall retired and now gets to travel. THEY SAVED AND PLANNED FOR IT! Most school districts in the state provide retirement plans (403bs, 457s, 401ks) that you can save up to $18,500 this year. In these plans you can invest your money so it is working as hard as you are. Also, you can receive tax benefits by sheltering this money to be used at a later date. Consulting a financial professional to help you explore your options and to take the appropriate amount of risk may be necessary.

 

 

Your district likely has approved advisors that can come listen to your situation to help you get started saving. Make sure this advisor is adding value and comfort to your retirement planning instead of just providing pizza in the teacher's lounge once a year. Saving money today can do nothing but help your situation later!  

 

Save As Soon As You Can!

 

I can't tell you how many conversations I've had with first year teachers telling them that saving can help them more than anyone else in the building. The sole reason is they have the most TIME to put money away to allow it to remain invested. The longer our money is invested the more time it has to build interest and compound.

 

A teacher who started saving $100/month at age 22 at a hypothetical 6% return would have $124,141.97 at age 55.

While a teacher who waited until they were 30 to start $100/mo would only have $69,299.40 at age 55 with the same return.

 

The three most important factors in saving are how long you save, how much you put in and how you're invested? Of those three factors, the first one TIME is still the most crucial to someone building money through investing. I encourage you to continue to explore your options in and out of the school district to invest for retirement!

 

The example on this slide is hypothetical and for illustrative purposes only. It assumes a steady 6% annual rate of return, which does not represent the return on any actual investment and cannot be guaranteed. Moreover, the examples do not take into account fees and taxes, which would have lowered the final results.

  

The Kentucky Teacher Pension drama will likely unravel over the next month and we will figure out exactly how we will all be effected. I challenge you to not fret and try to find the opportunity within the change. I still believe that those who plan and prepare will remain in the driver's seat of their retirement!

 

 

 

 

 

“By failing to prepare, you are preparing to fail.” – Benjamin Franklin

 

Patrick Portman is an independent financial advisor with the firm Thoroughbred Asset Management in Bardstown, KY. Thoroughbred Asset Management was founded on working with educators and they currently help with 403b plans in 20 different school districts in KY. Patrick's focus is helping people with retirement planning and investment management revolving around that planning. To set up a introductory meeting or phone call you can contact him at pportman@tam-team.com or 1-866-566-0460. Securities and Advisory Services offered through GWN Securities, Inc. A Registered Investment Advisor. Member FINRA/SIPC. 11440 N Jog Road, Palm Beach Gardens, FL 33418.  (561) 472-2700.  Thoroughbred Asset Management and GWN Securities, Inc. are non-affiliated companies.”