Have A Retirement Plan
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 vs. 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 a fixed annual amount. 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!