SUMMARY: Eventually, each must consider life beyond his or her career and the benefits offered through, and outside of, the public school retirement system.
The ability to enjoy a secure retirement is an objective that many teachers and their colleagues pursue years before they leave their jobs. Many public school workers, in different positions, devote their lives to furthering the education of young people. Eventually, each must consider life beyond his or her career and the benefits offered through, and outside of, the public school retirement system.
Not everyone qualifies
With respect to the pensions offered in the teaching profession, each state is unique in its requirements for service. The range is normally five to 10 years, but surprisingly, over half of all incoming teachers will not qualify for their state’s retirement benefits. Only a small percentage of newly employed teachers will see a full career pension upon retirement, while the majority will only receive a small amount. In Pennsylvania, for example, data for the past ten years from the state’s comprehensive annual financial report shows that the average pension for newly retired teachers is $24,603.00. Keep in mind that this figure only reflects a teacher’s retirement earnings, not what he or she contributed to the public school retirement system while employed. In addition, the data indicates that only 36% of new teachers will be eligible to receive a pension.
Whether you are a teacher or a union employee in another position, a defined-contribution retirement plan such as a 403(b) is probably available to you. Similar to a 401(k) in the private sector, the 403(b) allows you to invest money that is taken out of your monthly paycheck. This is usually a tax-deductible contribution and the earnings on your investment are tax-deferred. Your employer may match your contribution, but if no match is forthcoming, you do have other options, such as contributing to an IRA, which may actually provide you with more investment options.
The bottom line is that you should not expect your pension to serve as your sole source of income in the retirement years. Remember that the amount of the pension will vary depending on your length of service to the school system and your earnings history. In any case, you will need more of a cushion than what those pension funds can provide, but the task of creating new income streams can seem overwhelming; you must think about asset diversification, tax consequences, even healthcare costs in your later years. In short, when you are planning for retirement from the public school system, the path to a secure financial future may seem like a long and winding road. However, you can work with an experienced investment advisor to help you make sense of it and create a personalized retirement picture that is appropriate for your needs.
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into directly.
Contributions to a traditional IRA may be tax deductible in the contribution year, with current income tax due at withdrawal. Withdrawals prior to age 59 ½ may result in a 10% IRS penalty tax in addition to current income tax.
The information provided is not intended to be a substitute for specific individualized tax planning or legal advice. We suggest that you consult with a qualified tax or legal advisor.
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