teachers head back to class this fall, they may want to
brush up on their own retirement picture.
report this year by the National Council on Teacher
Quality found some grim financial statistics behind the
$499 billion teacher pension system debt:
funding ratios have declined in all but seven states
29 states, teachers have been required to boost their
pension contribution rates since 2008.
15 states, it takes 10 years for teachers to vest in
their pension plans. Across all states, fewer than half
of teachers stay in their districts long enough to vest
in a pension, and just 20 percent stay long enough to
achieve full retirement benefits.
letís recap: Despite the financial recovery, teacher
pension systems are on shaky financial footing, teachers
are paying more into them and most wonít see those
coveted defined benefit paychecks at the end of their
careers. Little wonder that college degrees related to
teaching jobs dominated a recent CareerBuilder list of
the degree completions with the greatest declines
between 2010 and 2014.
Grant, a financial planner and founder of Finance For
Teachers, has been telling clients to prepare for
retroactive cuts in retirement benefits, even once they
are already retired.
mindful of potential cutbacks and make sure youíre not
spending the entire pension" on living expenses,
said Grant, who is married to a middle school math
teachers still on the job, he recommends saving 15
percent of pay, including employer contributions to
are a few other homework items for teachers to consider:
summer job is even more important now. Teachers have a
long history of moonlighting in second jobs or over the
summer months, and those extra funds are even more
important now given the shaky hiring outlook and pension
Scott, a 48-year-old private school teacher in
Charlottesville, Va., has worked as a tutor on the side
for several years, but recently signed on to a new
service, Moonlighting (www.moonlightingapp.com which she
says makes the payment system smoother and helps get her
name out to a broad swath of potential clients.
extra income helps her afford a 5 percent-of-pay
contribution in a 403(b) plan at work, which her
doesnít have a traditional pension, and sheís
playing catch-up after depleting her retirement account
more than 15 years ago to pay for some medical expenses
for her daughter.
friends in public school are closer to being able to
retire, but I love what I do," she said, citing
more academic freedom in her current environment.
still need to scrutinize your 403(b) plan. Despite
federal regulations in place since 2010 that were
supposed to tighten standards on these workplace
retirement plans in which many teachers participate,
there are still many plans offering annuities that
charge expenses of 2.5 percent annually and carry
10-year surrender charges, said Dan Otter, founder of
www.403bwise.com a website specializing in these
accounts. The website offers a fiduciary pledge savers
can copy and ask their advisers to sign.
your Social Security income. This is more complicated
for some teachers and other government workers because
of the windfall elimination provision, which adjusts
Social Security benefits if workers spent time in a
public system where they and their employers didnít
contribute. Knowing how much youíll actually collect
in benefits will help you make more informed decisions
about how much income your savings will need to generate
Grant said, consider your teaching career in context
with the rest of your life. Married to someone who works
in a corporate environment? Pick and choose among the
best benefits at each employer, and explore the idea of
diverting some savings to a Roth IRA, he said.
to another teacher and you both have traditional defined
benefit pensions? Think critically about whether you
need any more annuities in your 403(b) plan, he said.
or widowed? Social Security could be a major component
of your retirement income, so be sure to study the best
claiming strategies for someone in your situation.