22 Sep How Much Should You Save for Retirement if You’re a Teacher?
Some say having $1 million in savings will set you up for a comfortable retirement. Is this possible for teachers? Is it necessary to save this much? If you wanted to try, how would you do it? How Much Should a Teacher Save for Retirement?
Save a set amount of your income every month for retirement.
This is a smart rule for everyone to follow. Set a goal that is reasonable for you. Saving 10% of your monthly income could be a good place to start. Look into ways to grow your money so that your savings will stretch farther.
Consider a traditional individual retirement account (IRA) or Roth IRA as an investment vehicle.
The difference between these two vehicles is in the way you pay taxes.
With a Roth IRA, your withdrawals are not taxed in retirement – you are not taxed on the growth of a Roth IRA either. Your contributions are made from money that has already been through income tax, so additional tax is not necessary. To withdraw earnings from a Roth IRA account tax-free, the account needs to be open for five years. You must also meet the age requirement of 59 ½. However, if you wish to withdraw your own contributions you may do so without restrictions.
A traditional IRA is different. Your contributions are tax-deductible, unlike the Roth IRA. However, you will pay income tax when you decide to withdraw money from this account.
Know the ins and outs of the 403(b) before deciding if it is the best option for you.
A 403(b) can be a great way for a teacher to save money for retirement. This is a tax-sheltered annuity plan where an employer, as well as the teacher, can contribute funds. Read more about the advantages and disadvantages so you can decide if this a good fit.
How Much Money Does a Teacher Need for Retirement?
Answering this question will be different for everyone. The state you live in has a big impact on your retirement finances, your pension plan does also—as will your savings/investment accounts. Health can play a big factor here, too. Take this all into account when deciding what to save.
So, what about the $1 million in retirement savings that seems to be recommended by so many? How long would this last? If you retire from teaching at age 60 and live to the average lifespan of about 79, according to the CDC, you’ll have about 20 years to cover financially. That means the savings of $1 million would provide you with about 50,000 annually.
Is it necessary to save that much as a teacher?
Perhaps not! If you qualify for one, your pension plan will most likely provide you with a good amount of what you need in retirement. Look up your state on this table to see the average pension amount for retired teachers and the percentage of those who qualify. Any gaps could be covered by social security, personal savings, or personal investments.
Lean on a Financial Professional for Help.
With so many moving parts in retirement planning, the friendly, knowledgeable advice from someone at Appreciation Financial will feel like a breath of fresh air.
We would love to ease the burden of planning for your retirement from teaching. Let us help you feel secure. We’ve assisted more than 60,000 teachers with their retirement, and we understand your unique needs. Connect with us to get the help you deserve!