02 Aug Is A Teachers’ Pension Enough for Retirement?
Whether you just started teaching or you have decades of experience instructing our country’s youth, you have probably thought about your retirement. You know you have a pension plan, but what does that mean? And, will it offer a stable retirement?
The truth is pensions can be confusing. But the confusing nature of these retirement funds should not keep you from understanding how a pension will impact your future finances and retirement.
Fortunately, the retirement experts at Appreciation Financial can help you navigate the confusing aspects of pensions with supportive pension review services.
You do not have to approach retirement alone. The Appreciation Financial team respects the public service you provide and offers informative money planning centered on aiding public servants.
What is a pension?
First, let us answer a question on the front of everyone’s minds: what exactly is a pension?
Unfortunately, not enough people ask this question because they think that they should already know the answer. Or they believe that everyone else understands pensions except for them and are too embarrassed to ask.
At Appreciation Financial, our agents know that all questions regarding retirement are important and take the time to make sure you understand the basics. Here is what the team has to say about pensions.
In short, a pension, also referred to as a defined benefit plan, is a specific type of retirement fund. Money is saved over time, and when you retire, it becomes available. Usually, you will receive funds as defined monthly payments for the rest of your life when you retire.
To fund the pension, a portion of your income is placed into the pension fund along with contributions from the school district. Pensions are often the major retirement income source for public servants like teachers. In fact, 85% of teachers are enrolled in these defined-benefit retirement plans.
Do teachers need to sign up to join a pension fund?
In most cases, public employees like teachers are automatically enrolled in a pension fund. However, pensions differ across the country, and the type you are enrolled in is often unique to your state. Because of this, make it a priority to have one of our professionals at Appreciation Financial conduct a free pension review to make sure you are enrolled and to explain your benefits.
Will a teacher’s pension offer enough to retire?
When it comes to teacher’s pensions, there is a lot of conflicting information out there. And compounding this issue, pensions have also become a hot-button political issue. Therefore, for each piece of researched information regarding pensions, there is also plenty of misinformation.
Because of conflicting particulars, it is no wonder many teachers wonder if their pension will offer enough for a stable retirement.
Unfortunately, there is no easy answer to this question. Factors that impact your teacher’s pension include:
How long have you been teaching?
Essentially, the longer you have been employed as a teacher, the more you will receive. Also, a pension usually factors in your highest salary average over a period of three to five years.
Therefore, if you began teaching straight out of college, you will probably receive a higher pension payment than someone who began teaching at age 35.
Here is a little-known fact about pensions: If you leave your profession as a teacher for a job in another industry, you might not qualify for any pension payouts at all.
That said, most pension plans provide avenues for you to transfer some or all of the money you have contributed to a new retirement plan, either funded by your new job or on your own.
Further complicating matters, even if you stay in teaching but begin a new teaching job in a different state, the accrued value of your pension probably will not transfer exactly to your new state’s pension plan.
The state where you teach
Pension payments are usually based on three factors:
- The number of years you taught
- Your final salary
- Your state’s pension multiplier
Therefore, where you live plays a significant role in your pension payments. Across the country, states’ pension multipliers differ widely.
Savings and other investments
Do you have investments you have been accumulating on your own outside of your pension? Does your significant other also have a retirement plan, or will they be relying on your pension payments as well?
These questions significantly factor into your retirement goals and whether your teacher’s pension will offer a stable retirement.
Your retirement goals
Everyone’s retirement goals are unique. Some people are happy to stop working and enjoy the extra time off in a house they have paid off in the town they have always lived and worked.
Others want to spend the summers in the North and have a winter home in the South to retreat to during the cold months.
Still, others want to spend their entire retirement exploring and traveling the world.
Each of these retirement dreams requires vastly different sums of savings.
Do not count on Social Security
A lot of teachers fall into the trap of counting social security benefits into their retirement plans. But what many teachers don’t realize is that some states don’t take Social Security taxes from teachers, therefore making them ineligible for SS benefits later in life.
Schedule a pension planning session or utilize the pension review services at Appreciation Financial
Pensions and retirement are very personal. And whether your teacher’s pension will offer a stable retirement is dependent on unique factors. Depending on circumstances such as location, other investments, and retirement goals, a teacher’s pension is more than enough for many to retire on and not enough to meet the goals of others.
The only way to know for sure if your teacher’s pension will meet your retirement goals is to schedule a pension planning or pension review service with the retirement experts at Appreciation Financial.
The pension review provided by our team is free. Contact our office today or request your consultation online.