Whether youâre a teacher in your 20s or 60s, youâve probably given some thought to life after retirement. Do you dream about moving somewhere warm and reading by the pool or traveling the world? Do you hope to spend your days gardening, crafting, or seeing family? Itâs fun to dream about retirement but to make it a reality, we need to plan. Itâs never too early, or too late, to start, so we created this age-by-age retirement planning checklist for teachers.
Age-by-age retirement planning checklist for teachers
A pension is usually a public educatorâs primary way to fund retirement. However, most of the time, our pensions fall short of our current salary. We usually need to supplement pensions with savings to set ourselves up for living our best life after retirement. Using our age-by-age retirement planning checklist for teachers is a good place to start. The next step is working with a professional financial representative who can help create a personalized solution that bridges the gap between pension benefits and current salary.
âJust choosing an arbitrary dollar amount to put away each month is not enough,â says Alex Kocoves, CEO of GLP Financial Group  and a professional who has helped educators meet their retirement goals for the past 35 years. âYes, the more, the better, but the determining factor for how much to save is: will that amount put you in the position to meet your goals?â
If youâre in your 20s âŠ
Life goes by in a blink of an eye, especially when youâre a busy teacher. We know, itâs hard to believe when youâre fresh out of college and basking in the bliss of your very first classroom. However, the reality is, the sooner you start planning for retirement, the better. Your 20s is a perfect time to start using this retirement planning checklist because you have time on your side and can take advantage of the power of compounding returnsâwhich basically means your money grows faster, and you may not need to put away as much to reach your goals.
1. Understand your districtâs retirement benefits
âAll retirement systems are different,â says Kocoves, âand districts donât always provide sufficient information to educate employees about their pension plans.â
Some states offer two choices: a defined benefit plan or a defined contribution plan. A defined contribution plan provides you with a lump sum at the end of your service to use as you please. A defined benefit plan gives you smaller, regular payments for the rest of your life. Some districts only give new teachers 45 days to decide which plan theyâll have to stick with for their entire career, so itâs important to understand the options and timelines.
2. Learn the differences between a 403(b) and 457(b), and choose based on your benefits
âItâs important to save on your own because you want to be in the position where you control your financial future,â says Kocoves. âThe more you protect yourself, the better.â
That being said, you need to pick the right option to meet your goals. Two types of retirement accounts for public educators are the 403(b) and 457(b). Both are deferred compensation plans for non-profits, and while there are differences between them, both plans may provide a tax break because they lower your taxable income by the amount of the contributions. The more you contribute, the greater the potential tax break.
3. Decide how much to spend and save
Kocoves advises people in their 20s to get in the habit of investing from the very beginning, as well as work side-by-side with their financial representative. âI donât want my clients to just randomly pick a dollar amount to defer into an account every paycheck,â says Kocoves. âItâs important for them to fully understand what theyâre doing and why theyâre doing itâto be informed and involved so they can get what they are entitled to through the plans offered.â
If youâre in your 30s âŠ
In your 30âs youâre settling into your teaching career. Your classroom probably runs like a well-oiled machine. Maybe youâre married, maybe you started a family, maybe you want to buy a home. Your financial burdens could be starting to build. Itâs easy to be tempted to take a break from saving or investing and use the money for other things. However, itâs important not to abandon your long-range plans.
1. Keep building your nest egg
Remain committed to setting aside money for retirement. Meet regularly with your financial representative to look at your investments and make sure theyâre on track. Use your annual pay raises to bump up your contributions. If youâre in your 30s and new to teaching, roll over any retirement savings youâve earned from past jobs.
2. Pay off student loans and other high-interest debts
Donât let student loans get in the way of providing for your future. Pay them off as quickly as you can. You might consider using gifts from family or tax returns to bring the balance down. And though itâs harder than it sounds, try your best to avoid credit card debt.
3. Plan for unexpected events
Youâve worked hard to set up your investments for the future. Now itâs time to protect them. Ask your financial representative about a Living Benefits plan. These policies provide you with life, disability, and options to help cover expenses like an assisted living or nursing home facility, all rolled into one policy. âIf you donât have the protection against unforeseen events,â cautions Kocoves, âyour assets can be gone just like that.â
If youâre in your 40s âŠ
In your 40âs, youâre likely in it for the long run. Youâre probably a trusted mentor at your school, and maybe youâve received advanced certifications or taken on a leadership role, which could mean a higher salary. However, at the same time, your own kids are growing, and youâre saving for college. You might own a house that needs to be maintained. Your financial burden is heavy, especially if you have a family.
1. Stay the course
It may be tempting to redirect money from your retirement account to cover other expenses, but for the sake of your long-term future, donât do it. Continue to meet with your financial representative regularly, make your scheduled contributions, and follow through on your plan.
2. Consider the financial risks youâre willing to take
âStuff happens,â says Kocoves, âand plans sometimes change the closer you get to retirement.â A well-managed plan, however, has the ability to pivot. While you may have been excited about the hottest new investment in your 20âs, you may want something less flashy now. Adjust your asset allocation to match your risk tolerance.
3. Start saving if you havenât alreadyâitâs not too late
You may wish you had started earlier, but the reality is until youâve built up your nest egg, you wonât be able to afford to retire. So, the sooner you put a plan in place, the better youâll feel.
If youâre in your 50s âŠ
If youâve been using this retirement planning checklist, you know that retirement is within reach. Youâve put in your time as an educator, and youâre starting to look forward to the final stretch. You may have children in college and plan to work for a few more years to continue to save for retirement, but your financial responsibilities are starting to taper off.
1. Start running the numbers
Meet regularly with your financial representative to make adjustments to your asset allocation and make sure you are on track. Shift your portfolio to more conservative options to match the risks youâre willing to take. A more conservative approach may be just the ticket to provide you with enough income to hold you for the long haul.
2. Spend wisely
Pay off remaining debt, like loans, credit cards, and your mortgage, if possible. You may be tempted to purchase a vacation home or take that trip around the world, but make sure the reality of your financial situation supports your immediate dreams.
3. Take advantage of catch-up contributions
Many investment plans allow you to increase your contributions after the age of 50. Some allow you to really crank it out once you are within three years of retirement. Check with your financial representative to find out whatâs possible.
A note on early retirement:
This year, there has been a noticeable uptick in educators thinking about early retirement, which is likely a result of the stresses of COVID teaching. Retirement takes planning and a heads-up to the district.
âThe first question you should answer is,â says Kocoves, âare you eligible?â
Most districts use a rubric that combines age and years of service. If youâre not eligible, any money youâve accrued might be held until youâre a certain age, for example, 60 in Michigan, 62.5 in other states. Most districts offer different options for retirement payouts. Usually, teachers need to make their decision six months before actually retiring. And once you make your choice, youâre locked in for the duration.
If youâre in your 60s âŠ
This is it! That retirement party is right around the corner. The name of the game now is moving from building and protecting your money to distributing and preserving it.
1. Run the final numbers
Before you take the plunge, run final numbers for your distribution with your financial representative. Make the modifications or adjustments needed to make sure your choices provide you with enough money to last the rest of your life.
2. Focus on preserving your money
Youâve worked hard to build your nest egg. Now is the time to protect it from being depleted by taxes, disabilities, or long-term care costs.
3. Start estate planning
This is also the time to think about setting up a trust, will, and medical directives. This protects your assets for years to come and spares your family the time, costs, and obstacles associated with managing finances in your absence.
Ready to get started with retirement planning?
You never know what life is going to throw at you, but regardless of your age or what point youâre at in your career, reviewing this financial planning checklist for teachers can help you make the retirement lifestyle you dream about a reality. The next step is to work with a financial representative to come up with a personalized plan.
âIf you take the right action with the right people,â says Kocoves, âyouâre going to be okay.â
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