Teachers face unique challenges, don’t we know it, in and out of the classroom. But when it comes to saving for retirement, including how to craft a strategy and the best way to invest for the future, 8 things may set a teacher’s retirement savings apart from other professions.
1.If you diligently plan, you may be able to retire comfortably (even on a teacher’s salary)
Everyone knows that you aren’t teaching to become a millionaire. Still, by saving as soon as you start working, having a sound saving and investment plan, and working with a financial professional, you’ll be surprised how much progress you may make.
2. Most teachers can participate in their State Teacher Retirement System (STRS), but it may not be enough for your retirement
While most educational employees participate in a state system, it won’t provide enough income to live on in retirement. This is why a supplemental savings plan such as a 403(b) is so important to a teacher’s retirement strategy, and it’s a no-brainer.
3. Teachers have multiple retirement plan vendor options, sometimes too many
Each district has vendor options for the 403(b) plans they offer. Some have one and others twenty. It can be hard to know which option is right for you. Ask for a list of options and compare each vendor’s products and services, then meet with the representatives of each to get more details about your choices.
4. Teachers usually have specific types of investment options
Teachers can often choose to invest in an individual account with an annuity contract provided through an insurance company, an option not available to participants in 401(k) plans.
5. There could be tax considerations of Roth and pre-tax 403(b) plan contributions
Understand your tax situation and how it might impact the type of 403(b) contributions you choose. Generally speaking, if you are in a lower tax bracket now and expect to be in a higher bracket in retirement, a Roth option may work for you because taxes are paid now, not later when funds are withdrawn.
6. Teachers especially need a retirement savings strategy
Before choosing investments, it’s important to have a savings strategy based on your personal goals, years to retirement, and other factors. While this is common to most retirement investors, it’s essential for teachers as career advances and changes occur in income, family, and goals.
7. As a teacher, you may have access to multiple retirement savings plan types, which can be a unique benefit
There may be more than one plan available to you. Some districts offer both a 403(b) and 457(b) plan. If yours does, you can save through both plans. Contributions won’t conflict with or affect the other. This means that you can contribute up to the maximum allowable amount to each plan.
8. Teachers need to get advice from a financial professional specializing in education
Knowing what you don’t know or where you need some help is the hallmark of a wise student, and every good teacher also strives to be a good student. Most will benefit from working with a financial professional with experience in education and the unique retirement savings plans offered to teachers. The right financial professional should know how teacher pensions differ from state to state, tier to tier, and more. Pairing STRS benefits with supplemental savings plans (like a 403(b) plan) could be critical to achieving a secure financial future. Getting started as early as possible is the wisest approach, but it’s never too late to begin saving for retirement.
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