Understanding the Variables for an Educator’s Retirement Plan

Educators have more than the usual number of variables to consider when thinking about retirement. There is usually a defined-benefit pension plan with multiple pay out options, you probably have access to a defined-contribution plan,  and many educators may retire at a relatively young age, leaving the door open for “encore” careers  as defined in an Investopedia article. Layer in Social Security and when the ideal time is to start drawing that benefit and the equation suddenly becomes pretty complicated.

Here are some things for educators to consider as you develop your plan:

Understanding Your Pension – Start Early and Seek Advice

Many educators wait until they are within six months or less of their retirement date to really begin to understand all the options for how a state pension program may be taken. Best practice would be to start weighing your options as you approach the five-year mark to your desired retirement date.

A great resource is your teachers’ association and the retirement system in your state. They typically offer a wealth of information as well as seminars and access to staff who can help you understand your defined benefit.

Another good resource is to seek out a fiduciary advisor who is legally bound to operate in your best interest. Ask your colleagues for recommendations on advisors who have specific expertise in helping educators so the person you select can help you maximize your pension and other benefits.

Understanding Your Defined-Contribution Opportunities

If you are a full-time employee for a public school or tax-exempt private school, you more than likely have a defined-contribution plan sponsored by your employer. These are usually 403(b) plans which are similar to the private sector 401(k) plans. You may also have a 457(b) plan available to you if you work for a public school district. This may be in place of or it could be an addition to a 403(b) plan. If your employer doesn’t provide a match, you may also want to consider a traditional or Roth IRA.

Again, having a fiduciary advisor in your corner will help you to get the most out of the resources available to you outside your state pension program.

Understanding Your Options for a Second Career

A recent article from Time magazine illustrates how many do not view retirement as they did in the past for a variety of reasons. This can be a double-edged sword, in my experience. While the option to work longer is certainly available, that does not always mean the ability is there. Issues with your individual health, an aging spouse or family member, and the desire to step away from a demanding career, among other reasons, all factor in the decision to eventually withdraw from one’s occupation. Retirement is more flexible than ever before, but that flexibility may be cut short due to some of the issues described above. With that in mind, you should develop a plan that isn’t dependent on earning extra income after you retire.

Developing a Plan – What Am I Saving For?

Everyone knows they must save money, it’s the difficulty of determining the objective(s) specific to their situation which causes the issue of being overwhelmed and viewing it as complex. Questions I am asked often include:

  • How do I know if I will have enough?
  • Should I target a certain dollar amount?
  • What age is financial independence feasible?
  • How do I account for healthcare expenses and emergencies as I get older?
  • How do I properly ensure I can leave a legacy?
  • How do I invest to accumulate, then how do I invest to conserve?
  • Can I derive enough income from my investments?

The list goes on. When I am consulting and advising clients on this matter, I never have an exact number to give them – it’s not my decision to make. The most successful solution is the creation and presentation of different scenarios that answers the questions they have. Showing clients the visual illustrations of what retirement looks like if they work till X age, what it looks like if they accumulate X dollar amount, what it looks like if we plan for X amount of years of healthcare expenses, etc.

This is where the advisor must educate, and the client must participate. Retirement planning cannot be entirely focused on market returns, growth percentages, or picking the hottest IPO – it’s about addressing the many scenarios that may arise in retirement and being fully prepared to address them. Overwhelming and complex? Yes, especially if you’re trying to do it on your own.

I am proud to serve on a team of financial advisors who can help you navigate all areas of your financial life as you prepare for, enter into and live in retirement. Want to learn more about what we can do for you? Start here.

The views and strategies described may not be suitable for all investors. This material has been prepared for informational purposes only, and is not intended to provide, and should not be relied on for accounting, legal or tax advice. References to future returns are not promises or even estimates of actual returns a client portfolio may achieve. Any forecasts contained herein are for illustrative purposes only and are not to be relied upon as advice or interpreted as a recommendation.

The views expressed are those of BerganKDV Wealth Management. They are subject to change at any time. These views do not necessarily reflect the opinions of any other firm. Investment advisory services and fee-based planning offered through BerganKDV Wealth Management, an SEC Registered Investment Advisor.

CATEGORIES: Wealth Management
Notify of

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Inline Feedbacks
View all comments


Let us know a little about yourself! We’ll deliver timely news straight to your inbox.