Invest Retirement

The Back-To-School Financial Primer Every Teacher Needs

Casandra Andrews  |  September 2, 2021

Six strategies for K-12 educators (and anyone with a state pension) to consider as they plan for retirement.

There’s likely never been a point in history when the true value of K-12 teachers was felt as absolutely as it was during the first waves of COVID, when millions of classrooms went dark and children headed home to learn remotely alongside their work-displaced parents. 

Despite disruptions during the 2020-2021 academic year, an estimated 3.7 million educators —  predominantly women — taught more than 56 million students in elementary, middle and high schools across the nation, in public, private and charter schools, according to the National Center for Education Statistics. 

As educators are now returning to the classrooms (virtual and in-person) it’s a good idea for new teachers and academic veterans alike to review their financial plans to ensure they are taking advantage of all the benefits their districts and state pension systems have to offer. 

Here’s a look at the best ways teachers can make the most informed decisions for their financial futures, courtesy certified financial planners. 

Save for retirement outside of employer plans

Megan Kopka, a certified financial planner who also taught in Massachusetts, says it’s important for educators to understand early on that pensions likely won’t be enough to cover their expenses when they’re ready to retire. 

“You may think you can’t afford to contribute, however, you can’t afford not to contribute,” says Kopka. “For those in the earlier years, or lower paying states, there is the possibility you may qualify for the saver’s credit, a tax credit that can help negate saving.” 

Some school districts have expensive and sometimes inflexible 403(b) products, and you could be better off saving money in an Independent Retirement Account (IRA). It’s important to get any employer match available, but after that, see if you have lower fees or better investment options with an IRA.

Listen to your colleagues, then verify

While your educator friends may tell you it’s too expensive to contribute to an additional retirement plan, do your own research to determine what that might look like for you and your situation. “‘Too expensive’ for some might mean anything,” Kopka notes. “In North Carolina, you can have your buy-in calculated every year. In year seven of working for the state the price/year goes down,” she says. “So you may price it one year and then need to look at your options again in a few years.”

Something else you can do is ask the human resources department in your school district if they know if there is a decreasing time, then an increasing one. If you plan to buy years, then open a traditional IRA and save tax-free there while investing, Kopka says. 

Keep a close watch on things if you’re moving to another state

Don’t forget that many pensions can be portable. If you are already vested in one state, you can leave your pension, or you may be able to roll it over to ‘buy’ years in your new home state, Kopka notes. Teachers also can use what’s known as “qualified money” to buy years into a new plan. Do your research before you make a jump, and don’t be afraid to schedule meetings with people on either end of your move to make sure you’ve got everything buttoned up. This is your financial future at stake — you don’t want to leave a single penny behind. 

Not all teachers qualify for Social Security

In more than a dozen states, public school teachers don’t pay Social Security through payroll taxes and aren’t eligible for those retirement benefits because of other pre-existing state plans.

In areas where public employees, including teachers, don’t contribute to Social Security, it’s essential to make sure there won’t be any gaps in retirement income, says Marianne Nolte, a certified financial planner in California. Typically, state retirement plans will make up only about 70% or 80% of an educator’s current earned income. 

If an educator ever worked at other jobs besides teaching, it’s important to research what happens with their benefits, because they could also end up with less money than they’re expecting for other reasons, says Justin Pritchard, a certified financial planner with Approach Financial, Inc., in Colorado. 

Because Social Security payments are intended to replace only some of a worker’s pre-retirement earnings (generally 40% of wages for most) state employees with less than 30 years before retirement may encounter what’s known as the Windfall Elimination Provision (WEP). This provision can impact how your retirement or disability benefits are calculated, notes Pritchard. If you work for an employer who doesn’t withhold Social Security taxes from your salary, such as a government agency or an employer in another country, any retirement or disability pension you get from that work can reduce your Social Security benefits.

To learn more about provisions that could impact your Social Security retirement benefits, visit this site. 

Other options for saving

Teachers also can save and invest through a 403(b) or 457 plan. Similar to a corporate 401(k), Nolte says, educators can save and invest by assigning a certain percent or dollar amount of their pay to be directly deducted before taxes and deposited into the 403(b) or 457. This money grows tax-deferred until the educator begins to draw the money out to supplement their other pension in retirement. When that happens, Nolte says, it is important to understand any money removed from the 403(b) or 457 will be taxable.  

Many teachers also have access to benefits offered in addition to pensions, including everything from long-term care insurance, to life and health insurance. These are often provided at a discount to educators, so make sure you understand all those benefits and take full advantage of them whenever you can. 

Also, if an educator has access to an HSA, (a health savings account for those with high-deductible insurance plans) they can potentially use that to get a tax deduction and fund future health expenses. Teachers also need to make sure they are maximizing benefits that many other educators typically take. These can include student loan interest deductions and the Lifetime Learning Credit. 

Behind in your savings? You can catch up!

A target savings rate for your entire career should be between 15% and 20% of your income, which includes the amount contributed by your retirement system. If you haven’t been contributing enough, remember to bulk up your contributions as much as you can (and as soon as you can) and maximize your salary in your last years of teaching before you retire, Nolte says. During your final year of work, you may want to look into a 403(b) if you don’t already have one. The final paycheck with sick payout may be tax-sheltered and then rolled into your IRA later.

And to all teachers from HerMoney’s staff — thank you. You’ve kept us all educated, sane and believing in miracles for as long as we can remember, and we so appreciate all that you do. Any teachers with special questions for Jean, or requests for future podcasts or articles can email We’d love to hear from you. <3 


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