A question we’re commonly asked by teachers planning to retire is how do I create a plan to ensure I receive the income I need to live my life comfortably in retirement? It’s a great question, with many different answers but we believe it’s best to start by taking an inventory of what income sources will be available upon retirement.
First, most teachers will be able to receive a pension once they qualify for retirement. Depending on your state, years of experience, pay history, and more, pension income can range from a small income supplement, to the equivalent of what you earn now. However, there is a huge caveat when it comes to this… the funding level of your state’s pension. Take some time to look it up, and if the percentage equates to an “F” grade, you may need to prepare for a benefit cut at some point in the future, unless your state fixes the issue.
Second, many teachers will be able to claim Social Security, but it depends entirely on your state. In 15 states and D.C., teachers are not covered. Usually their pension is designed to make up for this income gap, but it’s not a guarantee. Once you add up what you expect to receive from your pension and any social security you and your spouse may receive, take that number and subtract it from what you expect to spend annually in retirement.
If there’s a gap, you’ll need to supplement it by using distributions from your retirement savings or the purchase of a vehicle that’s designed to provide lifetime income, like an annuity. When you look at closing the gap, it’s best to project into the future to see if your distributions are sustainable or if you actually need to cut back on spending.
Planning for lifetime income as a teacher is one of the most important steps to preparing for your retirement. If you’d like to learn more or connect with a financial planner that specializes in retirement planning for teachers, don’t hesitate to give us a call or drop us an email.