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Dan's Blog

5 Steps Educators Need to Take to Ensure a Successful Retirement 📋

February 15, 2022

My pod partner Scott Dauenhauer, CFP and I were excited to hear about the recent publication of a paper by the Sinkfield Center for Applied Economic Research called Teachers’ Knowledge and Preparedness for Retirement: Results from a Nationally Representative Teacher Survey. Unfortunately the paper was entirely focused on pension plans. The 403(b) was mentioned once. The 457(b) wasn’t mentioned at all. Worse, we have since learned that the intent of the paper may have been to discredit pensions. Ughh. 

So what should teachers know in order to ensure a successful retirement? At the risk of sounding like click bate, here are the 5 steps educators need to take...

No. 1: Understand How Your Pension Works

Regardless of your age, understand what you can expect to receive in retirement. Most pension agencies have easy-to-use online calculators. Many put on educational workshops, both in person and via Zoom. Many also have online help lines. 

No. 2: Find Out If You Contribute to Social Security

Do you contribute to Social Security? Not all educators do. It has been said that you need to think of retirement as a 3-legged stool: 1) Social Security 2) Pension (if available) and 3) Defined contribution plans like a 403(b) and 457(b), and invidual savings plans like the traditional IRA and the Roth IRA. If you don't have access to Social Security you may contribute more to your pension which makes Step No. 1 even more important. 

No. 3: Invest in a 403(b) and/or 457(b)

These 401(k)-like retirement plans can be a great way to save for retirement. I say can be because many K-12 403(b) plans flat out stink. We created the District Plan Rating Project to help educators learn if their plan is good or bad. We do this by assigning a plan grade. If we don’t have your plan in our database you will see a link where you can easily upload your vendors. We will post them and assign a grade. You can learn more about the 403(b) here and the 457(b) here

No. 4: Understand the Basics of Investing

You do not need to be an expert to achieve a successful retirement but it is important that you have a basic understanding of saving and investing. We have free self-paced learning modules on the 403(b), 457(b) and the basics of saving and investing. We highly recommend Morgan Housel’s Psychology of Money. It teaches simple, powerful savings concepts through compelling stories. 

No. 5: Continue to Educate Yourself

While the basics never change (spend less than you earn; start saving as early as possible; invest in low-cost diversified investments) it’s important to continue to expand your financial knowledge. There are so many ways to do this. We think podcasts are one of the best. Our favorites include our own (Teach and Retire Rich), NPR’s Planet Money, Choose FI, and Morningstar’s The Long View. 

That’s it. That’s the list. Trust me, if you can teach, you can save for a comfortable retirement.  

Stay wise and well (and start stepping).

Related Podcast:

5 Savings Steps Teachers Need to Take We discuss 5 things every teachers should do to ensure a healthy retirement. Listen Now »