Written by Mason Moses.
As an educator who may be considering retirement, it is important to evaluate how you can maximize your benefits. 2020 has been the most difficult time many professionals have faced within the educational field, making the desire to retire understandable and certainly well-earned, but don’t let stress drive your retirement plan. Determine your retirement date by evaluating what’s most beneficial to you.
Your pension is the most valuable asset and it will directly affect the lifestyle you will live for the rest of your life and once you claim retirement. There will be no opportunities to increase your creditable earnings and it’s uncommon to receive a cost of living adjustment. Additionally, unless your plan is to retire and assume a second career, you will not have the ability to take advantage of tax-deferred savings vehicles to the same extent that you can as an educator.
With the stakes of retirement being rigid, it’s important to set goals and determine your cost of living before setting a retirement date. Evaluating your pension status and current savings will provide you a benchmark of where you stand today. You may find holding off on retirement or working part-time to be necessary. TCG can help you make a plan that won’t require you to end up working more than you desire.
Take the following steps before determining a retirement date:
1. Request an estimate from your pension system to project your pension payout. Compare that number to what your contract reflects to ensure they are aligned. (Tip: Know what your contract includes. Longevity pay, vacation days, and other items might be owed at separation.)
2. Craft a retirement budget with your estimated monthly needs and see how it compares to your pension. (Tip: Practice living off that amount for 2-3 months before announcing your retirement to see if that is realistic.)
3. Research your investments to see if they are appropriate as you enter retirement. You should also know what fees you are paying as those can significantly impact your returns. (Tip: If you are in an annuity, have a third-party provide an analysis to see if it really is in your best interest.)
4. Review your health care options and how those expenses fit into your budget. Factor in medical expenses, they will be different once you are retired.
5. Do not go it alone. This is the biggest decision you will make and it’s important to seek out independent advice from individuals familiar with educator pensions and retirement savings.
The items above are designed to provide clear expectations on your situation if you retire today. If you feel properly prepared and select a retirement date, be prepared with a timeline to begin your retirement journey.
Deciding to retire can be complex and there are many checkpoints along the way that can help you determine if you have successfully run your race. Naturally, other things like health, new grandkids, peace of mind, stress management, or other opportunities can impact these decisions beyond the numbers. However, some things do not come with a price tag. Still, it’s important to enter retirement with your eyes wide open. You have worked hard to earn this time and it is important you feel comfortable making this transition in a way that allows you to enjoy the shade of the tree you planted.
For a retirement consultation, please reach out to TCG. We are here to help and can lend our years of experience in working with school leaders on these issues to make sure you have the facts you need to make this important decision.