Comments from a teacher in another state with only a few years left -- filter this all through your own state's rules:
Teacher pensions are a good source of retirement income, but ONLY if you max out your years. If you started teaching at age 22 and put in 30 years, you'd qualify for a maximum pension at age 52 ... and also have basic paid medical (and can add your spouse to your medical at cost). That's the person who "wins" at the pension game: The person who starts working early, maxes out the years, never changes jobs, and begins collecting at a relatively young age.
As a result, they may not be attractive to the hard-core members of this website.
If you leave teaching at 20-25 years (instead of making it to the full 30), the deduction is fairly substantial ... and if you're younger than 62 (62?), they knock more off for your young age (because they'll be paying you longer). If you want to leave at 20-25 years but are willing not to begin collecting your pension until age 65, you can avoid this deduction. Some of my friends who are older say their deduction is only $20-25/month, but because I'm younger it would've been almost like cutting my pension in half. It's really a bit like the question of when to begin collecting Social Security -- so many individual circumstances, and you must run the math scenerios for yourself. It's complicated, and we have pages and pages of charts in our retirement handbook to tell you exactly what they deduct if you begin collecting your pension at age 60 with 26.4 years of service
Note that those 20-25-30 years must all be worked in the same state. Your wife is a STATE employee. If you're offered a job in another state, or y'all just decide you want to live in Florida, she leaves the pension program. She can leave her money in the system and can some day collect a small pension from two different states ... but every teacher I know who has moved from one state to another mid-career has said the same thing:
It's pension suicide. To say it more clearly: If you were to move to Florida next year, she would be hired in to a new school at a 6th year teacher's salary ... but she would start from Square 1 for her new Florida pension. So think carefully about whether you're likely to stay in your current state (or on the borders of your state so that she could reasonably commute to a -- did you say Missouri? -- school). 20-25 years is a long time.
Lots of states are dropping pensions; with people living longer, they're expensive to maintain. As long as your wife remains "in the system" under her current contract, she's "in". But if she were to take off a couple years (a new baby, illness, whatever), she might be forced to come in under a new no-pension system. Our state is moving this direction for teachers, yet they're not treating other state employees the same way.
Another big thing that's disappearing is paid medical for retirees. I'm "in" under the old system. I will have basic paid medical (for myself only) from the first day I begin collecting my pension. I will want an additional small policy because basic is BASIC. Younger teachers don't have this; it wasn't in their contracts on the day they joined the system.
If I want to cover my husband on my medical insurance in retirement, he must be "on my plan" at least the last year I am employed by the school system.
Teachers only a year or two older than me have a great retirement benefit: They will pay no state taxes on their pension. That benefit disappeared just before I started, and it's not in my contract.
Be sure you investigate your wife's options for sick days. In my state we can use sick days to "complete" 30 years (not 20-25 years ... you cannot use sick days unless you "max out"). So this means that if your wife has two years of sick days, she can retire at 28 years of service ... and it counts just as if she had 30. Except, of course, that her salary would be a little higher if she went to the full 30. Age doesn't matter /you have no deductions if you max out your years. I personally have SO MANY sick days, and I will not use them as sick days; I will drag my sorry, sick self into school no matter what ... and pretty soon it's going to pay off for me. Why does the state do this? Because it's to everyone's advantage if teachers DON'T stay out ... and they don't want to create a use-it-or-lose-it mentality with sick days.
An odd little note on sick days shared between teachers and other state employees: We can "gift" sick days to immediate family members. The intention is that a wife could "gift" sick days to a husband who is fighting cancer (or any number of similar situations); the intention is that benefits can be shared within a family. I have a friend whose husband is a state employee (not a teacher), and he is required to work
loads and loads of overtime in the summer months ... he receives comp time/not pay for that overtime ... and at the end of the year all that comp time "rolls into" sick days ... and he "gifts" them to his wife ... eventually she will use these to reach 30 years/full service sooner. In this way, they are "buying back" the years she stayed home with small children ... their goal is to get themselves "even" so they can retire at the same time, even though she will have worked fewer years.
When I begin collecting my pension, I will have
one chance to select from four options:
- Because I am younger and in better health than my husband, I will almost certainly choose the Maximum Option, which means I'll get the largest amount for the rest of my life ... and when I'm gone, the payments stop.
- I can accept a lower amount of pension; but if I die first, my husband would continue to receive 50% of my pension for his life.
- I can accept a lower still amount of pension; but if I die first, my husband would continue to receive 100% of my pension for his life.
- The last option is Social Security Leveling. The state figures up what my Social Security would be at age 62, and they pay me a MUCH lower pension ... but they also pay me what I will eventually receive in Social Security ... and then at age 62 I begin collecting Social Security and the state continues to pay the MUCH lower pension. This option is wildly popular among the math-impaired, as they cannot be convinced it isn't a way to collect Social Security at age 55 or so. Their typical "evidence" that it's a good choice: My friend turned 62, and her payments didn't change a dime!
Thing about these choices: You only get one chance to make the choice. As someone else pointed out to you, these options don't mean that you're BOTH receiving a pension ... only that if you make the right choice, you could continue collecting, even if she died early. Obviously, at your age you can't begin to choose -- you'll have to consider your health and your family's longevity as retirement age approaches.
Lots of teachers who are good at math opt to take their pension ... then substitute teach. Subbing means a teacher can work 8-9 days a month and (with the pension) have just as much money as they had while working full time. It's a job that's flexible for a retiree: You can say, "No, I can't work the last two weeks of the month. I'll be traveling." You're out the door at 2:30 -- but you have no parent conferences, no grades to calculate, no lessons to plan, no after school duties. Of course, it also means that you can't work in the summers, you won't have much work the first month of school, and you'll be asked to work a lot of Fridays. I am given to understand that subs watch HALF of a lot of movies. In my state -- for reasons I don't understand -- you cannot work in any paid capacity for the school system until you have been retired /collecting pension for six months.
Another good teacher option is tutoring. Our county office maintains a list of tutors, and parents can call whomever they like. Tutors set their own prices, and most opt to meet their students at the public library.
When you're looking at your state's formula for calculating pension, be sure you're basing your estimates ONLY on your wife's base salary. My state has started giving bonuses for various things (in place of raises); bonuses do not raise your retirement. Likewise, if your wife coaches the tennis team or does any other type of "extra" activity that boosts her salary, that doesn't raise her retirement. Only base salary raises her retirement.
Look into when she is allowed to retire. In my state, we are required to retire either on the first day of a month OR at the end of a grading period. Teachers who are good at math spend some time with the calendar and a calculator figuring up exactly whether it's wise to stay past spring break ... or whether they should leave at the semester break. Some people will say, "I'm retiring at the end of the semester so I can be paid for Christmas break", while others will say, "If I leave before Christmas break, those days will roll over into sick days and will bring me to my full 30 years." One friend of mine was planning to retire at the end of the school year ... but he realized that the bump-up in pension was enough to convince him to work fall semester /leave after first semester finals ... and it allowed him to coach fall track one more time, something he says he will miss. This, of course, is all highly personal and depends upon whether you were originally hired in the fall or (like me) mid-year and whether you've ever taken any time off (for children, perhaps).
Teachers have the option to "buy back missing time" under certain circumstances. If you took off a couple months for the birth of a child, for example, you can pay the state the amount of pension that would've been paid in during that time period (plus their half, plus a little more just because). You can also "buy back" time you missed during an extended illness or military service. I don't know as much about this.
If -- as the years progress -- your wife becomes dissatisfied with teaching (and, trust me, it's a burn-out job), remember that she can change jobs within the same system and remain in the pension system. So she could put in 20 years as a teacher, then she could "step down" to become a teacher assistant (no lessons to plan, no papers to grade, just helping a teacher), or she could become the school's receptionist ... and she'd still be working towards her 30 years ... in my state the formula uses your "four years of highest salary", so you can understand how that would work.
Another thought altogether: In your state, do teachers pay into Social Security? In my state, we do; thus, I will collect both a pension and Social Security (eventually). In some states, teachers are exempt from Social Security, so this isn't true for them. Just be sure you know where you stand on this subject.
Does your state offer cost-of-living increases for retirees?
Yes, a pension is an uncertain risk. A pretty big bite of my paycheck is deducted every month -- at this point, I have contributed a great deal to that fund. If I retire and die two years later, I will lose big time -- and my children would not inherit my "leftover money". On the other hand, if as expected, I live well into my 90s, possibly past 100, I will collect back every penny I put in -- and more. It's a "defined benefit" plan. The benefit is defined, and I cannot outlive my money. But it'll be decades 'til I know whether I am "winning" this bet or not.
Final thought: Look online and see if you don't have LOTS of information specific to your state. We have a whole handbook and a very informative power point online. I attended the "You're within five years of retirement" meeting last year, and I learned nothing -- it was all already online.
Good luck. I hope this is helpful
Ahhh... that makes a lot more sense. Yes huge difference. I knew the way I was looking at it was too good to be true.
No, the teacher pension is not "too good to be true". If you put in the years and make the right choices, it is definitely a good thing, but not "too good to be true".
My husband and I've been working on retirement numbers this week. I anticipate having $2344/month in pension /after taxes. Plenty for a comfortable day-to-day life, given that our house is paid for. Then we'll have our savings /investments for travel, fun, an occasional new roof or new car.