Author Topic: Teacher Pension Question  (Read 1012 times)

teachclimb

  • 5 O'Clock Shadow
  • *
  • Posts: 1
Teacher Pension Question
« on: February 22, 2019, 01:35:54 PM »
Hi All,

I am a high school teacher in my 6th year. My pension has an option to "buy years". I am hoping to log about 20 years, but it would be nice to retire earlier if I could buy some time. Does anyone have experience with this? pros/cons?

Thanks!

Cranky

  • Handlebar Stache
  • *****
  • Posts: 1869
Re: Teacher Pension Question
« Reply #1 on: February 22, 2019, 02:22:16 PM »
It's pretty expensive. You should talk to your pension plan rep. The only people I know who have done it have planned to take the pension and either get hired back or take a different job.

pressure9pa

  • 5 O'Clock Shadow
  • *
  • Posts: 48
Re: Teacher Pension Question
« Reply #2 on: February 22, 2019, 02:42:06 PM »
When I last looked at it for my wife, buying a year added value to the pension, but did not count toward when you could retire at the various levels.  I figured the return at about 3.5%, and figured we could do better elsewhere.  YMMV. 

Pigeon

  • Handlebar Stache
  • *****
  • Posts: 1207
Re: Teacher Pension Question
« Reply #3 on: February 22, 2019, 03:38:03 PM »
Every situation will be different. Pension systems are different, and some have certain years that matter a great deal in terms of benefits. In some cases it makes sense. I'd talk to people at your pension system.

jamaicaspanish

  • Stubble
  • **
  • Posts: 103
Re: Teacher Pension Question
« Reply #4 on: February 22, 2019, 03:46:15 PM »
I bought years in the Missouri PSRS system.
Hands down, the best investment I could have made.

If you are in MO, IŽd be happy to share my insight and experience.
If you are in another state, YMMV.

But definitely, do your homework -- dad / teacher joke included at no extra cost ;-)

aceyou

  • Handlebar Stache
  • *****
  • Posts: 1574
  • Age: 36
    • Life is Good - Aceyou's Journal
Re: Teacher Pension Question
« Reply #5 on: February 23, 2019, 01:39:55 PM »
If you buy the years,  does it mean that you can collect the pension sooner,  or does it just result in a higher payout? 

My wife and I teach in Michigan.   We both bought 5 years and as a result can collect full pensions after 25 years instead of 30.  We began teaching at 23, so the move allows us to peace out with 2 full pensions at age 48.  For us it was a no brainer.   They cost me 20k because I bought after the 1st year teaching.   My wife bought after 8 years teaching and a master's degree,  so he's were 45k.  65k for a half decade extra of permanent vacation seems like a steal to us.   

If it allows you to pull the trigger in retirement earlier,  then I'd say its probably worth it a just about any price...you're a mustachian, you'll make the finances work!

BicycleB

  • Handlebar Stache
  • *****
  • Posts: 1783
  • Location: Live Music Capital of the World
  • Older than the internet, but not wiser... yet
Re: Teacher Pension Question
« Reply #6 on: February 24, 2019, 04:39:52 PM »
Experience with buying years in similar pension systems, not teacher ones. Totally supporting all comments that it depends on the exact terms, which vary from system to system.

One subtlety is if you will ever work for a pay rate much higher or lower than your regular salary, some systems allow you to buy years at the new rate. It may be too late for this, but if you work for a low pay rate at first and have savings to buy years, buy them right away when eligible, then switch to a better paying job. Usually the price of the years depends on the pay rate, so the "hack" would be that you bought at a low price, but later had your pension amount based on the higher salary. You could look into the details and see if changing jobs within the district at some point temporarily allows something similar to happen - work as a low-paid aide one year, buy time cheaply, return to teaching.

The effect is somewhat less if you're young and plan to FIRE, though. Because in most systems the pension's monthly annuity payout is based on your highest 3 or 5 years of service, and if you FIRE, inflation has diluted that base by the time you start collecting. Again it depends on the details of your system, though.