How much is my pension worth?
- My wife and I are teachers in Austin, TX where we receive a pension called Teacher Retirement System (TRS)
-We make contributions to our pension each month. The pension pays out 2.2% for every year worked and averages your five highest paid years. E.g. if I work for 30 years and the average of my 5 highest paid years is $60,000, then I would receive an annual pension of: $39,600 (.022 x 30 years x $60,000).
Life Situation: Married, one child, likely to have at least one more at some point. Live in Austin, TX but next year will be moving to teach in Beijing China.
Gross Salary/Wages: $48,000 (mine) here in Austin. In Beijing, my salary will be $71,000, I will not have to pay income taxes on this salary and our housing will be provided. Thus, when we are abroad, we will have the ability to save a much larger chunk of our income. However, we will also not be contributing to our pension or Social Security...
Other Ordinary Income: We currently own two properties (one where we live, and one we use as a rental). Both will be rented out while we are abroad. We plan to use a good chunk of our savings while abroad to invest in more rentals.
Qualified Dividends & Long Term Capital Gains: We each have Roth IRA's.
Specific Question(s): As mentioned previously, my wife and I are both teachers and are moving abroad this next school year. Trying to decide as far as retirement goes as to whether or not staying abroad for a significant amount of time where we will have higher savings potential is a better retirement choice than working in Texas where we contribute to our pension.
Pension details: The pension pays out 2.2% for every year worked and averages your five highest paid years. E.g. if I work for 30 years and the average of my 5 highest paid years is $60,000, then I would receive an annual pension of: $39,600 (.022 x 30 years x $60,000).
-Pension cannot be collected until I am 62 (people older than me have different rules like the rule of 85, but I am grandfathered into this rule, where even if I retire before age 62, I cannot receive any pension money until the age of 62)
-As member of TRS, I do not contribute to Social Security
-I am 31-years-old and am in my 7th year of teaching - thus, if I never work another year as a teacher in the state of Texas my current pension's value is 7 x .022 x $46,000 = $6,930 annually
-This value could obviously change if I come back and work more years, would become an administrator and have a higher salary, etc.
Living Abroad Financial details:
-My salary next year will be $71,000 (I do not have to pay income tax on this salary)
-Our family housing will be provided by the school
-Since we will be living in Beijing, we will not own a car
-Healthcare is provided by the school
When living abroad, we will be able to save a much higher percentage of our income. While I know nothing in life is guaranteed, a pension is pretty nice in that it will be an almost 100% guaranteed source of retirement income. Whereas, any investments we put in our Roth IRAs, index funds, or even rental properties are not guaranteed sources of income.
Retirement goals: We both really love teaching and are people that don't like a ton of down-time. So, would love to save towards financial independence, but envision ourselves working part-time as either lecturers at a college, tutors, or substitute teachers.
An obvious negative of the pension is that we can't start collecting it before we are 62....whereas our rental income and portfolio investments could be accessed whenever we need them.
Again, any insight or advice is much appreciated.