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Quoted in HerMoney: THE BACK-TO-SCHOOL FINANCIAL PRIMER EVERY TEACHER NEEDS

In HerMoney, Marianne is quoted about teachers facing the retirement gap

Teachers face unique financial planning issues. Educators in some states do not qualify for Social Security. Therefore, they need to plan carefully and establish an additional source of income to fill the financial gap between their state pension income and their expenses.

THE BACK-TO-SCHOOL FINANCIAL PRIMER EVERY TEACHER NEEDS

Casandra Andrews  |  September 2, 2021

NOT ALL TEACHERS QUALIFY FOR SOCIAL SECURITY

In more than a dozen states, public school teachers don’t pay Social Security through payroll taxes and aren’t eligible for those retirement benefits because of other pre-existing state plans.

In areas where public employees, including teachers, don’t contribute to Social Security, it’s essential to make sure there won’t be any gaps in retirement income, says Marianne Nolte, a certified financial planner in California. Typically, state retirement plans will make up only about 70% or 80% of an educator’s current earned income. 

Click below to read the full article about the need for teachers to fill their retirement gap:

WHAT CAN TEACHERS DO TO FILL THE RETIREMENT GAP?

Many educators have supplemental retirement programs available through their school district. Retirement accounts like a 403(b) or a 457 allow teachers to save additional funds in a tax-deferred account. Later in retirement, accounts like these can be used to make up the shortfall or bridge the gap of funds produced by their state pension.  

How teacher 403(b) accounts work

Teachers can contribute to a 403(b) or 457. It is helpful to have a financial advisor assist in setting up these types of accounts. Each school district has an approved vendor list. From this point, investors need to determine if they want to invest in mutual funds or an annuity. Individual stock investments are not an option when using a 403(b) account. Third-party administrator (TPA) approval will be required to open and fund the account.  

403(b) accounts operate much like a corporate 401(k) account. They are deducted directly from your paycheck on a pre-tax basis which in turn lowers your earned income. They grow tax-deferred until you withdraw funds in retirement. Withdrawals are taxed as ordinary income. If funds are withdrawn prior to the account owner attaining age 59 1/2 a 10% penalty may apply.