Have you started thinking about your retirement yet? I waited until I was about 30 years old and I am totally kicking myself right now for waiting so long. I never thought I had enough money to even think about retirement. When the 403(b) people came to my first school, as a new CF I wanted to tell them, “Look, I can barely afford the gas to get here right now. I can’t really invest in my retirement at the moment.” In all reality, I could have afforded $25 a paycheck just to get myself started, but I didn’t do that and I really regret it now. When I see the impact of time on these accounts it’s like a knife in my heart. If you are a CF, step away from your laminating and GET ON THIS!
What is a 403(b)?
“The 403(b) is a retirement plan available to employees of educational institutions. Contributions can be made on a pre-tax or Roth basis. Pre-tax investment earnings grow tax deferred until withdrawal (assumed to be retirement), at which time they are taxed as ordinary income. After tax Roth contributions also grow tax free but are not taxed upon withdrawal (assumed to be retirement).” Source What that means in basic terms, it’s a way to invest money for the long term, and you can pick whether or not you want it taxed now or later. The 403(b) is like education’s version of the 401(k). If you prefer video explanations, check this one out.
“But I have a pension. I’m set for life.”
This is what a lot of people think, but it’s actually really far from the truth in a lot of cases. This is especially problematic if you are a relatively new hire, plan to retire early, plan to/have already taken time off to raise your children, if this is your second career, if you started working for your employer later in your career, or if you taught in more than one state. So CFs and SLPs who switched from medical to schools – this is especially important for you! Unless you plan on working at your school for 35 years straight, your pension may not be enough. There goes any hopes and dreams of retiring early! Not only that, if you are younger like me (30 y/o), our pensions aren’t as good as the people who are retiring now. In many states they keep decreasing new hire’s benefits. Look into your states pension system and see how yours works.
“But I Have Social Security”
Do you though? “About 40 percent of teachers are not covered by Social Security because they teach in jurisdictions that have not elected to participate in Social Security. This means these teachers don’t contribute to the Social Security system (7.65% of their income up to $117,000 this year with a corresponding 7.65% contribution from their school district) but it also means they don’t earn Social Security credit toward their retirement benefit. Some or all teachers in fifteen states—Alaska, California, Colorado, Connecticut, Georgia, Illinois, Kentucky, Louisiana, Maine, Massachusetts, Missouri, Nevada, Ohio, Rhode Island, and Texas—are not enrolled in Social Security.” Source
Okay, so I need to look into my retirement more closely. What are my first steps?
- Go to your school’s website (you may need to login for this) and head to the HR section. Look for a tab that says “Tax-Deferred Savings Plans”, “Tax Sheltered Annuities”, “403b “, “Retirement Benefits” or something similar to this. Click that tab and look for a vendor list for your 403(b) and 457(b) options. If you can’t find a list, email HR and ask for a list of your 403(b) and 457(b) vendors.
- Look into your pension plan. See what your pension equation is. See what pension class you are in and how much you are contributing to your pension. Figure out when your break-even point would be.
- Reference the list above and see if you are in a state that contributes to Social Security. Do some reading on what Social Security Income is and how it could impact you. Here’s a great resource for learning more about Social Security.
- Check out my next blog post (#2 in my 403b SLP series) for the next steps on taking control of your retirement. You’ll learn what to do once you have your vendor list.