Teachers: what are your best personal finance tips?

Non-investing personal finance issues including insurance, credit, real estate, taxes, employment and legal issues such as trusts and wills
seligsoj
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Teachers: what are your best personal finance tips?

Post by seligsoj » Wed May 31, 2017 7:58 pm

I'm dreaming of starting a personal finance website for educators (school psychologist here) and would love to hear from other educators what their best personal finance tips are? Have you managed to accumulate a nice nest egg despite the sentiment that educators are underpaid and broke...and if so, how have you managed to do it? Does your school district pay well, mediocre or poorly?

Goinganontoday
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Re: Teachers: what are your best personal finance tips?

Post by Goinganontoday » Wed May 31, 2017 8:53 pm

I love this idea and I have actually toyed around with a similar idea in the past. As teachers, we do not accept it when students say that they just can't understand something. We keep working with that student until he/she gets it. However, all too often, I hear teachers say that they just don't understand finances/retirement planning/medical options, etc., and then they shrug it off and say "oh well." Can you imagine what would happen if we allowed our students to get away with that attitude?!

In my opinion, teachers need to do the same thing that other people do. Create a budget and stick to it. Live below their means. Save for retirement (not just rely on underfunded pensions). Don't give the government an interest free loan throughout the year (fix their tax withholdings periodically). Don't give their district an interest free loan throughout the summer (take the summer paychecks as a lump sum rather than letting the district hold onto teachers' money for longer than necessary).

My school district pays pretty well, but I'm constantly hearing from colleagues about how they have no money. It's frustrating since most of them are paid more than I am (I'm a newer teacher). Based on my experience and observations, teachers often believe that they are in some unique financial situation when really they are not. They aren't the top paid profession, but in many areas of the country, they also aren't the worst paid.

Ron Ronnerson
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Re: Teachers: what are your best personal finance tips?

Post by Ron Ronnerson » Wed May 31, 2017 9:06 pm

I'm an elementary school teacher in the Bay Area. My wife works 30 hours a week for a small business. We're both 42. I earn $100k per year and she earns about $45k. This is middle class as I teach in Silicon Valley and the median home price around these parts is in the seven figures. We've got about $400k in savings & investments. Our retirement expenses should largely be covered by pension and social security. We save about $40k/year in retirement accounts - basically my wife's salary.

One thing that I realized early on was that watching how much we spent on expenses produced a greater bang for the buck than earning more money. In my specific situation, the following would happen to each additional dollar I earned: 25% would go to federal tax, 10.25% would go toward a pension, 8% would go to state tax, 5% would be gone due to being in the phaseout for the child tax credit, and 1.45% would go to medicare. This adds up to 49.7%.

So, instead, we've set things up a little differently. After taking itemized deductions and exemptions into account, we put enough into retirement accounts that our AGI stays at $110k. This means we get the full child tax credit and also happen to stay in the 15% tax bracket. I don't teach summer school or tutor. My wife works no more than 30 hours a week - enough to get health insurance benefits for our family as the school district I work for doesn't provide these benefits. We don't want to work any more since we're already saving plenty and any additional income would be taxed relatively heavily.

Our family of 3 lives in a four bedroom/four bathroom townhouse in an area with excellent schools. Our approach has been to focus more on spending than earning. It has worked really well as my wife and I are able to spend a lot of time with each other and our 3-year-old daughter and still live very comfortably.

We're on a trajectory to be able to retire in our late 50s. However, I really love my job and may continue to do it for longer than that. I look forward to going to work on most days. Though, to be honest, I don't mind that summer break is fast approaching as I could use it to recharge the tank at this point.
Last edited by Ron Ronnerson on Wed May 31, 2017 9:13 pm, edited 1 time in total.

Jags4186
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Re: Teachers: what are your best personal finance tips?

Post by Jags4186 » Wed May 31, 2017 9:10 pm

Where I live (NJ) teachers make pretty good money. 25 years experienced teachers with mostly online earned Masters degrees are making 100k. Plus a pension, 3 months off, good health benefits, tenure etc etc. The conversation in these parts is usually they have it too good and then the teachers say how hard they have it Yada Yada. Kind of amusing to be honest. Lots of teachers often moderate a club and get paid extra for that as well.

I have relatives who live in NY and, while they may have struggled early, are currently collecting pensions, teaching or administrating in other districts getting a salary, and will retire with a second pension.

I certainly feel for the teachers who make 30k/yr with no pension though.

Ron Ronnerson
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Re: Teachers: what are your best personal finance tips?

Post by Ron Ronnerson » Wed May 31, 2017 9:27 pm

Jags4186 wrote:Where I live (NJ) teachers make pretty good money. 25 years experienced teachers with mostly online earned Masters degrees are making 100k. Plus a pension, 3 months off, good health benefits, tenure etc etc. The conversation in these parts is usually they have it too good and then the teachers say how hard they have it Yada Yada. Kind of amusing to be honest. Lots of teachers often moderate a club and get paid extra for that as well.

I have relatives who live in NY and, while they may have struggled early, are currently collecting pensions, teaching or administrating in other districts getting a salary, and will retire with a second pension.

I certainly feel for the teachers who make 30k/yr with no pension though.

I sort of know what you mean and it is a strange situation. I have a six-figure salary, tenure, excellent job security, and 180 days off a year. My pension should be very nice as well. The parents, the administration, and the students couldn't be more awesome. There are very few behavior problems and the work environment is terrific. Here's the other side: There is a gigantic teacher shortage right now where I work and anyone with a credential and a pulse can get hired as a teacher. However, no one is signing up for the deal because home prices are totally insane. This is the case here in Silicon Valley, which I know is not exactly the same as most of the country. I guess my point is that context matters. $100k is a lot of money...except when it isn't.

6bquick
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Re: Teachers: what are your best personal finance tips?

Post by 6bquick » Wed May 31, 2017 9:54 pm

i'm not a teacher, but i'm married to one; first grade. She's in a district that pays very well for ohio. I have a very hard time not getting "political" or "judgey" when discussing these things and 95% of the time my teacher wife agrees with me. Suffice it to say that while there's little excuse for anyone to not save/plan appropriately, we (teacher wife included) find it even more ridiculous when said profession offers one the opportunity to garner two paychecks for ~25% of the year while only working one job at a time.

quoting Jags4186: "Where I live (NJ) teachers make pretty good money. 25 years experienced teachers with mostly online earned Masters degrees are making 100k. Plus a pension, 3 months off, good health benefits, tenure etc etc. The conversation in these parts is usually they have it too good and then the teachers say how hard they have it Yada Yada. Kind of amusing to be honest. Lots of teachers often moderate a club and get paid extra for that as well."

I echo his sentiments. contrary to popular opinion, If you went into teaching to get rich... congratulations, it really isn't that hard.

DVMResident
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Re: Teachers: what are your best personal finance tips?

Post by DVMResident » Wed May 31, 2017 10:19 pm

Not a teacher. Some ideas for the site content specific to teachers:
-Explain each state's pension plans. The plans are often complex, opaque, and difficult to understand. Subsequent articles comparing different systems.
-Highlight the issues with pension 'haircuts' and how to plan around them.
-Annuities and related products. Maybe (bad) plans are sold to teachers as administrators will offload their liability/responsibility to outside insurance companies.
-Fees, fees, and more fees. Many 403(b)s have very high fees.
-Advocacy for how to lower fees.

If you do start a blog/resource website, thank you in advance. Teachers do such incredible and critical work. I really dislike seeing them taken advantage of.

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mlebuf
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Re: Teachers: what are your best personal finance tips?

Post by mlebuf » Wed May 31, 2017 10:35 pm

In the '70's I was a professor teaching Management at U. of New Orleans. I saw my salary being eroded by stagflation and realized that I had to do something. I wrote a book that led to writing more books, speaking, etc. The result is that I took an early retirement age 47, twelve years after I started writing. I continued to write and speak until my early/mid 50's. What began as attempt to supplement my income earned me many times more in lifetime earnings than in my 20 years of teaching. My personal finance tips:
1. Find a way to supplement your income and save the bulk/all of it.
2. Live in a low cost of living area of the country.
3. Max out the most you can in tax deferred, retirement savings from your teaching and other incomes. It's not how much you make, it's how much you keep. My CPA tells me that he has some retired teacher clients with very nice nest eggs and pensions, while some other clients earned far more but have little in savings to show for it.
4. If you decide to launch a second career on the side, a good rule of thumb is that it takes 15 years to become an overnight success.
5. When it comes to working, saving and investing, stay the course. (Where have I heard that before?) :D

Good luck.
Best wishes, | Michael | | Invest your time actively and your money passively.

GrandMasterBlaster
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Re: Teachers: what are your best personal finance tips?

Post by GrandMasterBlaster » Wed May 31, 2017 10:54 pm

My wife is a teacher in NYS, as are many of my other family members and friends. Despite the bad rap the profession gets, most of them are doing quite well. My dad makes makes six figures as a gym teacher in our very LCOL area and will retire with a handsome pension. My wife only recently got a full-time job in a major district (she previously worked as a SPED teacher for a local agency), so as of now, our priority is to get her tenured. She's great at her job, so not too many worries there.

I've seen a few points stressed that may vary by district:

1.) Max out grad school and in-service credits. Many districts require you to eventually get your masters, but they also pay you more for having it. After that, for every 10 additional credits my wife receives up to 30 credits (and up to 60 in many districts), her salary increases by about a thousand dollars. When new contracts are negotiated, salary increases are often percentage-based, which will greatly benefit those teachers with the most additional credit hours.

2.) Know how your pension is calculated. Often it is based on the average of your three highest-salaried years. As you approach retirement, there are many ways you can bump your salary for those three years up even more, such as coaching, tutoring, heading departments, etc. Those few years of extra commitment can pay big dividends in retirement.

3.) Be aware of student loan forgiveness programs. My wife previously worked for five years at a high-turnover school for kids with autism and was rewarded with $17,000 in student loan forgiveness. Only certain loans types were able to be forgiven, so if you are considering refinancing/consolidating and work in such a school, make sure you look up how the forgiveness applies to your situation. In certain circumstances, the chance to get more loans forgiven might outweigh the benefits of refinancing.

4.) Understand your benefits. There are many benefits in my wife's package that take quite a bit of digging to fully understand. As a matter of fact, trying to understand her 403b options led me here!!! Thank God for those complicated benefits! It's good to have a rapport with your union rep to help in this regard. An example was my wife's recent maternity leave. Since she was a new teacher to the district, and she is not the financially savvy type, she didn't participate in a sick-day pool that her school offers. Essentially, it is a program where you donate a few sick days to a pool but then have the ability to take out many more than you put in when needed for things like prolonged sickness and maternity leave. We left a few thousand dollars on the table because she did not bother to learn about this program. Needless to say, we'll be ready for this when #2 comes along. Other examples include free life insurance as a member of the union (not a substantial sum, but better than nothing), as well as discounts on car rentals and hotel rooms.

I think a major consideration must also be managing burnout. As a teacher in Special Education who is currently working with emotionally disturbed children in the inner city, my wife's job runs the gamut from intensely rewarding to absolutely appalling. Many will tell you to pick up side jobs over the summer and laugh about all the "time off" teachers get, but I can say from experience that it is crucial to recharge your batteries in the downtime. My wife is lucky to have a relationship with a local restaurant she's worked for since she was a teenager that allows her to work one decent-paying shift a week during the summer, but I wouldn't let her do more than that unless she had a compelling reason to. It sounds strange, but enjoying our summers together by traveling and seeing music is an essential part of the job!

Thanks for starting this thread, I look forward to seeing what other teachers have to add!

pretzelfisch
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Re: Teachers: what are your best personal finance tips?

Post by pretzelfisch » Wed May 31, 2017 11:17 pm

My wife is a Teacher, I would suggest warning a new teacher singing up for their benefits program needs to know any "rep"/"adviser" is a salesperson, they will push you towards an annuity in the tax deferred options and will advise you to use life insurance for college savings.
My tip would be to always ask for a teacher discount 90% of places we shop have something.

livesoft
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Re: Teachers: what are your best personal finance tips?

Post by livesoft » Thu Jun 01, 2017 5:34 am

This signature message sponsored by sscritic: Learn to fish.

beetroot
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Re: Teachers: what are your best personal finance tips?

Post by beetroot » Thu Jun 01, 2017 7:29 am

I would recommend basic financial management such as minimizing expenses by using a budget as well as long term planning. Estimating expenses, income and taxes at different stages of life can help to determine and adjust savings and choose between low cost investment vehicles such as ROTH IRA or (mutual fund based) 403B, possibly using the 403B to decrease taxable income depending upon one’s situation.

I second the emphasis on using graduate work and in service hours to increase salary. Coaching, department chair stipends and clubs are also ways to increase pay.

For me the most helpful thing was to create a timeline of expenses and income. This highlighted the transitions. The decrease in income when transitioning from salary to pension, the increase in income when taking social security benefits, and the increase in income when taking RMD’s. Looking at these ahead of time can help estimate the amount needed to save in the 403B and estimated effect of those savings on taxes after age 70.5 so as to minimize taxes and avoid higher Medicaid premiums and other such pitfalls.

The best advice anyone ever gave me was to have two buckets, a ROTH IRA and a 403B for flexibility in spending.

Coato
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Re: Teachers: what are your best personal finance tips?

Post by Coato » Thu Jun 01, 2017 8:09 am

One tip: If you are in a district served but the Schoosfirst credit union they have a Summer Saver account for teachers where you can put maximum $2000 per month into a 3% savings account (no strings, no spend requirements, withdraw any time). That 3% rate is only for 1 year so cash not cleared out by August goes down to their lower rate.

Schoolsfirst also has a 2.6% 5-year CD for teachers but I think it needs to be inside their 457b. That's on my list to ask next time I go in.

One suggestion for your site would be to walk teachers through the three-headed decision of the IRA/403b/457b... Obviously you want to fill all three but if you cannot, then knowing the relative strengths of all is a plus. In our state a teacher can retire at 55 but the pension multiplier if you start drawing at 55 is 1.4. At 62 the multiplier is 2.4. So a 457b is great for the 55-59.5 bucket since it is the only tax-advantaged money you can access penalty free.

It would also be great to know how stable each state's teacher pension system is. We are in the Cali system and though our pension will supposedly be enough to cover our basic life, we don't even plan on it.

I would also love to read an article about how much risk is joined by a teacher holding a state muni that relies on a pension from that same state. In California with basically a 9.3% brackets for all teachers, it is hard not to look at the two Vanguard options for California Municipals. But I cannot gauge the risk to me very well.

bigred77
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Re: Teachers: what are your best personal finance tips?

Post by bigred77 » Thu Jun 01, 2017 8:27 am

DVMResident wrote:Not a teacher. Some ideas for the site content specific to teachers:
-Explain each state's pension plans. The plans are often complex, opaque, and difficult to understand. Subsequent articles comparing different systems.
-Highlight the issues with pension 'haircuts' and how to plan around them.
-Annuities and related products. Maybe (bad) plans are sold to teachers as administrators will offload their liability/responsibility to outside insurance companies.
-Fees, fees, and more fees. Many 403(b)s have very high fees.
-Advocacy for how to lower fees.

If you do start a blog/resource website, thank you in advance. Teachers do such incredible and critical work. I really dislike seeing them taken advantage of.
+1
All of these ideas would be excellent.

My wife is a teacher and her public school pension materials are just ridiculous with all of the tiers and yearly rule changes and lack of clear explanation. Not to mention in our state, teachers' pensions are reduced for SS benefits (including spousal SS) which makes them less generous then they may appear on the surface.

Would love to read an in depth write up on our state's plan because I'm sure I've missed a couple of nuggets while researching it on my own.

anonenigma
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Re: Teachers: what are your best personal finance tips?

Post by anonenigma » Thu Jun 01, 2017 8:36 am

Ron Ronnerson wrote:
We're on a trajectory to be able to retire in our late 50s. However, I really love my job and may continue to do it for longer than that.
Your CalSTRS pension at 58 will have an age factor of 1.8. At age 61.5 (assuming 30 years), the age factor maxes at 2.4. Huge difference.

anonenigma
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Re: Teachers: what are your best personal finance tips?

Post by anonenigma » Thu Jun 01, 2017 8:42 am

bigred77 wrote:
Not to mention in our state, teachers' pensions are reduced for SS benefits (including spousal SS) which makes them less generous then they may appear on the surface.
Other way around. It's the Social Security benefits that are reduced, not the pension. Windfall Elimination Provision. Also, if the teacher's spouse predeceases the teacher, the teacher won't receive the spouse's Social Security (but if the teacher passes first, the spouse can receive both pension survivor benefits and Social Security with no reduction).

bigred77
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Re: Teachers: what are your best personal finance tips?

Post by bigred77 » Thu Jun 01, 2017 8:49 am

anonenigma wrote:
bigred77 wrote:
Not to mention in our state, teachers' pensions are reduced for SS benefits (including spousal SS) which makes them less generous then they may appear on the surface.
Other way around. It's the Social Security benefits that are reduced, not the pension. Windfall Elimination Provision. Also, if the teacher's spouse predeceases the teacher, the teacher won't receive the spouse's Social Security (but if the teacher passes first, the spouse can receive both pension survivor benefits and Social Security with no reduction).
I think you are correct.

I just wish my wife's district participated in both plans. Absent that, I would personally prefer if they participated in SS and then did away with the pension and offered a generous 401k style match (I realize I am in the minority with that position).

donaldfair71
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Re: Teachers: what are your best personal finance tips?

Post by donaldfair71 » Thu Jun 01, 2017 8:50 am

1. Don't buy a house that costs more than twice your household income.
2. Don't buy new cars. Or finance any of them.
3. Don't trust your pension will be there.
4. Don't pass up savings on top of pension.
5. Don't marry another teacher (I broke this rule)
6. If you get #1 and #2 right, you really have to try to screw it up.

I speak with our Lincoln 403b/457 rep when she comes to my building. Her face is funny when she sees that I max out my 457 and put another 3% (to get the match) in my 403b. She doesn't even know that we max two Roths as well. When I asked her once what the average % contributed she sees, she says the highest other than me is probably 5% in the entire district. That's sad.

renue74
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Re: Teachers: what are your best personal finance tips?

Post by renue74 » Thu Jun 01, 2017 9:09 am

Don't trust your school district to feed you correct information on your 403b or associated retirement plans. Do your own due diligence.

My wife's school district gave us ONE advisor's contact info for their 403b plan. An AXA advisor. :(

Only after I asked multiple times did the district HR office give us 4 other plans that we could contribute to....one being ASPIRE, which is much better in terms of expenses.

Texanbybirth
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Re: Teachers: what are your best personal finance tips?

Post by Texanbybirth » Thu Jun 01, 2017 9:10 am

Whoa, such different experiences from teachers. Sounds like I should have moved to the north to become a teacher!

My dad was (is) a teacher down here in TX. The pay always sucked and my mom had to work so that us kids could have health insurance. (The family plan in my dad's district was obscenely expensive.) The summers off with my dad were nice, but he had to take a lot of work for us to make ends meet. Ultimately, the job made him tired and the politics broke him. He retired early with a good pension, and now teaches outside the public school system. I'd like to see him retire completely (maybe work part-time on one his passions) from teaching, and get back some of his life from teaching. God bless you teachers; I think it's one of the most noble professions.
donaldfair71 wrote:1. Don't buy a house that costs more than twice your household income.
2. Don't buy new cars. Or finance any of them.
3. Don't trust your pension will be there.
4. Don't pass up savings on top of pension.
5. Don't marry another teacher (I broke this rule)
6. If you get #1 and #2 right, you really have to try to screw it up.
I think this is great advice, but it's good advice for any profession really. I married a teacher (I'm not one, though had a strong desire to be one) and we follow the steps above, except our house is a little more expensive.

stoptothink
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Re: Teachers: what are your best personal finance tips?

Post by stoptothink » Thu Jun 01, 2017 9:37 am

6bquick wrote:i'm not a teacher, but i'm married to one; first grade. She's in a district that pays very well for ohio. I have a very hard time not getting "political" or "judgey" when discussing these things and 95% of the time my teacher wife agrees with me. Suffice it to say that while there's little excuse for anyone to not save/plan appropriately, we (teacher wife included) find it even more ridiculous when said profession offers one the opportunity to garner two paychecks for ~25% of the year while only working one job at a time.

quoting Jags4186: "Where I live (NJ) teachers make pretty good money. 25 years experienced teachers with mostly online earned Masters degrees are making 100k. Plus a pension, 3 months off, good health benefits, tenure etc etc. The conversation in these parts is usually they have it too good and then the teachers say how hard they have it Yada Yada. Kind of amusing to be honest. Lots of teachers often moderate a club and get paid extra for that as well."

I echo his sentiments. contrary to popular opinion, If you went into teaching to get rich... congratulations, it really isn't that hard.
Similar sentiments. I as well am not a teacher, but my stepfather (who started teaching after 15yrs in private industry, for the money) and sister are, and I've actually lost several employees (I'm a director in a health megacorp) to teaching because it simply was a better financial opportunity. Of course it varies drastically by region and district, but you could do much worse in the private sector (compensation-wise) than teaching public school and the job stability is pretty much unparalleled.

This is a relevant discussion on this board though, which always seems to be dominated by highly paid professionals (myself included...well, at least compared to public school teachers).

Ron Ronnerson
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Re: Teachers: what are your best personal finance tips?

Post by Ron Ronnerson » Thu Jun 01, 2017 10:23 am

anonenigma wrote:
Ron Ronnerson wrote:
We're on a trajectory to be able to retire in our late 50s. However, I really love my job and may continue to do it for longer than that.
Your CalSTRS pension at 58 will have an age factor of 1.8. At age 61.5 (assuming 30 years), the age factor maxes at 2.4. Huge difference.
Yes, it is interesting how the pension numbers can change quite a bit by moving the retirement age just slightly. I played with the CalSTRS pension calculator and assumed the highest salary on the schedule when I retire will be the same as it is today (just for a crude estimate). Here are the monthly pension numbers that come out for my particular case by age (this is for 100% option so that my wife continues to receive the pension if I predecease her):

58: $4600
58.5: $4800
59: $5600 (I get a boost here for having 30 years in the system)
59.5: $5800
60: $6000
60.5: $6300
61: $6500
61.5: $6800
62: $6900
62.5: 7000

If I'm enjoying myself then as I am now, I'll probably keep working into my 60s. However, we're saving $40k/year in Roth IRAs, a 457b, a 403b, and a SEP-IRA so hopefully can retire around 59 if I want to do so.

On a side note, while these numbers may seem really nice, it's important to keep in mind the cost-of-living. I teach in Silicon Valley and houses in the neighborhood where I work are 7 figures (mostly around 2M).

MGBGTV8
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Re: Teachers: what are your best personal finance tips?

Post by MGBGTV8 » Thu Jun 01, 2017 11:50 am

One specific point would be career guidance for new teachers, especially with respect to pension plan participation. If you move, and end up teaching in 4 places for 8 years each, that "good pension" may not vest to much, in comparison to 25 years in one place and retiring at 55. From a mid-career POV, the pension may limit mobility, whereas a portable 403(b) contribution can be carried with you.

Another area of focus for your site could be on handling the intricacies of "side jobs" like tutoring/private coaching. The practicalities like conflict of interest, business recordkeeping could also be combined with some business development advice.

Good luck.

denovo
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Re: Teachers: what are your best personal finance tips?

Post by denovo » Thu Jun 01, 2017 12:06 pm

anonenigma wrote:
bigred77 wrote:
Not to mention in our state, teachers' pensions are reduced for SS benefits (including spousal SS) which makes them less generous then they may appear on the surface.
Other way around. It's the Social Security benefits that are reduced, not the pension. Windfall Elimination Provision. Also, if the teacher's spouse predeceases the teacher, the teacher won't receive the spouse's Social Security (but if the teacher passes first, the spouse can receive both pension survivor benefits and Social Security with no reduction).
If OP wants to get into it, he or she will have to do a lot of state-specific research. I believe in many states, teachers do not pay into Social Security, but have a pension. In some other states, they do pay into Social Security.

Slapshot
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Re: Teachers: what are your best personal finance tips?

Post by Slapshot » Thu Jun 01, 2017 12:38 pm

This is an excellent topic. I can only speak to my own experience as a 35 year high school teacher/coach who has been retired for 13 years in Mass. In general, live below your means, max out all retirement avenues, and educate yourself on sites like this.

Our best move was probably buying a small house in the town where I taught early on. 3 BR, 1 BA. Then we added on as our family arrived and grew rather than being like some of our friends who bought big houses and were strapped forever with big payments. We added on when we had the cash to do so. Now we have a 4 BR 2BA house with a separate dining room and family and a 2 car garage all paid for. In addition, I saved mucho money not to mention time over the years with a one mile commute.

Another key was living on just my salary. My wife stayed home until the kids were all in school. Then when she started working, we were able to save her income. This enabled us to pay for college as we went without having to take out loans, and both our kids graduated without any debt and without us having any debt. We did a lot of camping back in those days instead of high priced vacations. But the kids still talk about how much they loved the trips that we could take since we had the summer off.

When I was in my early 40s, I started to get serious about retirement and investing. I learned about Vanguard, started a 403b with them, and went to our HR department at school and got them to put Vanguard on our plan. Then I put $150/week into Vanguard funds automatically and never missed the money. Over the years it mounted up to a nice sum that I'm just starting to tap at 70 years old. Like when we were young, we now live on my teacher pension income, and everything else, including my wife's social security, is gravy. We don't go camping anymore; instead we go on cruises, many ski trips where we stay in top notch accommodations, drive nice cars, eat at nice restaurants, help our kids out, etc. In other words, we are now reaping the benefits of our past frugality while we see many family and friends our age still struggling.

I realize that we have been extremely blessed and not everyone can be so lucky. But as a teacher, you should enjoy the job and its benefits, like the time off, and try not to get over-strapped with expenses. Looking back, the good times with our kids were better than any extra money we could have made. If you're frugal and don't do anything stupid with your money, you can end up better than you'd imagine.
This time, like all times, is the best of times if we but know what to do with it.

pretzelfisch
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Re: Teachers: what are your best personal finance tips?

Post by pretzelfisch » Thu Jun 01, 2017 2:19 pm

Ron Ronnerson wrote:
anonenigma wrote:
Ron Ronnerson wrote:
We're on a trajectory to be able to retire in our late 50s. However, I really love my job and may continue to do it for longer than that.
Your CalSTRS pension at 58 will have an age factor of 1.8. At age 61.5 (assuming 30 years), the age factor maxes at 2.4. Huge difference.
Yes, it is interesting how the pension numbers can change quite a bit by moving the retirement age just slightly. I played with the CalSTRS pension calculator and assumed the highest salary on the schedule when I retire will be the same as it is today (just for a crude estimate). Here are the monthly pension numbers that come out for my particular case by age (this is for 100% option so that my wife continues to receive the pension if I predecease her):

58: $4600
58.5: $4800
59: $5600 (I get a boost here for having 30 years in the system)
59.5: $5800
60: $6000
60.5: $6300
61: $6500
61.5: $6800
62: $6900
62.5: 7000

If I'm enjoying myself then as I am now, I'll probably keep working into my 60s. However, we're saving $40k/year in Roth IRAs, a 457b, a 403b, and a SEP-IRA so hopefully can retire around 59 if I want to do so.

On a side note, while these numbers may seem really nice, it's important to keep in mind the cost-of-living. I teach in Silicon Valley and houses in the neighborhood where I work are 7 figures (mostly around 2M).
Also keep in mind that CA teachers with CalSTRS don't get SS and anything they earned prior to teaching is reduced.
CalSTRS looks to be in better shape then CalPERS.

anonenigma
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Re: Teachers: what are your best personal finance tips?

Post by anonenigma » Sat Jun 03, 2017 12:15 pm

pretzelfisch wrote:
Ron Ronnerson wrote:
anonenigma wrote:
Ron Ronnerson wrote:
Your CalSTRS pension at 58 will have an age factor of 1.8. At age 61.5 (assuming 30 years), the age factor maxes at 2.4. Huge difference.
Yes, it is interesting how the pension numbers can change quite a bit by moving the retirement age just slightly. I played with the CalSTRS pension calculator and assumed the highest salary on the schedule when I retire will be the same as it is today (just for a crude estimate). Here are the monthly pension numbers that come out for my particular case by age (this is for 100% option so that my wife continues to receive the pension if I predecease her):

58: $4600
58.5: $4800
59: $5600 (I get a boost here for having 30 years in the system)
59.5: $5800
60: $6000
60.5: $6300
61: $6500
61.5: $6800
62: $6900
62.5: 7000
Do these numbers also include the additional years worked between 58 and 62?

Remember, also, that the longer you stay in, the more likely that there might be pay increases.

If you started out as a sub or worked a partial year, look into whether you can purchase service credit for that time.

seligsoj
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Re: Teachers: what are your best personal finance tips?

Post by seligsoj » Sat Jun 03, 2017 1:12 pm

OP here! Wow, lot of great ideas and thoughts here....many of which I hadn't considered myself. A lot of posters here seem to be working for higher paying districts, including myself....which would be one of my tips for new recently graduated educators without geographic ties to an area...pick a high paying school district and research their benefits/healthcare/pension in advance. My friend and I both graduated from our programs 13 years ago. She is in North Carolina making in the high $40,000 range while I am in Maryland making $110,000. Her housing costs are not much different than mine: $350,000 vs $450,000. I imagine it's a lot easier for me to save simply because of my higher income and that my pension (which I'm not banking on to fully be there in the end...but it is in decent fiscal shape right now) will probably be a decent amount higher due to how high our salary scale goes up to $130,000 versus hers $70,000.

spoco79
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Re: Teachers: what are your best personal finance tips?

Post by spoco79 » Sat Jun 03, 2017 3:45 pm

I've said I would do the same thing before, but I really only have about three topics. Maybe I can be a guest contributor on your blog.

I am a college professor and my wife is a high school teacher in a very low cost of living area. We have done very well for ourselves, and it grieves me to hear bright kids say that they don't want to enter the education field because it doesn't pay enough.

I make about $80k, my wife $55k. The average household income in my state is under $34k. So while our measly $135k income wouldn't do well in NYC or LA, we are able to afford a good lifestyle and only work 9-10 months per year.

pretzelfisch
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Re: Teachers: what are your best personal finance tips?

Post by pretzelfisch » Sat Jun 03, 2017 4:45 pm

anonenigma wrote:Do these numbers also include the additional years worked between 58 and 62?

Remember, also, that the longer you stay in, the more likely that there might be pay increases.

If you started out as a sub or worked a partial year, look into whether you can purchase service credit for that time.
The last three years are important, if you have 30 years of service they highest wage within this time span is used to calculate your pension payout. So if you can pickup extra services that bump your salary it will pay dividends for as long as your pension lasts

Ron Ronnerson
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Location: Bay Area

Re: Teachers: what are your best personal finance tips?

Post by Ron Ronnerson » Sat Jun 03, 2017 5:05 pm

anonenigma wrote:
pretzelfisch wrote:
Ron Ronnerson wrote:
anonenigma wrote:
Ron Ronnerson wrote:
Your CalSTRS pension at 58 will have an age factor of 1.8. At age 61.5 (assuming 30 years), the age factor maxes at 2.4. Huge difference.
Yes, it is interesting how the pension numbers can change quite a bit by moving the retirement age just slightly. I played with the CalSTRS pension calculator and assumed the highest salary on the schedule when I retire will be the same as it is today (just for a crude estimate). Here are the monthly pension numbers that come out for my particular case by age (this is for 100% option so that my wife continues to receive the pension if I predecease her):

58: $4600
58.5: $4800
59: $5600 (I get a boost here for having 30 years in the system)
59.5: $5800
60: $6000
60.5: $6300
61: $6500
61.5: $6800
62: $6900
62.5: 7000
Do these numbers also include the additional years worked between 58 and 62?

Remember, also, that the longer you stay in, the more likely that there might be pay increases.

If you started out as a sub or worked a partial year, look into whether you can purchase service credit for that time.
Yes, the numbers include additional years worked between 58 and 62.5 but I didn't include a salary increase. I agree that over 4.5 years, salary is likely to go up and understand that it will affect the size of the pension if it does.

I did substitute teach before being in my own classroom but have already earned credit for that time.

I think it generally makes a lot of sense for those who have 30 years in the CalSTRS system (and were first hired before 2013) to try to get to 61.5 as that seems to be optimal in terms of pension benefits. I may stay until that age and perhaps longer. I really love my job and look forward to working. However, I'm trying to set things up so that I can retire by 59 if I don't wish to work longer. I'm currently 42 years old so we'll see how I'm feeling as retirement approaches. My portfolio size outside the pension will, of course, be part of the equation too.

anonenigma
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Re: Teachers: what are your best personal finance tips?

Post by anonenigma » Sat Jun 03, 2017 5:16 pm

pretzelfisch wrote:
The last three years are important, if you have 30 years of service they highest wage within this time span is used to calculate your pension payout. So if you can pickup extra services that bump your salary it will pay dividends for as long as your pension lasts[/quote]

Not quite correct for CalSTRS:

1) for teachers hired before 2013, under the 2% at 60 model, it's your highest year if you have 25 years in, not 30.

2) Extra duties do not count in the defined benefit pension calculation, only base pay. Extra duties go into the Defined Benefit Supplement account, where the employee but not the employer, pays in 8% of earnings. This can be annuitized at retirement.

Ron Ronnerson
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Location: Bay Area

Re: Teachers: what are your best personal finance tips?

Post by Ron Ronnerson » Sat Jun 03, 2017 5:41 pm

seligsoj wrote:OP here! Wow, lot of great ideas and thoughts here....many of which I hadn't considered myself. A lot of posters here seem to be working for higher paying districts, including myself....which would be one of my tips for new recently graduated educators without geographic ties to an area...pick a high paying school district and research their benefits/healthcare/pension in advance. My friend and I both graduated from our programs 13 years ago. She is in North Carolina making in the high $40,000 range while I am in Maryland making $110,000. Her housing costs are not much different than mine: $350,000 vs $450,000. I imagine it's a lot easier for me to save simply because of my higher income and that my pension (which I'm not banking on to fully be there in the end...but it is in decent fiscal shape right now) will probably be a decent amount higher due to how high our salary scale goes up to $130,000 versus hers $70,000.

OP: You make a great point about researching the pay and benefits a district offers. I picked a high paying district with no health benefits because my health benefits are provided by my wife's employer (she is not a teacher). My salary will be about $105k as of next school year (technically next month). My wife makes less than half what I do (she works 30 hours/week) but has great benefits.

Together, we've done pretty well even in a VHCOL area such as the Bay Area. For us, it was a result of being frugal rather than making giant incomes - we make about the median salary for our area. We drive Corollas into the ground, travel using credit card points/miles, live in a townhouse we bought during the depths of the recession (got lucky there), have low childcare costs by choosing to purchase our home near family, etc. Being frugal means we don't have to work any additional hours (and thus have plenty of time together as a family) while still being able to save enough for the future. Above all, I think frugality is the key. We went through each expense category carefully and that has made a world of difference.

SrGrumpy
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Re: Teachers: what are your best personal finance tips?

Post by SrGrumpy » Sat Jun 03, 2017 5:45 pm

Ron Ronnerson wrote: I have . . . 180 days off a year.
How is that possible? Do you live on Mars, or does this include weekends and public holidays?

Ron Ronnerson
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Re: Teachers: what are your best personal finance tips?

Post by Ron Ronnerson » Sat Jun 03, 2017 6:25 pm

SrGrumpy wrote:
Ron Ronnerson wrote: I have . . . 180 days off a year.
How is that possible? Do you live on Mars, or does this include weekends and public holidays?
Yes, it includes all days that I'm not physically at work, including holidays and weekends. It doesn't include sick days, however, since that varies. I do take work home at times. It's Saturday and I graded papers for about an hour this morning and will probably grade for another hour or so this evening. I'm doing report cards next weekend and that will take a while too. So maybe it's only sort of 180 days off.

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pondering
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Re: Teachers: what are your best personal finance tips?

Post by pondering » Sat Jun 03, 2017 6:46 pm

Feel free to pilot your website on my wiki
--Robert Sterbal | 412-977-3526 call/text

krow36
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Re: Teachers: what are your best personal finance tips?

Post by krow36 » Sat Jun 03, 2017 6:55 pm

States in Which Public Employees Are Not Covered by Social Security:
* Alaska
* California
* Colorado
* Connecticut
* Georgia (certain local governments)
* Illinois
* Kentucky (certain local governments)
* Louisiana
* Maine
* Massachusetts
* Missouri
* Nevada
* Ohio
* Rhode Island (certain local governments)
* Texas
* http://www.nea.org/home/16819.htm

Teachers with a pension in the above states who also have had employment that earned them SS credits can find their SS payments greatly reduced by the Windfall Elimination Provision (WEP). http://socialsecurityintelligence.com/t ... -security/

All teachers, but especially teachers in the above states, should make use of their tax-deferred options (IRA, 403b, 457). Most teachers (70%?) do not contribute to a 403b plan and most of those who do contribute are in annuity 403b plans--this should change! Districts that don't offer a low-cost plan should be "encouraged" to do so. The folks at 403bwise.com have been working on these problems for many years. https://www.bogleheads.org/wiki/403b_pl ... _employees

gr7070
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Re: Teachers: what are your best personal finance tips?

Post by gr7070 » Sat Jun 03, 2017 8:49 pm

I'm married to a former teacher, now public school librarian (basically the same things). I do all the heavy lifting re our personal finances.

#1 most important is to choose to live in a state/school district that pays well!!! Choose wisely!

Do not work in a state with awful pay! Consider cost of living, as well, of course. My wife makes half to two-thirds of what she could make in many other states with reasonable COL. That's a massive loss based solely on where one decides to live!

There are many options out there! Make that choice early in your career! Actually make that choice, though, don't solely rely on birth location.

May want to consider actuary soundness of pension plan and current/future political climate w/r to pension. Though that is likely a difficult thing to assess. Getting hit with a 50% increase in contribution and coupled with a reduction in defined benefit is yet another massive financial loss.

Texas sucks for teacher pay! It also ranks very poorly in quality of education systems nation-wide, though this doesn't necessarily affect the teaching experience. Do not teach in this state! Lots of good things in Texas, but teaching here isn't one of them!

krow36
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Re: Teachers: what are your best personal finance tips?

Post by krow36 » Sat Jun 03, 2017 9:24 pm

Teachers have one advantage over employees in the for-profit world that have 401k’s. They usually have a choice of plan providers. If there are no low-cost providers on the school district’s list, they can frequently succeed in getting one added if they work at it. Of course they have to understand the critical importance of fees, and the importance of saving for retirement.

Toadandfriends
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Re: Teachers: what are your best personal finance tips?

Post by Toadandfriends » Sat Jun 03, 2017 10:14 pm

I wish I had understood just how much I would have to contribute to retirement accounts to make up for social security - I chose a defined contribution plan instead of our floundering/death spiral defined benefit plan - and as a state employee I will not be eligible for social security. So no social security and no pension. I didn't understand the ramifications of my situation. And those bleepin 403b and 457 options - you have to work hard to figure your options out and all the confusing choices are intimidating. How many times did I look at all the options and then not take action because I didn't know what to do? Figured it out eventually but lost many years of saving. (I would have been more motivated to figure it all out if I had understood my bleak financial situation better)

EdLaFave
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Re: Teachers: what are your best personal finance tips?

Post by EdLaFave » Sat Jun 03, 2017 10:20 pm

seligsoj wrote:I'm dreaming of starting a personal finance website for educators (school psychologist here) and would love to hear from other educators what their best personal finance tips are? Have you managed to accumulate a nice nest egg despite the sentiment that educators are underpaid and broke...and if so, how have you managed to do it? Does your school district pay well, mediocre or poorly?
My number one piece of advice is to understand and use the retirement accounts offered by your state and district. Know ahead of time that the system is rigged against you but it can be navigated to work in your favor if you're careful. I've got a website to help OCPS (FL) employees do just that https://educatorsfightingforfairness.wordpress.com/ Every other piece of advice I might have is applicable to everybody, not just teachers.

If you decide to setup a site, I'd be happy to help out in any way you might need.

I think it is more of a fact than a sentiment that educators are underpaid. They're paid less than other major countries and I believe a first year teacher at OCPS makes under 40k and basically receives inflationary raises unless they become an administrator.

duuuuuude
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Re: Teachers: what are your best personal finance tips?

Post by duuuuuude » Sat Jun 03, 2017 10:30 pm

Public school teacher in Southern California here. We do not have SS, just the STRS retirement plan (around 10% of your salary). However, we do have the option for contributing to a 403b and/or 457 to supplement the required STRS plan. We also make just the right amount of money to contribute to Roth IRAs. We're phased out of taking traditional IRA deductions.

Taking a snapshot at my colleagues at my school site, we still reflect our general population.

1) Those who are interested in finances and ready to plan for retirement beyond the pension and take actionable steps to DIY. (These tend to teach, retire, and you never hear from them again because they're off into the sunset).

2) Those who need a "guy/gal" to help them with their retirement, so they take a partial step on their own because they are afraid or have no interest in financial planning. (These teacher hang around a little, subbing every once in awhile.)

3) Those that assume the pension will be there, so they don't think they need to save. (These are the teachers that "retire" only to return to regular subbing because they need a extra cash to make ends meet).

4) Those who have no clue that they even have a state retirement pension, live paycheck to paycheck, and are frequently in credit card debt, so they don't have any money to put away anyway.

The irony of this whole thing is, teachers are pretty much paid the same amount of money. The pay range isn't huge for teachers in my district. However, you have people who have a lot more financially "together" than others. Finances isn't something normally talked about among staff/colleagues, but I sure started it this year!

Here's a little story:

I just spent last summer tracking down my school district's Plan ID # with Vanguard. Yes, my district has a direct account with Vanguard!

However, as long as I've been teaching, there's only been ONE single insurance company coming to our schools at the beginning of the year (they pay our district for access), to sign teachers up for 403b annuities, as well as other insurance products. When I signed up, the representative didn't even know what exactly the funds were..."We just sign them up for like 65% this ,and 35% this"....at the time, I didn't know much about investing either, so I signed up for the "pre-tax" benefit - whatever that meant...must be good!

It wasn't until after finding Bogleheads that I understood how the game worked and did some digging and learned how to DIY.

As I'm informing my colleagues about going with Vanguard direct, most people fit in categories 2-4. No action. I had two teachers willing to learn a little about how it works and start/switch with #1, and they just started putting their money in the Vanguard Target 2045 fund this year. WOO HOO!

The rest have stuck with the existing insurance company 403b plan (most of which have been on the on "guaranteed" 1.5% interest plan)...and little do they know, the fine print says there's a 1.3% annual maintenance fee for the insurance company to "invest" their money.... :shock: :oops: If they were signed up for variable annuities (like I was), the fee was in addition to super high expense ratio of the funds offered (Frequently around 1%...

After signing up for Vanguard, I quickly transferred funds from the insurance company over to save on the extra fees...we'll see what happens...I have about 25-30 more years till retirement, but with some simple math with tracking the cost of investing, I'm confident I'll be ahead a lot more than if I were to stick with the insurance folks.

So as a teacher, I think we have a bunch of benefits and opportunities to plan to be financially independent even though we aren't super high earners. We also have the "never make enough money" thought like many others in other industries, but again, it's all about getting a head start, budgeting, and putting the effort into saving and investing, which I'm assuming we all do as Bogleheads already. It's spreading this knowledge to others that I find most interesting.

pretzelfisch
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Re: Teachers: what are your best personal finance tips?

Post by pretzelfisch » Sun Jun 04, 2017 12:43 am

The only people that represent the 403b or 457 plans to teachers are sales people for life insurance and annuities. Worse they way our district messages this, it sounds like they are coming on behalf of the district to help the teacher.
Much like how 401k providers prey upon small businesses.

sweeden22
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Re: Teachers: what are your best personal finance tips?

Post by sweeden22 » Sun Jun 04, 2017 4:05 am

Ron Ronnerson wrote: Yes, it is interesting how the pension numbers can change quite a bit by moving the retirement age just slightly. I played with the CalSTRS pension calculator and assumed the highest salary on the schedule when I retire will be the same as it is today (just for a crude estimate). Here are the monthly pension numbers that come out for my particular case by age (this is for 100% option so that my wife continues to receive the pension if I predecease her):

58: $4600
58.5: $4800
59: $5600 (I get a boost here for having 30 years in the system)
59.5: $5800
60: $6000
60.5: $6300
61: $6500
61.5: $6800
62: $6900
62.5: 7000
.

Hi Ron, sorry if you know this already. The calculator at CalSTRS works as if you name the option beneficiary at the time of retirement (you mentioned it is your wife).

If you elect your person at age 55, you get a much better option factor. You can look at the CALSTRS handbook for the "option factor tables." Find you and your wife age when you hit 55 (first eligible for retirement) and then at the upper end when you turn 63. You get to keep more of your money by electing at 55. I guess there are risks in doing that early, but if you are almost 100 percent sure your wife will be your option, it makes sense to do it then, I think.

sweeden22
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Re: Teachers: what are your best personal finance tips?

Post by sweeden22 » Sun Jun 04, 2017 4:11 am

anonenigma wrote:
pretzelfisch wrote:
2) Extra duties do not count in the defined benefit pension calculation, only base pay. Extra duties go into the Defined Benefit Supplement account, where the employee but not the employer, pays in 8% of earnings. This can be annuitized at retirement.
The district does pay 8 percent into the supplemental account for extra activities. I just double checked this as I am always helping my family's California teachers.

chipperd
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Re: Teachers: what are your best personal finance tips?

Post by chipperd » Sun Jun 04, 2017 4:43 am

Ron Ronnerson wrote:I'm an elementary school teacher in the Bay Area. My wife works 30 hours a week for a small business. We're both 42. I earn $100k per year and she earns about $45k. This is middle class as I teach in Silicon Valley and the median home price around these parts is in the seven figures. We've got about $400k in savings & investments. Our retirement expenses should largely be covered by pension and social security. We save about $40k/year in retirement accounts - basically my wife's salary.

One thing that I realized early on was that watching how much we spent on expenses produced a greater bang for the buck than earning more money. In my specific situation, the following would happen to each additional dollar I earned: 25% would go to federal tax, 10.25% would go toward a pension, 8% would go to state tax, 5% would be gone due to being in the phaseout for the child tax credit, and 1.45% would go to medicare. This adds up to 49.7%.

So, instead, we've set things up a little differently. After taking itemized deductions and exemptions into account, we put enough into retirement accounts that our AGI stays at $110k. This means we get the full child tax credit and also happen to stay in the 15% tax bracket. I don't teach summer school or tutor. My wife works no more than 30 hours a week - enough to get health insurance benefits for our family as the school district I work for doesn't provide these benefits. We don't want to work any more since we're already saving plenty and any additional income would be taxed relatively heavily.

Our family of 3 lives in a four bedroom/four bathroom townhouse in an area with excellent schools. Our approach has been to focus more on spending than earning. It has worked really well as my wife and I are able to spend a lot of time with each other and our 3-year-old daughter and still live very comfortably.

We're on a trajectory to be able to retire in our late 50s. However, I really love my job and may continue to do it for longer than that. I look forward to going to work on most days. Though, to be honest, I don't mind that summer break is fast approaching as I could use it to recharge the tank at this point.
School social worker here. I didn't read all the way through, but became alarmed when you said that part of your retirement expenses will be paid by social security. In our state, (and in yours per quick google search) teachers don't pay into and receive social security. Is this your situation?

Needtoknow
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Re: Teachers: what are your best personal finance tips?

Post by Needtoknow » Sun Jun 04, 2017 5:04 am

bigred77 wrote:
anonenigma wrote:
bigred77 wrote:
Not to mention in our state, teachers' pensions are reduced for SS benefits (including spousal SS) which makes them less generous then they may appear on the surface.
Other way around. It's the Social Security benefits that are reduced, not the pension. Windfall Elimination Provision. Also, if the teacher's spouse predeceases the teacher, the teacher won't receive the spouse's Social Security (but if the teacher passes first, the spouse can receive both pension survivor benefits and Social Security with no reduction).
I think you are correct.

I just wish my wife's district participated in both plans. Absent that, I would personally prefer if they participated in SS and then did away with the pension and offered a generous 401k style match (I realize I am in the minority with that position).
s

I am not sure what state your wife's job is in but that could have a big effect on you wanting some of the things you say.
It is not your wife's school district that determines if they will participate in social security, it is the decision of the government. Those of federal guidelines and not state or union guidelines for the Windfall Elimination Provision and the Government Pension Offset. If she has paid into social security for other jobs and is eligible for a social security check, she would not lose all of it but a certain amount of it. If your wife is in the California State Teachers Retirement System, you would not want a 401K plan. Your wife gets two sources of income from her pension. She should get her Defined Retirement Benefit and a Defined Benefit Supplement. The supplement is money that is based upon any extra duty she has performed including summer school, coaching, after school activities, etc. That can add up to a substantial amount of money. You and your wife need to look much closely at the Calstrs benefits at calstrs.com because If you were able to steer her toward a matching 401k, you'd be leading her down the wrong path. Remember this is for California.

Needtoknow
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Re: Teachers: what are your best personal finance tips?

Post by Needtoknow » Sun Jun 04, 2017 5:33 am

Ron Ronnerson wrote:
anonenigma wrote:
Ron Ronnerson wrote:
We're on a trajectory to be able to retire in our late 50s. However, I really love my job and may continue to do it for longer than that.
Your CalSTRS pension at 58 will have an age factor of 1.8. At age 61.5 (assuming 30 years), the age factor maxes at 2.4. Huge difference.
Yes, it is interesting how the pension numbers can change quite a bit by moving the retirement age just slightly. I played with the CalSTRS pension calculator and assumed the highest salary on the schedule when I retire will be the same as it is today (just for a crude estimate). Here are the monthly pension numbers that come out for my particular case by age (this is for 100% option so that my wife continues to receive the pension if I predecease her):

58: $4600
58.5: $4800
59: $5600 (I get a boost here for having 30 years in the system)
59.5: $5800
60: $6000
60.5: $6300
61: $6500
61.5: $6800
62: $6900
62.5: 7000

If I'm enjoying myself then as I am now, I'll probably keep working into my 60s. However, we're saving $40k/year in Roth IRAs, a 457b, a 403b, and a SEP-IRA so hopefully can retire around 59 if I want to do so.


I am not sure if there is a pension boost just because you get to 30 years. You have to get to age 61.5 and have at least 30 years of service credits. The age factor is extremely important. You have to get that 2.4 age factor to realize that boost.
On a side note, while these numbers may seem really nice, it's important to keep in mind the cost-of-living. I teach in Silicon Valley and houses in the neighborhood where I work are 7 figures (mostly around 2M).

Needtoknow
Posts: 88
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Re: Teachers: what are your best personal finance tips?

Post by Needtoknow » Sun Jun 04, 2017 5:42 am

pretzelfisch wrote:
anonenigma wrote:Do these numbers also include the additional years worked between 58 and 62?

Remember, also, that the longer you stay in, the more likely that there might be pay increases.

If you started out as a sub or worked a partial year, look into whether you can purchase service credit for that time.
The last three years are important, if you have 30 years of service they highest wage within this time span is used to calculate your pension payout. So if you can pickup extra services that bump your salary it will pay dividends for as long as your pension lasts

In California's system, once you get to 25 years of service they look at your one highest year of salary to calculate your pension and not your three consecutive highest paying years.

Needtoknow
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Joined: Sun Apr 01, 2012 11:19 am

Re: Teachers: what are your best personal finance tips?

Post by Needtoknow » Sun Jun 04, 2017 6:44 am

There are so many items that can be placed in your blog that I cannot even imagine where you can start. However, many are already stated. I am a school administrator and have been for the last 20 years. I am going to retire in a few years. I have always tried to educate my new teachers about planning for retirement. Some listen and try but many more don't. I have found that many don't even know how much money they even make. They know that a deposit goes into their checking account but they almost never see the pay stub unless they need one. I believe that your site needs to emphasize that teachers look at their contracts closely for their district benefits and then also closely review their state's teachers' retirement benefits. These are not the same. However, there are lots of ways people can maximize there incomes by knowing what is available to them. For example, my school district offers that sick day pool. I deposited 5 days of sick time and can use a great deal more than 5 if I would like. I mean like months more than five days I deposited. When I was a teacher, the Calstrs handbook discussed buying years of service credit. I inquired about it. I was told I would be making out better than if I invested it. I bought the five years. At the time I was making about $55,000 I would be increasing my pension from 81% of my salary to 92% of my salary at retirement. Well, that will be 92% of over $150,000. Who knew at the time. I will recoup that money in the first two years that I invested to buy those years. I was much younger and poorer when I bought those years, but it was a great investment I would have missed out upon if I did not open that handbook. Well, the state government stopped people from being able to do that anymore. It was a great deal. I too had the district retirement guys come to me at three different school districts wanting me to buy annuities and I did for a while. Then I stopped. I began reading about annuities and realized I did not need them since my pension was one. I just recently consolidated the four annuities I had with Calstrs Pension 2. I have had the Pension 2 account for a while now, but I have now consolidated all of my accounts into one so I don't have to keep up with so many accounts. Calstrs Pension 2 has good rates in my opinion for teachers. They have good choice like Vanguard funds, Dodge and Cox and others.

I find that most teachers are lazy as it pertains to their finances. They know they are getting a pension but don't even know what or how it is calculated until they get about 5 years or so out. They don't realize the money they lose by not being in the know. For example, if you make your pre retirement election for your spouse to receive survivor's benefits at age 55 instead of doing it at 62 or later, you can save yourself thousands of dollars. Also, I am going back to the classroom, I am going to give up some salary to do this but I will work three less months and have a lot less headaches. Also, since our sick days can count toward our pensions, I will gain more money in retirement because the sick days are divided by your contracted work year. I will be dividing my sick days by 186 days instead of 223 days. In other words, I will be making money because I am working less days as a teacher in my contracted year. In addition, California allows teachers to work a reduced workload and still get a full year of service credit if you're at least age 55. So if you work at least half time, you can still receive a full year of service credit and still keep full medical benefits for you and your family. This is an excellent way in which to semi retire if you'd like. I plan on taking advantage of this which feeds into this last tip. I am moving from California to Texas where there are no state income taxes and there is a lower cost of living. I have built a new home there and will take advantage of it sooner with the reduced workload. I will recover almost 10% of my pension and 403B buy moving to Texas with no income tax.

Teachers need to be placed in a seminar as part of their training to review the retirement system.

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