Preparing Now For Retirement Later – A Comprehensive Teacher Retirement Planning Checklist

Our goal is to help teachers understand different retirement planning milestones and how to work toward their long-term financial goals.

There are different strategies you might consider depending on your age which may change over time. It is more than just putting a percentage of money away each paycheck so that in retirement you have enough to supplement your public educator’s pension. Therefore, it may help to have a retirement checklist that you can continue referring to as you enter each new stage in life.

For those who are in their 20s:

• I understand my retirement benefits: Educate yourself on how the retirement plan works with your school district. Studies indicate that about 45% of teachers could not identify their retirement plan type and 30% of teachers weren’t sure how long their benefits would last.[i]
  
   
• I have calculated how much I need to save: When individuals are in their 20s, they may feel like they have all the time in the world to save enough for retirement, but time flies and expenses and responsibilities change
   
• I have educated myself on the difference between a 457(b) and a 403(b): It may be a good idea to also save for your retirement along with the expectation of a pension. However, as you will see mentioned, a pension may not be enough for you to experience all you want in retirement. Selecting the most beneficial option to align with your financial goals is critical. There are two types of retirement accounts for public educators, 457(b) and 403(b) plans. Both plans are deferred compensation plans for non-profits and may offer tax advantages because they lower your taxable income by the amount contributed. So, in essence, the more you contribute the more advantageous the tax break could potentially be. However, there are differences
  • I have a 457(b): Offer more flexibility with withdrawals, particularly for those who haven’t yet reached 59 1/2, without triggering the 10% penalty that you may from withdrawals from a 403(b).
  • I have a 403(b): Allow for pre-tax contributions and may offer employer matching opportunities.[ii]

A financial professional can help determine which would be beneficial for your retirement strategy.

• I have explored opening a Roth IRA or Roth 401(k): Opening one of these types of retirement accounts can help you benefit from tax-free withdrawals in retirement, particularly if you think you may be in a higher tax bracket down the road.
  • I opened a Roth IRA
  • I opened a Roth 401(k)
• I contribute regularly to an emergency fund: Add a portion of each check to an emergency fund. As this continues to grow it will help to safeguard your retirement savings in the event of an emergency you won’t dip into your savings since you will have this fund for such unexpected circumstances.
• I have joined my educational institution’s retirement plan: Educational institutions, public schools, colleges, and universities generally provide interested teachers a variety of retirement plan options.

For those who are in their 30s:

If you are focused on preparing for retirement in your 30s you are ahead of the pack. It is a good time to take steps specific steps toward retirement planning.

• I have reviewed my accounts: Review retirement and investment balances and other savings accounts to determine if anything needs to be modified.
• I have maximized my retirement plan and investment contributions: As your salary increases over the years, you should make an effort to maximize your retirement plan and investment contributions. Plan on saving 15-20% of your income toward retirement.
• I have revised my budget: As you did in your 20s when money was tighter, you created a budget. Now that you are making a bit more money, revise your budget as your spending evolves.
• I am investing in growth opportunities: Investing early, including stocks, bonds, mutual, and index funds can help you potentially take advantage of compounding 30 to 40 years down the road. The trick to long-term investing, investing toward retirement is to stick to your strategy and be patient.
• I have begun paying off student loans and other high-interest debt: Now that you are probably earning a little bit more, it is critical to begin paying down or finally paying off your student loan debt or any other high-interest debt you may have accumulated in your 20s learning how to manage your money and getting yourself situated. There are three popular debt strategies that people turn to when trying to shave off that debt which can be quite tenuous. You have the Debt Snowball Method, the Debt Avalanche Method, and Debt Consolidation.
  • I use the Debt Snowball Method: You pay the smallest debt in full first, then roll the amount that was going toward that bill into paying off your next smallest.[iii]
  • I use the Debt Avalanche Method: Pay off the debt account with the highest interest rate first. Then you work your way to the next highest and so forth until the debt is paid off.[iv]
  • I use the Debt Consolidation Method: This strategy combines multiple debts into a single, new loan, often with a lower interest rate or more manageable terms. Keep in mind, this strategy will give your credit a significant hit so, discuss your options with a financial professional before making that decision.
• I only became a teacher in my 30s and though I am offered a defined benefit pension plan I have selected to utilize the defined contribution retirement plan offered by my educational institution: I have carefully reviewed both the 403(b) and the 457(b) plans.
  • I have a 457(b)
  • I have a 403(b)

For those who are in their 40s:

Reaching your 40s is a milestone. By now you have probably been teaching for a decade or so and it is a good age to conduct an assessment of your retirement savings and survey the strategies employed and, if necessary, consider minor modifications. Here are several strategies you may wish to continue pursuing or implement if you haven’t done so already.

• I have reviewed my accounts: Review retirement and investment balances and other savings accounts to determine if anything needs to be modified.
• I have maximized my retirement plan and investment contributions: As your salary increases over the years, you should make an effort to maximize your retirement plan and investment contributions. Plan on saving 15-20% of your income toward retirement.
• I am planning to diversify my investments: Spreading investments across a variety of asset classes such as stocks, bonds, real estate, and other alternative options helps you manage your risk and work to preserve your wealth and grow returns.
• I have determined a health savings account (HSA) is right for me: If you have a high-deductible health plan, a health savings plan can offer triple tax benefits and the potential to be used in retirement.
• I am continuing to pay down any debt that may still be hanging over my head: Debt is extremely difficult to get rid and requires consistency and discipline. Stay the course. It is possible to be debt free.
  • I use the Debt Snowball Method: You pay the smallest debt in full first, then roll the amount that was going toward that bill into paying off your next smallest.
  • I use the Debt Avalanche Method: Pay off the debt account with the highest interest rate first. Then you work your way to the next highest and so forth until the debt is paid off.
  • I use the Debt Consolidation Method: This strategy combines multiple debts into a single, new loan, often with a lower interest rate or more manageable terms. Keep in mind, this strategy will give your credit a significant hit so, discuss your options with a financial professional before making that decision.

For those who are in their 50s:

For most people in their 50s, you have been working for a while and building up your savings and investment portfolio and there are several factors you want to consider now that you on closing in on potentially the last decade before retirement.

• I have reviewed my accounts: Review retirement and investment balances and other savings accounts to determine if anything needs to be modified.
• I am continuing to contribute to my retirement portfolio using a dollar-cost average method while also increasing my contributions through salary increases and bonuses: Continue contributing as much as possible to your retirement accounts. Autopay dollar-cost-averaging might be a great way to contribute. This strategy involves paying the same amount into your retirement accounts, each paycheck, week, or month regardless of what the market is doing.
• I am taking advantage of catch-up contributions: Once you reach 50 and older you become eligible for catch-up contributions allowing you to increase the amount of money you contribute. Review your accounts and determine which allow for a catch-up contribution and how much.
• I continue to contribute to a health savings account (HSA): If you have a high-deductible health plan, a health savings plan can offer triple tax benefits and the potential to be used in retirement.
• I am continuing to pay down and off my debts: Keep chipping away at any debts you have still have. Work hard to be debt-free.

For those who are in their 60s:

You have finally made it! You have worked, saved, and prepared your whole life to enjoy your golden years as financially independent and free of stress as possible. However, retirement is a new beginning with its own set of responsibilities and challenges that also require preparation and attention.

• I have reviewed my accounts and retirement income sources: Assess your accounts and total balances and ensure you have no immediate concerns:
• I have finalized my retirement healthcare: It is critical to address health insurance, including Gap coverage (if you retire before you are eligible for Medicare) Medicare if you are eligible, and long-term care planning all of which can be a considerable cost in retirement.
• I have finalized a retirement budget that includes my expenses and takes into consideration my lifestyle plans: Just like you did during your working years, it is essential to have a budget to manage the money coming in versus essential expenses and discretionary spending and other money issues. You will want to take into account housing expenses, hobbies and activities, events that may or may not occur such as the wedding of a child, the birth of grandchildren and other life events.
• I have rebalanced my investment portfolio: If you still have funds in more aggressive investment you may want to consider transferring them to lower-risk opportunities.
• I have reviewed my estate plan to determine if any modifications are needed: The goal now is to manage your money with a focus on wealth preservation and slow growth. It is critical to take into account tax implications, healthcare and disabilities, and potential long-term care needs.[v]
• I have created a withdrawal strategy: To help lessen the stress in retirement, design a withdrawal strategy to determine how you will withdraw funds from your retirement accounts to both ensure a sustainable income and that you make your required minimum distributions and tax payments in a timely fashion.

Consider scheduling a consultation with a financial professional to ensure you haven’t left anything out

The world of finance and retirement planning is extremely complex with many moving parts that are constantly changing and evolving. You are highly encouraged to seek the advice and guidance of a financial professional. They have the skillset and knowledge to help you manage your affairs, so you won’t find yourself facing financial obstacles and challenges after you retire. It comes quickly and it requires many years of preparation so don’t wait. Start as early as possible, however, if you are a late bloomer, now is as good as any to get yourself moving in a forward direction. Call us today to schedule a meeting. We look forward to building a relationship with you and helping you work to make those “golden years”, golden.

_{Important Disclosures:}

_{Content in this material is for general information only and does not intend to provide specific advice or recommendations for any individual.}

_{Investing involves risks including possible loss of principal. No investment strategy or risk management technique can guarantee return or eliminate risk in all market environments.}

_{This checklist was prepared by LPL Marketing Solutions}

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_{[i]Teachers’ Knowledge and Preparedness for Retirement: Results From a Nationally Representative Teacher Survey - Dillon Fuchsman, Josh B. McGee, Gema Zamarro, 2024}

_{[ii]403(b) vs. 457(b): What's the Difference?}

_{[iii]Debt Snowball Method: How It Works, When to Use It - NerdWallet}

_{[iv]How to Use the Debt Avalanche Method - NerdWallet}

_{[v]Retirement Planning Checklist for Teachers: an Age-By-Age Guide}