Never Too Soon: A Guide to Retirement Planning for Educators

One of the most prevalent myths in the workforce is that there’s no reason to think about your retirement until you’re in your 40s or 50s. Unfortunately, many people also believe that their retirement will take care of itself somehow. They put it in the back of their mind until the final years of their employment, which leads to long-term financial consequences.

The truth is that if you want to retire comfortably, you should start learning about retirement concepts and balancing your income as early as possible. This applies to all workers in any industry, but especially so if you’re an educator. There are unique retirement options and unusual sources of income that demand extra attention.

Finance experts all say that the earlier you start planning, the better and more robust your retirement experience will be. If you’re a teacher or you work in the education industry in some way, this guide is for you.

Defined Benefit Pensions

Most educators and their employers contribute to defined-benefit pension plans throughout their tenure. Upon retirement, the state disburses the pension monthly. Unfortunately, given the underfunding of educators’ pension funds, these amounts fall short of a person’s financial needs during retirement.

Many states only provide $20,000 a year in annual pension benefits. For this reason, it’s essential to supplement your retirement funds through other contribution plans.

Defined Contribution Retirement Plans

If you are a full-time worker in a public school or tax-exempt private school, you may be eligible for two types of defined contribution retirement plans. With these plans, you can choose how much of your income is allocated to tax-sheltered accounts.

1. 403(b) Plan

This is the preferred contribution plan that many educators choose. You can choose an amount that will be deducted from your paycheck and put into investments. The contributions are tax-deductible, so you will only pay tax when you make withdrawals in retirement.

As of 2021, the contribution limit is $19,500 or 100% of your salary. Once you are 50 years old, you can add $6,500 on top of that limit. In addition, some employers make matching contributions to 403(b) plans to help with your future retirement. Employer limit is $58,000 or your total compensation ($64,500 for those above 50 years old).

2. 457(b) Plan

This plan is specifically for workers in public school districts. You can contribute to this plan instead of or in addition to a 403(b) plan. The process and contribution limits are similar to a 403(b) plan, although very few employers match contributions.

The withdrawal process is also different. If you opt for a 457(b) plan, you will not be able to make any withdrawals from your account, regardless of your age. However, if you’ve left the job or you’ve officially retired, you can then access the funds without penalty.

Further Steps for Retirement

It’s best to ask your employer about your access to these contribution plans. Remember that these plans have ongoing fees that may eat into your funds. Do your due diligence before pursuing a specific plan. If your retirement landscape feels confusing and you need financial guidance, you can opt for professional retirement planning services.


Most workers in the United States are eligible for a pension, but that amount may not be enough for all of your expenses upon retirement. Therefore, early in your career, you should consider other retirement plans to supplement your pension. Make sure to take in all the information you can about these plans before making a financial decision. Planning for retirement can be overwhelming, and not all choices will allow you to retire in full comfort. At My State Pension, our licensed agents and investment advisors offer retirement planning services for educators and state employees. Schedule a free retirement planning session today!

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If you are a K-12 educator or staff, collegiate educator or staff, municipal or state employee we can connect you with a licensed financial professional with the experience needed to help you understand your pension benefits and overall retirement plan.