• Written by
    Lindsey Crossmier

    Lindsey Crossmier

    Financial Writer

    Lindsey Crossmier is an accomplished writer with experience working for The Florida Review and Bookstar PR. As a financial writer, she covers Medicare, life insurance and dental insurance topics for RetireGuide. Research-based data drives her work.

    Read More
  • Edited By
    Lamia Chowdhury
    Lamia Chowdhury, editor for RetireGuide.com

    Lamia Chowdhury

    Financial Editor

    Lamia Chowdhury is a financial content editor for RetireGuide and has over three years of marketing experience in the finance industry. She has written copy for both digital and print pieces ranging from blogs, radio scripts and search ads to billboards, brochures, mailers and more.

    Read More
  • Reviewed By
    Barbara O’Neill, Ph.D., CFP®, AFC®, CRPC®
    Barbara O’Neill, Ph.D. CFP®, AFC®, CRPC®

    Barbara O’Neill, Ph.D., CFP®, AFC®, CRPC®

    Certified Financial Planner™ professional, Accredited Financial Counselor™ and owner and CEO of Money Talk

    Barbara O’Neill is a personal finance expert with 41 years of experience working at Rutgers University. She is a Certified Financial Planner™ professional and an Accredited Financial Counselor™. Currently, she is the owner and CEO of Money Talk, where she writes, speaks and reviews content related to personal finance. In 2020, she authored Flipping a Switch, published in 2020.

    Read More
  • Published: October 30, 2023
  • Updated: January 10, 2024
  • 11 min read time
  • This page features 14 Cited Research Articles
Fact Checked
Fact Checked

A qualified expert reviewed the content on this page to ensure it is factually accurate, meets current industry standards and helps readers achieve a better understanding of retirement topics.

Cite Us
How to Cite RetireGuide.com's Article

APA Crossmier, L. (2024, January 10). Retirement Planning for Educators. RetireGuide.com. Retrieved May 21, 2024, from https://www.retireguide.com/retirement-planning/planning-for-educators/

MLA Crossmier, Lindsey. "Retirement Planning for Educators." RetireGuide.com, 10 Jan 2024, https://www.retireguide.com/retirement-planning/planning-for-educators/.

Chicago Crossmier, Lindsey. "Retirement Planning for Educators." RetireGuide.com. Last modified January 10, 2024. https://www.retireguide.com/retirement-planning/planning-for-educators/.

Key Takeaways
  • Establishing a budget and paying off your student loans can be the first steps of your retirement plan.
  • Most educators have access to a pension, 403(b) plan or 457(b) plan. These are great opportunities for educators to build their retirement funds.
  • Not all educators qualify for Social Security benefits. Eligibility varies depending on what state and school district you live in.
  • Free options for life insurance coverage are available for teachers.
  • Educators should utilize their community by talking to other teachers about negotiating pay and benefits.

Challenges Educators Face When Planning for Retirement

Retirement planning can be challenging for employees of educational institutions, especially teachers and support staff with modest incomes.

Teachers are among the nation’s most educated workers, yet their average earnings have continued to decline since 2010, according to the United States Census Bureau. Meanwhile, housing and food costs have increased by 25.7% and 21.2%, respectively, since 2010.

The average educator’s salary depends on their job title. For example, the average salary of a middle school teacher is $61,320, according to the U.S. Bureau of Labor Statistics. A professor’s average salary, on the other hand, is $79,640.

No matter the title, there’s a consensus that retiring on an educator’s salary is no longer easy. Teachers displeased with their pay have an additional roadblock to achieving a comfortable retirement — student loans.

Nearly 50% of educators took out student loans, borrowing $55,800 on average, according to the National Education Association. Establishing a budget and slowly paying off your student loans can be the first steps of your retirement plan.

Our editorial team interviewed two educators, Dennis Shirshikov and Barbara O’Neill, to get their take on challenges they’ve faced as educators.

They’re not compensating people the way they used to. That means people hired 30 years ago often have much better benefits than the people being hired now. This has implications for our entire society. On a global scale, we should be concerned about having an adequate benefit structure to keep and attract teachers.
Barbara O'Neill, Ph.D. CFP®, AFC®, CRPC®, Distinguished Professor EMERITUS at Rutgers University
Overall, I don’t think teachers are given enough options right off the cuff, and under compensated to the point where their cost of living basically wipes out their entire income.
Dennis Shirshikov Professor Finance and Economics at the City University of New York

Currently, retirement planning for educators functions as a puzzle with pieces that don’t fit. Compensation isn’t keeping up with inflation and roadblocks remain unaccounted for.

Illustration of puzzle pieces representing parts of the educator's retirement plan

Luckily, there are a few retirement plans and investment options available to educators. Signing up for these plans can help teachers catch up on their savings.

Educators face unique challenges when saving for retirement, primarily the fact that their pay is modest relative to their level of education, which limits savings contributions. In addition, some teachers do not participate in Social Security and many are repaying student loans. Nevertheless, there are resources and strategies for educators to build wealth over time including defined benefit pensions, 403(b) and 457 plans, and Social Security benefits from teaching and/or supplemental jobs. To summarize, teachers can become wealthy over time.
Barbara O'Neill, Financial Expert & Contributor to RetireGuide
Barbara O'Neill Ph.D., CFP®, AFC®, CRPC®

Retirement Plans Educators Should Consider

Educators may have access to pensions, 403(b) and 457(b) plans. These options can be great opportunities for educators to grow their retirement funds.

You’re likely to have different benefit options depending on what type of educator you are, what state you live in and how long you’ve been teaching. Check with your employer or school district to see which options are available to you.

It’s important to understand the benefits of each of these programs before signing up. In some cases, you may want to consider other investment options.

Defined Benefit Plans

A defined benefit plan, also known as a pension, provides predetermined payments for life after you retire if you’ve worked a specific number of years. Benefits are based on earnings and years of service.

The employer bears the investment risks with a pension, according to the U.S. Securities and Exchange Commission. The longer you work, the more money you receive from your pension.

Did You Know?
Most states require educators to teach for five years before qualifying for a pension, and 16 states require service for 10 years. This means that in some states you could work for seven years and still not receive a pension.
Source: TeacherPensions.org

Pension requirements present an issue since many teachers are leaving the profession due to stagnated wages and burnout. According to a recent survey by the EdWeek Research Center and Merrimack College, one in three teachers say they’re likely to quit and find another job within the next two years.

Pension benefits also have a lower impact than in years past. O’Neill offered her thoughts on the benefit downgrade: “I think it’s challenging because many public sector employers have implemented lower tiers of benefits for recent hires, which reduces their future pension benefits. I think it’s going to be hard to keep teachers.”

So, a pension may only really provide for you if you plan to stay in the profession for many years.

Defined Contribution Plans

Defined contribution plans are tax-advantaged retirement savings programs available to most educators. The most popular are 403(b) and 457(b) plans. In some cases, you can qualify for both plans.

These plans don’t promise payments upon retirement like pensions. Instead, the employee and employer may contribute to the employee’s individual account. The employee owns this account and can keep it after leaving the sponsoring employer and they can withdraw from it in retirement. The employee bears the investment risks with a defined contribution plan.

403(b) plans are available to most educators, according to the Washington State Department of Retirement Systems.

Our editorial team asked O’Neill and Shirshikov if they think a 403(b) plan is useful.

“Yes. That’s easily one of the best ways to grow a retirement portfolio in a tax-deferred way. Most educators should be seeking to put as much money as possible away,” Shirshikov told RetireGuide.

O’Neill seconded Shirshikov’s statement, saying, “Yes, absolutely. Full disclosure, I am in a 403(b) myself and funded it for many, many years.”

However, there can be high fees and a narrow range of investments available with 403(b) plans. Make sure you fully understand the costs and investment options before signing up. You may find other accounts offer better benefits.

Other Accounts To Consider

You can consider other accounts, like a traditional IRA, to replace or supplement your pension, 403(b) plan or 457(b) plan.

O’Neill recommends an IRA and suggests other alternatives.

“Other options available in addition to the 403(b) would be a Roth IRA or traditional IRA. If they’re entrepreneurial, they can do a simplified employee pension or a SEP IRA,” O’Neill told RetireGuide.

“Even a health savings account can be a form of retirement savings. And then, of course, taxable accounts, which can be opened with a brokerage firm that you might throw a target date fund into or an index fund.”

Consider these options if you find that the available defined contribution plans have unnecessarily high fees.

Other Account Options for Educators
  • Traditional IRA
  • Roth IRA
  • Simplified Employee Pension
  • SEP IRA
  • Health Savings Account
  • Taxable Account
Discover the options available to you.

Investment Options for Educators To Consider

Due to long periods of free time during the summer, educators can have unique investment opportunities. Our editorial team asked Shirshikov’s take on other investment options to consider.

speech bubble icon
Dennis Shirshikov Professor Finance and Economics at the City University of New York
What investment option would you recommend to other teachers?

Teaching leaves you with the opportunity to develop something on the side. Even moving into small-time real estate investing can be a really powerful option for a lot of teachers because it opens up the door for portfolio growth beyond what you’d expect. So, that’s probably a big opportunity for a lot of teachers.

One big thing to consider is peer support, whether that comes from teachers or other parents who are more involved. For example, maybe you can’t go buy a small piece of property to rent out yourself. But maybe you and four other teachers can.

Are there small business investment options for educators?

I’ve seen some people take an IRA or a 403(b) and actually roll it into a business and be able to pay themselves out and grow their business forward. It’s called a rollover-as-business startup. If you want to open a bakery, yoga studio or general store, you can do it that way.

Educators can also consider purchasing an annuity as a unique investment option. You receive tax benefits similar to a 403(b) and can add on additional benefits, like long-term care coverage.

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How Your Educating Career Impacts Your Social Security Benefits

Whether you receive Social Security benefits as an educator depends on which state and school district you live in.

Social Security State Coverage for Educators
  • Thirty-three states provide Social Security coverage
  • Twelve states and Washington, D.C., do not provide Social Security coverage
  • Five states allow school districts to decide coverage
Source: The National Center for Education Statistics
Map of Social Security Coverage for Educators by State

Even if your state doesn’t offer Social Security benefits for educators, it doesn’t mean eligibility is impossible. O’Neill is an educator who ended up qualifying for benefits.

“Where we stand now, 40% of teachers don’t have Social Security coverage in their teaching jobs. But notice I said teaching jobs because you can still have Social Security coverage even if your job doesn’t provide it. You can start a side hustle or summer employment,” O’Neill told RetireGuide.

“I’m a perfect example of that. I worked in a job for 41 years that didn’t have Social Security coverage. But then I started Money Talk, and my company has been running for 32 years or so. So, all hope is not lost. But you must plan it yourself if it’s not going to come from your job.”

After you settle your employee benefits, investment options and Social Security benefits, the next step in retirement planning is insurance.

Insurance Options To Consider

Some states may automatically enroll you in health and life insurance coverage.

For example, in Florida, if you are enrolled in the FRS Pension Plan and were enrolled in employee health and life coverage when you retired, the People First Service Center will automatically enroll you in health coverage and a $2,500 life insurance policy.

Check with your state’s enrollment rules and offerings for health and life insurance coverage.

Health Insurance

Most states provide educators with health insurance options, according to the Education Commission of the States. Some states offer individual plans at lower costs, but there aren’t many options for family plan coverage.

If you need help understanding your health insurance options, the National Education Association (NEA) has services to advocate for educators.

Life Insurance

Many school districts offer life insurance for educators, according to the National Educational Association. Even if your school offers life insurance coverage, you may want to open another policy for additional coverage.

If your district doesn’t provide life insurance, or you don’t qualify, you can still get life insurance coverage for free.

You can become a NEA member and receive life insurance coverage at no additional cost. Prudential issues these policies.

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Other Resources Available to Educators

There are national, state and local resources available to you.

The National Education Association is a nationwide resource with many benefits. As previously mentioned, the NEA offers free life insurance, and they help teachers understand their health insurance coverage options.

Other NEA resources include:
  • Ways to set legislative and political action goals for education and education employees.
  • Volunteer opportunities in community-based programs.
  • Participation in national and regional conferences and seminars.
  • Credit programs.
  • Loan and mortgage programs.
  • Deposit savings accounts.

You can also lean on your community and talk to other educators about negotiating pay and benefits, and finding solutions together. Shirshikov suggests meeting weekly.

“Decide a place where a group of teachers can meet once a week and discuss what everyone is doing. The reality is that it can be awkward and difficult to have conversations about money with peers and coworkers,” Shirshikov said.

“But teachers are in a unique position where their employer is a monolith. It’s not just your boss. And I think the more that conversation happens, the more confident they’ll feel in making those decisions and moves since retirement planning is difficult.”

“I think taking retirement stress off the table for teachers is one of the best things to increase the quality of education. When you’re stressing about what you’re going to do in retirement, you’re not all there.”

Checklist for Educators Preparing for Retirement

Utilize our checklist, specifically curated for educators, to help ensure you have all the necessary pieces to build a strong retirement plan.

Educator’s Retirement Planning Prep List

Establish a:

  • Monthly Budget
  • Student Loan Payback Plan

Check if you have access to a:

  • Pension
  • 403(b) plan
  • 457(b) plan

Consider other account options, like a:

Consider other investment options, like:

  • Small-time real estate investing
  • A rollover as business start-up

Research your Social Security coverage and:

  • Check if your state provides Social Security benefits
  • Consider a side gig for benefits if they’re not provided

Make sure you have affordable:

  • Health insurance
  • Life Insurance

Expert Contributors

  • Barbara O’Neill, Ph.D. CFP®, AFC®, CRPC® - CEO and Owner of Money Talk
    Barbara O’NeillPh.D., CFP®, AFC®, CRPC®, Distinguished Professor EMERITUS at Rutgers University and author of "Flipping a Switch"
  • Dennis Shirshikov, Professor Finance and Economics at the City University of New York
    Dennis Shirshikov Professor Finance and Economics at the City University of New York
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Last Modified: January 10, 2024

14 Cited Research Articles

  1. O’Neill, B. (2023, August 15). Guest Blog: When To Say No to a 403(b) Plan. Retrieved from https://403bwise.org/blog/entry/guest-blog-when-to-say-no-to-a-403b-plan
  2. Will, M. (2023, May 22). Teachers Are Stressed and Disrespected, but Happier Than Last Year: 7 Takeaways From New Poll. Retrieved from https://www.edweek.org/teaching-learning/teachers-are-stressed-and-disrespected-but-happier-than-last-year-7-takeaways-from-new-poll/2023/05
  3. U.S. Securities and Exchange Commission. (2023, April 6). A Guide for Teacher’s - Planning for Retirement. Retrieved from https://www.sec.gov/teachers-guide/planning-for-retirement
  4. Department of Management Services. (2023). Retirees. Retrieved from https://www.mybenefits.myflorida.com/health/eligibility_and_enrollment/retirees
  5. Washington State Department of Retirement Systems. (2022, September 1). Considering a 403(b) or 457(b) Plan? Retrieved from https://www.drs.wa.gov/403vs457-newsfeed/
  6. Beckhusen, J. & Cheeseman-Newburger, J. (2022, July 21). Average Teachers’ Earnings Declining, Lower Than Similarly Educated Workers. Retrieved from https://www.census.gov/library/stories/2022/07/teachers-among-most-educated-yet-pay-lags.html
  7. Gereau, H. (2022, January 6). Report: Albany Cost of Living Up 16.6%, Among Highest in the US. Retrieved from https://www.news10.com/reviews/br/education-br/money-investing-br/report-albany-cost-of-living-up-16-6-among-highest-in-the-us/
  8. Flannery, M. E. (2021, July 27). The Depth of Educators’ College Debt. Retrieved from https://www.nea.org/nea-today/all-news-articles/depth-educators-college-debt
  9. National Center for Education Statistics. (2021, June). Teacher Satisfaction With Salary and Current Job. Retrieved from https://nces.ed.gov/pubs2018/2018116/index.asp
  10. National Educational Services. (2021, May 19). How Much Life Insurance Do Teachers Need? Retrieved from https://www.nesgroup.us/life-insurance-for-teachers/
  11. National Education Association. (2021). NEA® Complimentary Life Insurance. Retrieved from https://www.neamb.com/products/nea-complimentary-life-insurance
  12. Drexel University. (2021). What Is the Difference Between a Teacher and a Professor? Retrieved from https://drexel.edu/soe/resources/career-path/difference-between-teacher-and-professor/
  13. Alderman, C. (2019, August 14). Why Aren’t All Teachers Covered by Social Security? Retrieved from https://www.teacherpensions.org/blog/why-aren%E2%80%99t-all-teachers-covered-social-security
  14. Aldeman, C. (2018, October 25). Do All Teachers Get Pensions? Retrieved from https://www.teacherpensions.org/blog/do-all-teachers-get-pensions