Retiring or Quitting as a Teacher What to Know
Working as a teacher can be a gratifying profession. Being able to shape the minds of young students in your community can be very powerful and fulfilling. But the amount of burnout for a teacher is incredibly high given COVID and its impact on teachers and shortages of them in the classroom. So unsurprisingly, many teachers leave the profession early and find work elsewhere or retire early. So what are some of the significant financial issues you need to know if you want to retire or quit as a teacher?
1) Career Transition: If you plan on changing your career, ensure you have enough money to offset getting trained or transitioning into a new job. It may take several years to build your salary up to where you were a teacher. Therefore, I recommend having at least one year of expenses or two years as a cushion in savings before you transition. You can also try to work part-time in your new career and build up your skills, so the career change runs smoothly. Generally, moving to a new job will require sacrifice, so be willing to accept this emotionally and financially.
2) Pension Plan: If you were paying into a state pension, see what you can do with the old pension. If you have enough years of service, you may be able to start collecting on the pension. This can be a good or bad choice, depending on your financial situation. The benefit of taking it later is a build-up of the pension and a more significant monthly income in retirement. You could also roll the pension into a retirement plan at your new job or an IRA. Again, I would speak to a financial planner before making this life-changing move.
3) Healthcare: If you retire before you can get Medicare, what will you use for healthcare? Since most healthcare is tied to your employer, you may need to get a job that provides healthcare. I would suggest finding a job that offers good healthcare until you can get trained, or if you have a spouse with healthcare, you can be on that plan. Depending upon your income, you may qualify for reduced healthcare through the healthcare exchanges with the premium tax credit. Understanding healthcare options is essential for a career transition.
4) Pension and Social Security: Being a teacher in Texas, you may not be paying into Social Security. As a result, you could be impacted by the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO). I would understand how these affect your Social Security and strategies that can be used to mitigate their impacts. In addition, if you are retiring, many teachers get a surprise Social Security offsetting from their state pension. Be prepared for this, as it could significantly impact your retirement income.
5) Financial Coaching: Some teachers transition to starting their own business. Maybe financial coaching with a CERTIFIED FINANCIAL PLANNER™ makes sense to understand the savings options for retirement or the financial impact of running a business. Being about to talk to someone else that has experience in a big transition can be very helpful to put you on the right track. Understanding how to benefit from saving on taxes being a small business owner is especially important.
Making the shift from being a teacher can be challenging. Many teachers do not anticipate that it may take some time to build up to their salary and do not transition as effectively as possible. This is why speaking to a financial planner can benefit you during this transition and be aware of all the issues and challenges you will face. Contact me on the contact page below if I can be of service.
*This content is developed from sources believed to be providing accurate information. The information provided is not written or intended as tax or legal advice and may not be relied on to avoid federal tax penalties. Individuals are encouraged to seek advice from their tax or legal counsel. Individuals involved in the estate planning process should work with an estate planning team, including their own personal legal or tax counsel. Neither the information presented nor any opinion expressed constitutes a representation by us of a specific investment or the purchase or sale of any securities. Asset allocation and diversification do not ensure a profit or protect against loss in declining markets.