Retirement 101 for Teachers
If you are
a teacher, you are in a unique position to inspire learning
and discovery in your students. Your work can affect your
students for the rest of their lives. We’ve noticed that
teachers devote so much of themselves and their resources
to their students that they sometimes overlook their own
needs, such as planning for a secure retirement. While you
may be covered by a state pension plan, you may also feel
like you need to save additional money to provide for a
comfortable retirement. Here are some steps to get yourself
“I Can’t Invest!
I Spend Everything I Make.”
If you are spending
all your income, and never have money to save or invest, you’ll
need to look for ways to cut back on your expenses. When you watch
where you spend your money, you will be surprised how small everyday
expenses that you can do without add up over a year.
Add Up to Big Money
How much does
a cup of coffee cost you?
Would you believe
$465.84? Or more?
If you buy a cup
of coffee every day for $1.00 (an awfully good price for a decent
cup of coffee, nowadays), that adds up to $365.00 a year. If you
saved that $365.00 for just one year, and put it into a savings
account or investment that earns 5% a year, it would grow to $465.84
by the end of 5 years, and by the end of 30 years, to $1,577.50.
That’s the power
of “compounding.” With compound interest, you earn interest on
the money you save and also on the interest that money earns.
Over time, even a small amount saved can add up to big money.
If you are willing to watch what you spend and look for little
ways to save on a regular schedule, you can make money grow. You
just did it with one cup of coffee.
Know What You
It’s easy to forget
how much you’ve charged on your credit card. Every time you use
a credit card, write down how much you have spent and figure out
how much you’ll have to pay that month. If you know you won’t
be able to pay your balance in full, try to figure out how much
you can pay each month and how long it’ll take to pay the balance
Pay Off the Card
with the Highest Rate
If you’ve got unpaid
balances on several credit cards, you should first pay down the
card that charges the highest rate. Pay as much as you can toward
that debt each month until your balance is once again zero, while
still paying the minimum on your other cards.
The same advice
goes for any other high interest debt which does not offer the
tax advantages of, for example, a mortgage.
Savings vs. Investing
are usually put into the safest places or products that allow
you access to your money at any time. Examples include savings
accounts, checking accounts, and certificates of deposit. At some
banks and savings and loan associations your deposits may be insured
by the Federal Deposit Insurance Corporation (FDIC). But there's
a tradeoff for getting that security and ready availability. Your
money is paid a low wage as it works for you.
When you "invest,"
you have a greater chance of losing your money than when you "save."
Unlike FDIC-insured deposits, the money you invest in securities,
mutual funds, and other similar investments are not federally
insured. You could lose your "principal," which is the amount
you've invested. That’s true even if you purchase your investments
through a bank. But when you invest, you also have the opportunity
to earn more money than when you save.
Most public school
teachers can invest for retirement with automatic payments made
directly through payroll deductions in a 403(b) plan. Read more
about your investment choices in our publication “Evaluating Your Retirement Options"