Retirement account options for teachers

Everyone knows that you don’t go into education for the money, but that doesn’t mean that money doesn’t matter. In fact, it matters more because we have less of it and therefore need to manage it well if we want to enjoy our retirement comfortably (And we do want to retire comfortably).

Please note that the information below is based exclusively on my own experiences and personal research. I am not a financial professional. It is important to be fully informed before making financial decisions and I encourage you to meet with a financial advisor through your school system. You can likely get free financial advice through the company your school system has contracted with to offer financial services like retirement plans. For example: MetLife, AXA Equitable, and VOYA.

Retire Piggy Bank” by aag_photos 

Pension Plans are awesome

One of the longest standing benefits of teaching is the pension plan. It is difficult to name jobs today that still offer pensions. To be clear, a pension is a regular payment made to you after your retirement from an investment account that you and your employer paid into while you were working. You will likely contribute around 5% of your pay each month, pre-tax through a salary deduction and your employer will contribute around 7%.

Becoming vested in the retirement plan

If you teach in a public school in a single state for 5-10 years you are generally vested in their retirement system. Vested means you have 100% ownership of the funds in your account and can receive those funds as either a payout upon leaving service or as a pension upon retirement. Note that if you leave a job without being fully vested (check your state’s retirement plan website for specifics) you may forfeit some or all of the amount in that account.

How a pension is funded

The funds (contributed per pay period by you and your employer) in the account are invested by your employer and grow tax-deferred until you withdraw them during retirement or as a refund upon ending employment.

You likely won’t have any control over how or where that money is invested. It is a hands off experience. Your contribution will automatically be deducted from each paycheck and the retirement plan servicer for your state will invest or use that money how they please until you either take a payout or pension. The zero effort on your part is one of the bonuses, but the lack of control can be perceived as a negative.

Pension con – immobility

Your pension won’t help you much if you don’t work very long in your state. Different states have different rules. I looked up what my pension will be given different scenarios. I started teaching in Virginia at 24 years old. So far, I am 16 years in and 40 years old. My first opportunity to retire and receive a pension immediately up on retirement would be at 26 years of service and 50 years 1 month old (they are very specific). At which point, I could receive a pension of around $991 a month. If I teach five years longer and retire at 30 years of service and age 54 and 11 months, the pension would pay $2,555.

Most pension plans are back heavy. Meaning the last few years of service are weighted most heavily towards your payout. Working five more years will be the difference in a $11,982 a year pension and a $30,000 a year pension for me.


If you quit teaching in your state before you are eligible to retire you have two options. You can either take a lump sum payout of what you have accumulated in your account or you can leave the money there until you reach retirement age. No further contributions will be made, but you can let the money continue to grow and then receive at least some pension when you hit retirement age.

For example, if I were to leave service at 45 years old and 20 years of service and leave my pension funds alone, I would be eligible for a $774 a month pension starting at 54 years and 11 months old.

Save for retirement beyond your pension

Will your pension alone provide you enough funds to live comfortably in retirement? I wouldn’t count on it. The combination of your pension and social security (if you paid into social security as an educator; there are some states where teachers don’t) might be enough, but I wouldn’t count on that either. If you want to retire worry free, odds are you will need to do retirement saving beyond your pension. I do, and have been since the first year I started teaching. You have options like 403(B)s, 457(B)s, Traditional IRAs, and Roth IRAs.

Stay tuned for my next post which will detail ways to save beyond your pension.

If you found this post helpful, check out some of my other posts:

Can you live on a teacher’s salary?

10 month vs 12 month pay checks

5 Gift ideas for Ed. School Graduates

Recommended reading for future/new teachers

You’ve signed a teaching contract. Now what?

Or Start Here to check out my posts curated by theme.

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A Teacher's Guide

I am a National Board Certified educator currently teaching in Virginia. I have taught the following: English 9, 10, 11, and 12 (on academic, collaborative, and honors levels); Dual Enrollment English; Mass Communications, Yearbook, Newspaper, and Communications Technology. I have experience in five different school systems, four in Virginia and one in Maryland. I served as my school’s 2019 Teacher of the Year and was a top five finalist for the Teacher of the Year for Virginia Beach City Public Schools. I am passionate about recruiting and retaining quality educators in our public schools. Let me help you find your path to changing lives through teaching!

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3 Responses

  1. May 13, 2022

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    […] start with small amounts, the power of compounding will work in your favor. Check out my article Retirement account opinions for teachers to learn more about your saving […]

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    […] mentioned in Retirement account opinions for teachers (part 1), the combination of your pension and social security (if you paid into social security as an […]