Retirement Planning Self-Assessment for Educators

Excerpt from my ebook: Common Core Money: Financial Literacy for Educators & Other Professionals, available at Amazon.  Common Core Money

The purpose of this section is for you to take a moment to assess where you are when it comes to planning your retirement.  Working for the next thirty-five years and letting your service credit, along with your state teachers’ defined pension plan, build, is not my idea of a sound plan.  It can be, if you enjoy working and expect to stay employed into your seventies.  Many of our former teacher colleagues end up continuing to come to school, becoming district substitutes; they love the company of kids and other teachers.  Still others retire and find part-time jobs to avoid running out of money.  There are plenty of former teachers greeting us at Walmart.  I’m not trying to push an agenda on what to do with your spare time once you retire.  However, I want to help so that working after retiring from education is a choice, not a survival necessity.  See the rubric below.  What grade would you give yourself?

Retirement Planning Rubric

D	My retirement nest egg is my monthly withdrawn contribution to State Teachers’ Retirement automatically every month.  I only read about my account/service credit at the end of the year when I’m sent a communication from the state.  I plan to work as an educator until I become senile or I can’t hold my pee longer than five minutes. I have a checking and a savings account with a credit union or bank and live month to month because of my many expenses.  Retirement savings…ha! I rent. What’s a Section 125?  Is that some sort of housing for the homeless?
C	My retirement nest egg is my monthly contribution to State Teachers’ Retirement withdrawn automatically every month.  I read all the information that is mailed to me by the state on retirement and I know exactly how much service credit I have each year.  I plan on working as an educator until the math (State Teachers’ Retirement) makes sense i.e. there are no additional benefits for me to continue an extra year teaching or working for the, “Dark Side.”  In fact, staying an extra year would cost me more! I have a checking and savings account.  Sometimes I manage to have money left over at the end of the month because I have a budget, and occasionally I transfer it to my savings account for a rainy day. I rent. I heard of Section 125…doesn’t it have to do with your taxes?  They were telling us about this at a staff meeting one time.  A rep shows up every year, but I don’t make an appointment to see them.
B	SAME AS “C” except… I have a checking account, a savings account that has just enough to cover over-drafting, and I have a Money Market Account with my credit union/bank.  At the end of each month, I transfer any kept cash to this account.  This is my emergency fund!  I’m hoping to fund it so that it’s 6 months’ worth of expense reserves.  If I don’t have an emergency, this becomes extra money for my retirement.  Cha-ching! I have a mortgage.  Section 125 allows me to save on taxes by reducing my taxable income every month or by allowing me to pre-tax some medical, dental, vision, and dependent daycare costs.  I’m enrolled each year.  I have X amount withdrawn from my gross pay monthly to later claim and get reimbursed for any qualified expense.  Woo-hoo!  Oh, and if I could spare it, I’d contribute to a 403(b).
A	SAME AS “C” except… I’m really thinking hard about how to retire as early as economically possible.  If I only knew more. I have a checking account, a savings account that has just enough to cover over-drafting, and I have an investment Brokerage account with my bank or a discount broker (TD Ameritrade/Scott Trade, e.g.).  I keep cash available on hand to transfer to my checking account (called being “liquid”) in my brokerage account, and what I don’t need immediately, I use to invest in equities (stocks/mutual funds/ETFs) and debt (bonds).  I’m not a sophisticated investor, so I do monthly or periodic contributions to an Index or Target Date mutual fund, or an ETF that tracks the market and let it ride until I retire and need the money.  I go online and check my portfolio occasionally, but it’s pretty much on automatic pilot. I have a mortgage.  Section 125? Of course!  I also use $X of pre-tax pay to build my 403(b) annuity.  Since I already use my Brokerage account to invest in equities, I select the fixed-interest choice of 3% for my 403(b) annuity. Why take more risk by letting my custodian do market investing with my hard-earned money.  OR…You know what, I don’t care that I already do my own investing; I’m in it to win it!  Bring on the risk baby!  So, my 403(b) is tied to the market and I’m confident my custodian can minimally keep up with the market.  I don’t like their fees though!
NM (No Mark)	I only care enough about my State Teachers’ Retirement to do the minimum number of service credit years to retire.  I’m endeavoring to retire ASAP!  I love what I do, don’t take me wrong, but life is too short.  I’m up to speed on all information regarding my defined benefit pension plan with my State, including how to maximize my retirement benefits. Same as “A,” but I also do my own stock picking.  I hold a basket of ten stocks in my portfolio, and do the necessary homework to stay on top of the companies I invest in.  I have my own approach/strategy to investing in equities.  I understand the features of other equities (mutual funds, exchange traded funds, and bonds).  I understand, and put to use modern portfolio theory: security valuation, asset allocation, portfolio optimization, and performance measurement.  I also look at alternative investments (private equity, mortgage backed securities, art, antiques, and basically anything of value not a stock, bond, or cash) if they make themselves available to me.  I’m pretty good at this! I have a mortgage.  I have 1-3 rental properties in my real estate portfolio. Section 125?  Same as “A”
I (Incomplete or Insane)	I only care enough about my State Teachers’ Retirement to do the minimum number of service credit years to retire.  I’m endeavoring to retire ASAP!  I love what I do, don’t take me wrong, but life is too short.  I’m up to speed on all information regarding my defined benefit pension plan with my State, including how to maximize my retirement benefits. Same as “NM,” however, I also invest in commodities, precious metals, and currencies.  I have a margin account.  I short stocks all the time.  I use puts and calls to hedge.  I’m a professional day trader on the side and trade when the kids are doing their test or working in groups.  If the Principal comes in my room, I pretend to look busy at my desk and quickly minimize the screen.  I’m a freakin’ genius! Same as “NM” Section 125?  Same as “A”

Note: No educator gets an F in my book.  “NM” is given to the professional investor.  They will undoubtedly experience many highs and lows in their career, trying to beat the market by stock picking (they won’t over the long haul), and may control several rental properties, but with no guarantee each of these cash flows.  I give myself a NM and praise God daily!  The “I” grade is extremely high risk investing, leave this to the best money managers this nation holds.