Retirement is a time that many people look forward to. However, preparing for retirement does present some challenges. People are living longer, and Social Security benefits are not an option for some teachers.
Believe it or not, it is possible to retire comfortably on a teacher’s salary even without social security. The right financial plan and practical financial habits will allow you to live out your golden years securely while still enjoying all the activities and hobbies you crave.
The key is to plan early, create a budget and utilize the financial tools available to you. Invest in employer-sponsored retirement plans, especially if they match contributions. Work a side hustle and put money in the right places.
By saving and following a budget, you can ensure a comfortable retirement on a teacher’s salary. Here’s how:
Tax-Advantaged Retirement Accounts
Tax-advantaged retirement accounts are a great place to start saving for your golden years. Aside from building a nest egg, these plans also help minimize the tax burden every year. Tax-advantaged retirement accounts are often employer-sponsored retirement plans with low fees.
Many teachers who work full-time for a public school, or even a tax-exempt private school, can take advantage of a 403(b) plan. Some district employees have access to a 457(b) plan. These are both tax-advantaged retirement plans with high annual contribution limits.
In addition to employer retirement plans, you can also fund your own retirement using a high earning Individual Retirement Account, such as our Premium Market IRA. This IRA’s rate fluctuates monthly, depending on what the market rate is. However, it never goes negative, making your money safe and secure, even in times of market volatility.
For the 2019 tax year, contribution limits are set at $19,000 per person. Both plans have provisions that allow catch-up contributions for employees ages 50 and older. Catch-up contributions are limited to $6,000. That means that one person can theoretically stash away $19,000 or $26,000 in pre-tax dollars annually, depending on their age. The best part is that contributions to these plans are tax-deferred. It lowers the taxable income for the year the contributions were made. Instead, distributions are taxed when they are taken in retirement. Many employers will match these tax-deferred contributions up to a certain amount. The higher annual contribution limits and employer contributions can help fund a retirement account and fill it up.
Invest Side Hustle Money
It is often necessary to earn more than just your salary to reach your financial goals. Creating a side hustle is a great way to generate extra cash every month. Investing side hustle money can help your retirement account grow quickly.
As an educator, the best way to do this is to market your finest skills. Selling some of your lesson plans makes efficient use of your time and helps generate extra cash. You must create them anyway, and some websites make the marketing easy.
New teachers and homeschooling moms are always on the lookout for great lesson plans, and they will pay handsomely for them. You could also tutor students for extra money. You can offer one on one tutoring in your community, or you can tutor people online.
Do what comes easiest to you and earns you that extra money to sock away for your retirement. Some educators even teach English as a second language to make extra money. You could also write a book about something you are passionate about. E-books are easier to format, they don’t have to be long and you can self-publish.
The internet allows access to many tools that make it easier to earn side hustle money. Prioritize retirement funding and make efficient use of your skills. Then, invest the profits wisely for your retirement. It will grow quicker than you think and before you know it, you will have a sizable nest egg.
CDs and Money Market Accounts
You’ve already seen how socking away money can help you retire comfortably on a teacher’s salary. However, where you put your money matters. A simple savings account doesn’t earn enough interest to really multiply your savings.
A CD, or Term Share Account, is a locked savings account that earns high interest rates without any associated risks. These are federally insured accounts that are offered in various terms, from three months to five years. You choose the term that is right for you based on your individual situation.
If you don’t want your money locked up, a Money Market account is a great option. It is a hybrid account between a CD and a checking account. You earn a higher savings yield, but can still make up to 6 withdraws per month.