Money, Teachers, and Teaching

The state is messing around with our pension. The pension they force us to pay into and promised teachers years back in exchange for lower pay. The county is now claiming they’re going to give us raises, when they’re actually playing a shell game with our money.

Monday, at lunch, one of the association reps was explaining this to the people at my table. A younger coworker in her second year mentioned that she knows she should have extra retirement put aside, but she doesn’t even know where to start or what to do.

I lost out on five years of retirement planning in my first five years of teaching. I have no SSA for that time because my old district didn’t pay into SSA (not that I think SSA is going to be around for me).

I had only a small pension, which sat around for several years after I left the county, until they eventually sent me a letter saying I was no longer going to get interest on my account. That finally got me to roll it over.

I told her I don’t want her to make the same mistake, and I dragged her up to my classroom. She set up a 457b before we left for the day. It felt really good to help her out, and she was grateful.

While we were opening her account I said, “I know talking about money is socially unacceptable. I hope this isn’t making you uncomfortable. But I really want to help people not make the mistakes I made.”

“No, I am so grateful for this, because nobody ever taught me about this, and I just had no idea where to even start.”

A few years ago, my job helped me discover that I truly wanted to become a gifted and talented teacher.

Working with an intern this year has taught me that I really like working with neophyte teachers. My mentors were all assigned to me by their principals, and they had no choice. I was assigned an intern because I asked for one.

A few months ago, an instructional coach said she could see me in coaching or admin. I don’t see myself in either position, but I do see the appeal of working with adults.

One thought on “Money, Teachers, and Teaching

  1. Comment from: S L G [Visitor]
    I’m a teacher in DC and there is no Social Security taken out for teachers here..I would like to know more about the account you set up w/ the new teacher..I myself am a first year teacher in the states after teaching in Korea for 3 years..I’m clueless about this stuff!
    05/13/12 @ 18:45

    Comment from: admin [Member]
    This is an overview of what I did. I am not telling you what to do. When I worked with the new teacher, she did her picking, not me. I am not acting as a financial adviser. :)

    As public school employees, we’re not eligible for 401(k)s, but we are eligible for 403(b)s and 457(b)s. There are some differences between them (http://www.457bwise.com/features/planner_sd.html).

    Choosing a plan:
    I chose a 457(b) when I moved here because I could withdraw upon termination, and I wasn’t sure how long I would live here. 457(b)s also usually have fewer fund options. To me, that was great! I was already overwhelmed by all of the choices around me (I cried in the frozen pizza aisle when I was going through reverse culture shock). I knew if I had more options, I would just keep putting off a decision.

    The new teacher chose the same plan for similar reasons.

    However! I now see that the 403(b) available from my provider has a “target fund.” These can be very nice. You choose a the date closest to your retirement date, and the fund is managed to start off riskier and grow more conservative as you get closer to retirement. If I had known that when I opened the account, I probably would have gone for that.

    Choosing a Provider:
    In my county there is only one plan provider for 457(b), while there are three for 403(b). (I *think* AIG might have been a 457(b) provider when I enrolled, but well….) My provider also does 403(b), so I chose that one with the idea that if I wanted to open a different account later, I could.

    Choosing a Deferral:
    I went to the website and enrolled, which was very easy. I started with a small deferral to see how much it would “hurt.” My county also has a paycheck modelling application on their website where you can compare how different deferrals will affect your pay.

    Note! Deferring 10% will NOT decrease your pay 10% because these are PRE-tax deferrals!

    I started off with 4% I think, then bumped it up from there, as our money situation improved.

    Choosing Funds:
    I had multiple funds to choose from.

    As a quick rundown, international funds usually have more international stocks. Big risk/reward.

    Then there are large/mid/small cap funds. They invest in larger/middle/smaller companies. (If you look at the fund overview sheet, you can see their largest holdings. You see how the company sizes are different.) Generally, large cap is considered smaller risk/smaller reward, whereas the opposite is true for small cap.

    Then there are the bonds and fixed funds. Stable, stable, slow, slow. Very little growth.

    As a younger person, you generally want more money in riskier investments (stocks), and less in safer investments (bonds). More risk, more reward, and more loss possibilities. Less risk, less reward, less loss possibilities. This is a gross simplification.

    If you Google “asset allocation calculator,” you should be able to find some calculators that will suggest a mixture based on your age and risk tolerance. (I really don’t want to risk ANY money, but I know my funds won’t keep up or beat inflation if I do that.)

    I chose the funds I wanted by looking at their overview sheets (Google “how to read a fund overview”). You can also sit and read all the fine print in a prospectus, but again, I was freaked over choice. I was going with “any decision is better than no decision.”

    I then decided the percentage of my deferral I wanted to go to each plan. 20% to the international fund I wanted, 20% to the large-cap fund, etc.

    That was it!

    Other Stuff:
    I will say, I think ANY decision is better than NO decision when it comes to retirement funds. Get started, then so some more research about investing, change your allocations, etc.

    Also, FYI, if you plan on buying a house, many times these plans can be tapped after a certain amount of time. You basically lend yourself your contributions and then pay them back. It’s not something I would do, but it’s something to consider. The money usually has to age a bit. It would be something to ask one of the provider reps about. (Our provider reps are no-fee and don’t work on commission. I worked with one when I rolled over my GA pension, and she was great!)

    There are other things to consider like fund costs, but in my provider, the fund costs are low enough (for me) that I don’t worry about it much. Again–ask your provider what that means.

    I hope that helps!

    One more thing: I worried that I shouldn’t start a 457(b) when we first moved here because Good Man was in school and we were dependent upon my income for the most part (his parents paid tuition). But I am really glad that I invested right away. I didn’t see the money go since it came straight off my check, so I didn’t miss it.

    Disclaimer:
    I am not a financial adviser, all of this was for informational purposes only, and I am not be liable for any errors or omissions in this information or any damages arising from its display or use.
    05/13/12 @ 21:20

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