Teacher Retirement Information
Most states provide their educators with a teacher retirement fund. In most instances, the teacher and school district contribute matching amounts to the teacher retirement fund. When the teacher reaches a certain age, or teaches a certain number of years, he may take retirement and start collecting his retirement fund. Contributions and how well investments performed are the prime factors that indicate how much a teacher has in their retirement fund.
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Significance
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In most instances, public school teachers do not pay Social Security taxes. Instead their retirement contributions go into public school teacher retirement funds. Just as Social Security benefits are an important source of income for retirees in the public sector, teacher retirement income provides the primary source of income for retired educators. The rate of contribution varies by state. The state legislature sets standards for the contribution rate. For example, Texas currently sets the rate of contribution at 6 percent for both the teacher and school district according to the Teacher Retirement System of Texas. According to the Public School and Education Employee Retirement Systems of Missouri, Missouri sets their retirement rate at 14 percent for the 2010-2011 school year.
Size
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The size of the teacher retirement fund depends on the rate of contribution over the teacher’s working lifetime. It also can fluctuate based on how the state retirement system handles their investments. In times of economic growth, it’s not uncommon to see the net worth of retirement accounts increase. If the retirement fund has fiscally responsible managers, the retirement funds should not drop dramatically during economic downturns.
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Time Frame
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As a teacher nears retirement age, she should begin to make plans for retirement. Often the final average salary for the last five years is the basis for computing the retirement income, so the teacher may want to look for teaching opportunities that pay more. Some states require 30 or more years of teaching, while others require fewer years. In some instances, early retirement with reduced benefits is possible. One common formula used by many states is the “Rule of 80.” Whenever the teacher’s age plus years of service add up to 80, they may take full retirement. As the teacher approaches their retirement date, they should visit with a representative from their state’s teacher retirement association. This representative can give them exact amounts of their retirement check as well as help them fill out all the required paperwork.
Benefits
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In addition to having a paycheck for the rest of their life, retired teachers often have additional benefits from their retirement plan. Many plans offer life insurance and disability coverage as well.
Considerations
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As the teacher reaches retirement age, he must decide what type of retirement package to take if multiple options are available in his state. He may opt to take a lump sum payment or he may select monthly payments at a reduced rate that would continue to his survivors after his death. Most teacher retirement planning seminars cover these options and give the teacher specific amounts of money they would receive in each instance.
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References
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