I’m retired from teaching, now what?

Retirement: does it feel like a weight off your back, or is it bringing an increased sense of anxiety?

This new phase of life can bring a sea of emotions, and many of them can be unexpected. However when it comes to planning what to do with your time – which can span decades – it pays to put some deliberate thought into it.

Im retired from teaching now what

 

What’s your encore career?

For many life-long teachers, they can retire in their mid to late 50s, and have a pension to provide the income they need. But what happens if the pension doesn’t meet all your living expenses, or you’re just plain bored? Let’s face it, being in your late 50s is no reason to stop working – it could be a time to start a second career. Take time to realize what your passions are and think of ways to make money doing these things. Love quilting? Do custom quilts for those who don’t have time? Enjoy sports? Become a referee for as many sports as you desire, and get paid for staying active.

Just because retirement has come in one career, it doesn’t mean that your working life is over. It could be time to start working at another job that you enjoyed as much as teaching.

 

Can you collect Social Security?

Social Security laws for teachers vary between states, so some teachers will collect Social Security alongside their pension. For others, it will depend on their employment history. You can read about this here (Can I collect TRS and Social Security?)

 

Do you know if you’re eligible to collect Social Security?

Take a look at your Social Security statement (found here https://secure.ssa.gov/RIL/SiView.do) and see how many credits you’ll need. As you can collect four credits per year, if you can work a short number of years and then be eligible for benefits, it would make sense to do so.

 

Maintaining your lifestyle while not outspending your pension

Retirement is a time to enjoy the things that you haven’t been able to due to your work schedule. Or it’s time to develop hobbies that you didn’t know you’d enjoy, and now you have all the time in world to master them. For those that don’t want an encore career, there is so much time to fill with fun activities!

But these things can come at a price. For the avid golfer, a once-a-month tee time can turn into a three time a week habit, and the budget for golfing just went through the roof. Even on a smaller scale – for foodies who enjoy trying new restaurants, it may have only happened once or twice per month. Now it can happen multiple times a week, and that can hurt the purse strings (let’s not mention the waistband!).

But retirement is meant to be enjoyed – don’t get me wrong. But it needs to be enjoyed responsibly. Understand how much income your pension provides, and what your fixed expenses are each month. Then take the rest and fill life with enjoyable, but budget-friendly, pursuits.

 

Keeping an appropriate asset allocation

A pension is great at providing a fixed amount of income. But there will be times when you’ll need more than your pension, either to make ends meet, pay for one-off expenses or high-priced “fun” ticket items. This will be coming from your savings, whether it be in the bank or in a retirement account.

Depending on how often you see yourself dipping into your investments will depend on what your asset allocation should be (how aggressively or not you invest your money). If you don’t foresee needing your money that much, maybe you should invest it more aggressively so it has the opportunity to grow into a larger amount for your heirs. If you know you’ll frequently need the money make sure to keep a larger amount in cash so you don’t have to sell investments when they go down in value.

There is no right way to have your investments allocated in retirement (see this article for more information) but if you see your investments growing or falling too fast for your liking, chances are your investments are too aggressive and it’s time to adjust things. On the other hand, if you see your investments not doing much and you want them to have the opportunity to do more, it may be time to make your allocation more aggressive.

 

Do you use TRIP, Medicare or another medical insurance plan?

If you retire in your mid 50’s, you have another decade to wait until you are eligible for Medicare benefits.

What are you doing in the meantime?

If you are willing and able to find additional employment, try and find a position that has health insurance benefits. It will be a big savings in your monthly budget as private insurance and TRIP (Teachers Retirement Insurance Program) can have hefty monthly premiums.

But what if you don’t want to work?

Make sure you have coverage through TRIP, or through another avenue. When it comes time to enroll in Medicare, be sure to evaluate all of the options between the different plans, combining it with TRIP (or not), or if you should stay on a spouse’s plan.

Be careful when you make this decision as there are some irrevocable decisions you can make with TRIP, and there are some deadlines that have to be met with Medicare, with financial penalties if you miss them.

 

Consolidate 403(b)s, 457s and IRAs

During your career, you may have moved districts or have been able to contribute to various retirement plans. Some school districts allow their staff to contribute to a 457 plan as well as a 403(b).

It’s now time to play cleanup as investing and managing your portfolio gets harder the more fragmented it is.

Thankfully, you can consolidate your retirement accounts (now that you are retired) into an IRA. All of your previous district retirement accounts – 403(b) or 457 – can be rolled into one account. This makes it a lot easier to invest your money, keep track of your investments, and also manage your Required Minimum Distributions (RMDs) when you reach age 70½.

In order to do this, use one of the larger custodians (Fidelity, Charles Schwab, Vanguard) as they have great customer service teams, cheap investment choices, and easy to use technology platforms. By using as insurance company or a high street brokerage company (e.g. Edward Jones) you can be sold expensive investments and have to rely on a broker to do the trading for you. If you can’t / don’t want to do the trading yourself, then find a financial advisor who will guide you through the process but charges you for their time, not a fee based on the size of your investments.

 

Do you need Long Term Care Insurance?

As a retiree, you have fixed expenses that are fairly predictable, but there is the potential that health care expenses could ruin your “predictable” lifestyle.

To insure against this situation and expenses, it may be worthwhile to compare purchasing a Long Term Care policy vs. self-funding the expense. According to the U.S. Department of Health and Human Services, the average stay in a Long Term Care facility is 2.4 years. With an average cost of around $67,000/yr, this could quickly deplete your nest egg. The average premium for this coverage can be as low as a couple of thousand dollars a year, which in comparison can seem very worthwhile.

However, if you have been fortunate enough to accumulate enough to absorb this potential cost, it may be in your best interest to not pay this insurance. A review of your budget needs and portfolio holdings with a fee-only advisor can help provide the complete assessment needed in order for you to make this decision.

 

I have a unique problem – I have more money than I’ll need. What should I do?

This is a problem that some teachers have, but many feel embarrassed to admit. Teachers are meant to be frugal, underpaid and civil servants with a mediocre pension in retirement – how dare they have money! But I jest.

If you have been diligent in saving, and/or find yourself with more money than you need in retirement, you can approach this in two ways – increase your lifestyle or help others to live a better life. Neither is the wrong answer, but is based on personal preference, and there is certainly a middle ground between the two.

If you want to better the lives of others, then understand how you want to do this. Do you want to gift to family, leave a legacy to heirs upon your passing or provide funds to charity? If you want to gift to family, then start by talking to them and explaining the generalities of your situation. Understand what their financial priorities are and ask permission to help them if you’d like to support their journeys.

If you want to leave money to heirs, then visit with an Estate Planning attorney to draw up a will and potentially a Living Trust. This will lay out in specific detail which of your heirs get what and in which amount. By using a Trust, you can also control the timeline and method that assets get dispersed should you not want your wealth to be distributed all at one time.

By giving to charity, your money can have a wider impact on various good causes. This can be done while you are living and when you pass away. It can be done as simply as writing a check, setting up a donor-advised fund at a brokerage firm, or through some complex estate planning vehicles (e.g. a CRAT or CRUT). The method you choose will depend on your level of wealth and how you want your donation to be structured. If you want to explore methods beyond writing checks, then it is wise to visit with an attorney and financial planner to determine which methods would be best for you.

 

Whatever situation you find yourself in when you enter retirement, be sure to enjoy your time and fill it with fulfilling activities. You’ve earned it!