How Much Money The Average Teacher Can Expect To Have In Retirement Savings

Teaching is often considered a gray-collar job, as it is a tough but essential profession; it’s also often associated with inadequate compensation. Retirement savings, like compensation, are also a mixed bag for educators. Teachers are more likely to be eligible for pension plans or other programs like 403(b) or 457(b) retirement accounts. However, a large number of educators do not qualify for Social Security benefits. Still, teachers fare well when it comes to saving up for retirement. According to Equable, the average teacher who started their career in the 2022 school year can expect to save $668,000 for retirement throughout their working years. Meanwhile, a typical American aged 55 through 64, according to the Federal Reserve, has on average $537,560 in retirement savings, meaning teachers appear to be in a better spot than most.

But although teachers are theoretically able to amass a considerable amount of wealth, their retirement savings are in a worse state now than in years prior. According to a 2022 study on teachers’ pensions from Equable, educators who started working in 2005 will have an average of $768,000 in retirement savings by the time they’re 65 — that’s an edge of $100,000 over their younger counterparts. Educators entering the workforce more recently end up with lower balances in their defined benefit plans because they only have access to less expensive tiers. State governments have restructured the pensions this way in an attempt to offset the costs of paying out legacy pensions; in simple terms, the younger cohort of educators is paying for their older counterparts. If you’ve recently started a teaching career, it may be wise to be proactive about your retirement savings.

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As a teacher, saving for retirement may look different, but it’s still a good idea to know how much you’re aiming to accumulate before you stop working. While not perfect, a one-calculation retirement savings rule like the Rule of 25X gives you a ballpark estimate for how much you need to retire at your current income level. It is also important to know whether you’re contributing to Social Security. You can find out by checking your payroll deductions. Around 40% of public school teachers do not contribute, according to Nasra. This can be a significant blow to retirement savings, so saving extra may be required for those individuals.

When it comes to investing your money, teacher pension plans, 403(b), and 457(b) accounts can look different from a standard IRA. In some instances, individuals may have a say in where their money is invested, while other times pensions are managed at the state level. In accounts where individuals have control over their assets, it’s a good idea to pick low-cost and diversified options like index funds or target date funds. Teachers are also still eligible for Traditional or Roth IRAs, which could be a good way to supplement retirement savings if your employer plan has lackluster returns. And remember to avoid making common mistakes before retirement, as they greatly impact your golden years.