What a Texas School Employee Needs to Retire

Discover seven things you can do today to enhance your retirement experience.

Each school year and every summer, winter and spring break seems to fly by. Your career as a school employee — be it spent primarily in the classroom, front office or on the sports field — may feel much the same.

Yet whether retirement seems far away or right around the corner, it’s always wise to take stock of your future plans with an eye to ensuring you have the money necessary to live your golden years to the fullest.

Setting aside time to take a closer look at your retirement plans, funds and overall strategy need not be daunting, although it certainly may feel like it when your schedule stays busy.

If you approach the process with the following seven tips, however, you may discover that retirement planning can be more manageable, time-efficient and successful.

1. Decide what you want retirement to look like before you retire

You’ve heard the adage: If you don’t know where you’re going, you’ll end up someplace else. The truth of the matter is that you should be outlining what you want your retirement to be like — even if you won’t start it for several decades.

Keep in mind that how much money you will need largely depends upon your personal dreams and goals for retirement. This may include a chance to travel, time to spend with family and friends or freedom to pursue hobbies.

You’ll want to be practical as you consider retirement goals, too. Having the financial means to pay for medical expenses and to account for inflation’s impact on medicine and healthcare premiums may help make your retirement go more smoothly.

2. Build a plan for the future by strengthening today’s financial health

If you’re near the start of your career, it’s understandable that retirement might seem too far down the road to be worth giving much attention. It also can be challenging to save money for your golden years when you’re focused on saving for a down payment on a house, buying a car or paying back student loans.

Yet if you build a budget that makes savings a priority, healthy financial habits will begin to take shape that can set you up for a lifetime of financial success. Not only will you be able to save for the long term, but also you’ll be able to build an emergency fund for those unexpected expenses that pop up throughout your life.

To find motivation to become disciplined about your retirement savings, consider how having more money on hand later can help keep your long-range options as broad as possible.

Complicating retirement planning for many of us is the fact that we're living longer. This means that your retirement savings may have to last many years, perhaps even decades. A financial advisor can help with retirement plans that extend well into your 80s or older — an important consideration if your family elders are prone to living to a ripe, active old age.

3. Reduce debt

Cutting debt and other unnecessary expenses can make investing more manageable. Credit card debt is easy to acquire but often difficult to pay off — especially if you are making only minimum payments. Keep in mind that as you pay down your debt, the more money you’ll be able to direct toward saving and investing.

It’s possible that you may still be paying off higher-education loans. Making those payments can diminish the cash on hand you have to put into savings. Yet the more money one puts into sound investment solutions and savings accounts early on, the more time there is for your savings to grow. In other words, loan repayments can be a barrier to your ability to grow retirement savings specifically and wealth more generally.

The good news is that as a school employee, there are several loan forgiveness programs that may help you pay down — or even pay off — your loan.

• Teacher Loan Forgiveness (TLF) for those who have taught for at least five years at a qualifying low-income school. ¹
• Public Service Loan Forgiveness (PSLF) Program eliminates remaining debt after 10 years, but you’ll need to have made 120 payments to qualify.²
• Perkins Loan Cancellation for Teachers can potentially forgive all Perkins Loan debt if you teach certain subjects or work in a low-income school.³
• Teach for Texas Loan Repayment Assistance Program (TFTLRAP) applies to teachers teaching in locations or fields for which the state has identified as a shortage.⁴

4. Understand (and stay informed about) broader retirement issues unique to Texas school employees

In planning your retirement, it is crucial to be aware of two laws that can negatively impact Texas school district faculty and staff. First, most Texas districts do not participate in Social Security.

Because of this fact, many school employees may not be eligible for Social Security benefits and, even if they have established eligibility through other employment, those benefits may be reduced due to a federal statute called the Windfall Elimination Provision (WEP).⁵

Finally, it’s important to note that the Government Pension Offset (GPO) may significantly reduce government employees’ spousal or survivor benefits under Social Security. However, school employees who work in a position covered by both Social Security and a government pension for the last five years before retiring may be exempt from the GPO.

5. Consider supplementing your TRS benefits

For many school employees, the Teacher Retirement System of Texas (TRS)⁶ provides a foundation upon which to build a retirement plan in the absence of Social Security benefits. But it’s important to know that the TRS retirement annuity is not automatically adjusted for inflation, and over time your monthly pension will decrease in purchasing power due to inflation.⁷

As a general rule of thumb, you may anticipate needing 70-80% of your pre-retirement income to maintain your current standard of living. Depending upon your specific needs, your TRS savings may come up short. If you want to maintain the lifestyle to which you’ve grown accustomed, you might need to consider other savings strategies.

Fortunately, having a well-planned investment portfolio can help you close the difference between what you will eventually receive from TRS and your pre-retirement salary as a full-time school employee.

One simple strategy for helping you meet your long-term goals is to set up a separate account for unexpected expenses so you are less tempted to dip into retirement accounts. Later, when your salary increases and debts are paid, you can increase your monthly contributions to this account.

6. Discover the value of a 403(b)

A convenient way to supplement your TRS pension is to set up a 403(b) that deducts a specific monthly amount from your paycheck. Having an automatic payroll deduction that goes directly to your 403(b) account can help you save more on income taxes. Plus, since contributions are automatic, you can eliminate having to give much consideration to monthly 403(b) contributions deducted from your paycheck. Just set it and forget it — and let your money work toward your retirement.

Remember: Every penny counts when it comes to saving money for retirement. Over time, compounded earnings have the potential to add up, particularly if you start saving when you’re very young. Plus as your salary increases — and provided that you adhere to IRS rules about annual contribution limits, you may be able to increase the amount that goes into your 403(b) plan as well.⁸

7. Understand how a 403(b) plan might impact your income taxes

An immediate benefit of a 403(b) Tax-Sheltered Plan designed specifically for school employees is a reduction in the income taxes you are paying now, making this option a particularly effective saving strategy.

For example, if you contribute $200 a month to your 403(b), that’s $2,400 in annual income you will not pay taxes on until you withdraw the funds.

Meanwhile, Roth 403(b) Tax-Sheltered Plans allow you to pay income taxes on the amount contributed, but then all the earnings from that investment are generally tax-free upon withdrawal when certain conditions are met.

»Learn more about tax implications for the two types of 403(b) plans.

The takeaway

Having a career that you love serving children and teens in Texas public schools doesn’t mean you also must sacrifice having a satisfying retirement. With the right retirement savings plans and strategy in place, you may reduce debt and increase future opportunities for yourself.

To learn more about what the RBFCU Retirement Program has to offer employees of Texas school districts — including our 403(b) offerings, visit rbfcu.org/retirement now or set up a no-cost, no-obligation consultation by calling 1-833-291-1310, emailing retirement@rbfcu.org, or scheduling an appointment online.

Investment products are not insured by the FDIC, NCUA or any federal agency, are not deposits or obligations of, or guaranteed by any financial institution, and involve investment risks including possible loss of principal and fluctuation in value.

Ameriprise Financial Services has a partnership with this financial institution to provide financial planning services and solutions to clients. The financial institution is not an investment client of Ameriprise but has a revenue sharing relationship with us that creates a conflict of interest. Details on how we work together can be found on ameriprise.com/sec-disclosure.

Ameriprise Financial is not affiliated with the financial institution.

The initial consultation provides an overview of financial planning concepts. You will not receive written analysis and/or recommendations.

A Roth IRA is tax free as long as investors leave the money in the account for at least 5 years and are 59 1/2 or older when they take distributions or meet another qualifying event, such as death or disability.

Ameriprise Financial, Inc. and its affiliates do not offer tax or legal advice. Consumers should consult with their tax advisor or attorney regarding their specific situation.

RBFCU Retirement Program, a financial advisory practice of Ameriprise Financial Services, LLC, is a division of RBFCU Investments Group LLC.

Investment advisory products and services are made available through Ameriprise Financial Services, LLC, a registered investment adviser.

Securities offered by Ameriprise Financial Services, LLC. Member FINRA and SIPC.

SOURCES

The following sources were accessed in April 2023.

¹Teacher Loan Forgiveness.” Federal Student Aid, https://studentaid.gov/manage-loans/forgiveness-cancellation/teacher.

²“Public Service Loan Forgiveness (PSLF).” Federal Student Aid, https://studentaid.gov/manage-loans/forgiveness-cancellation/public-service.

³“Federal Student Aid.” Federal Student Aid, https://studentaid.gov/manage-loans/forgiveness-cancellation/perkins.

⁴“2022-23 Teach for Texas Loan Repayment Assistance Program (TFTLRAP) Application - Teacher Portion.” Texas Higher Education Coordinating Board, https://forms.thecb.state.tx.us/forms/lrpapplication.

⁵“Windfall Elimination Provision.” Social Security, https://www.ssa.gov/pubs/EN-05-10045.pdf.

⁶“Teacher Retirement System.” Teacher Retirement System of Texas, https://www.trs.texas.gov/Pages/Homepage.aspx.

⁷“Understanding the Pillars of a Secure Retirement.” Teacher Retirement System of Texas, https://www.trs.texas.gov/Pages/pension-benefits-secure-retirement.aspx.

⁸“Retirement Topics 403B Contribution Limits: Internal Revenue Service.” Retirement Topics 403b Contribution Limits | Internal Revenue Service, https://www.irs.gov/retirement-plans/plan-participant-employee/retirement-topics-403b-contribution-limits.