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Educators Considering Early Retirement

May 04, 2022

Most of the nation’s teachers and K-12 educational employees are members of their state’s public pension plans. After years of service, these plans have promised a secure retirement for educators and support staff. Unfortunately, a significant number of public pension plans serving these employees were severely underfunded before the Great Recession.5 The situation was compounded by the COVID-19 pandemic, pushing this program and educators further into debt. It’s now more important than ever that teachers have a plan to supplement their pensions with their savings. 

With the recent pandemic, an option to take early retirement was presented to many educators. If you find yourself over age 55, this option may provide a desirable option even if it comes with financial constraints. You’ll want to consider how early retirement will affect your pension benefits, healthcare eligibility, and tax implications. 

If you’re evaluating the decision to retire, there are a few steps that you can take now to determine if you’re on track financially. Before taking any next steps, we recommend a discussion with your financial professional.

What are my projected retirement expenses? You can better understand how much money you'll need each month by adding up all your necessary living expenses and desired discretionary spending. If you’re having trouble estimating your expenses, a good starting point is to use 85% of your current pre-retirement monthly expenditures.

What are my sources of income? Identify any income sources from Social Security, pension, and other savings programs. You’re looking for consistent income sources, not a one-time influx of cash.

How much of a financial gap will I need to cover? The “four percent” rule was popularized in previous decades and meant that retirees could safely take out 4%-4.5% of their portfolio each year. In volatile markets, you’ll want to take a personalized approach to strategizing. Any gap between your guaranteed income and your expenses may need to be covered by withdrawals from your retirement savings.

If you discover you’re going to fall short of your income needs, it’s time to make some financial adjustments. Depending on your financial plan, it might make sense to start by increasing your savings and contributing as much as possible to a tax-advantaged retirement account. Next, talk through options such as delaying retirement, downsizing, or even working part-time during your retirement.

As you navigate your transition from work to retirement, we’re here to serve as a resource for you and your family. If you have questions, or want to review your options, call us today.


This document is for educational purposes only and should not be construed as legal or tax advice. One should consult a legal or tax professional regarding their own personal situation. Any comments regarding safe and secure investments and guaranteed income streams refer only to fixed insurance products offered by an insurance company. They do not refer in any way to securities or investment advisory products Insurance policy applications are vetted through an underwriting process set forth by the issuing insurance company. Some applications may not be accepted based upon adverse underwriting results.  Death benefit payouts are based upon the claims paying ability of the issuing insurance company. The firm providing this document is not affiliated with the Social Security Administration or any other government entity.

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