Monday, January 15, 2018
How Much Should A NYC Teacher Be Saving Yearly For Retirement?
Being a NYC teacher can result in a very comfortable retirement, if the teacher invests wisely and makes it to full retirement age. We have a pension, a 403(b) plan, and Social Security. All three are exempt from New York State and Local taxes. Assuming a teacher works 25 years and retires at 62, they will receive 50% of their Final Average Salary (FAS), less if they select a spouse to get part of the pension (about 40%). NYC teachers will also get Social Security, starting as early as 62 (reduced benefit). The combination of the two will probably account for 50% or more of the teacher's retirement income. The remaining 50% will come from the teacher's various savings accounts. For NYC teachers that may be primarily their TDA,
A July 2011 study by Financial Researcher Wade D. Plau showed that if a person saved an average of 16.62% of their salary annually, that person will have saved the equivalent of 50% of his or her necessary retirement income. Add that to our pension and Social Security and the NYC teacher can expect to achieve a 100% replacement income in retirement Therefore, if the NYC teacher can last to their full retirement age of 62 or 63, they can expect a financially conformable retirement.
Of course there are a couple of cavorts. First, how many NYC teachers will reach their full retirement age? According to a study which I used in a previous post, only 33% of Tier 1-IV teachers in NYC reached that goal. With the punitive teacher evaluation system and Charlotte Danielson being used to determine teacher effectiveness and the vastly inferior Tier VI pension plan, the percentage of teachers reaching their full retirement age is probably closer to the teens for newer teachers.
Another issue is the improving economy. Fewer college graduates are going into the low paying education field and even less want to be a classroom teacher. Moreover, many existing teachers leave the high stress classroom environment for greener pastures, be it to the suburbs or outside of the education field. Finally, the poor quality of NYC school administrators and the lax student discipline rules makes teaching in the NYC classroom a hostile environment. Consequently, few newer teachers will stick it out for the long term despite the rewards of a comfortable retirement 20 to 30 years down the road.
The bottom line, if you can make it to full retirement age, the NYC teacher will have a financially comfortable retirement but realistically we are talking about the minority of teachers that can stick it out and are smart enough to save at least 16.62% of their paycheck.