Back to School Series 1: Three Things All Educators in Georgia Should Know about Retirement

It’s almost August, which means it is officially “Back to School” season here in Georgia.  If you are an educator in the public system, this post is JUST for you (and written by a former educator!). In this post, we will break down the top three things you need to know about the pension system so you can be in-the-know and take control of your retirement.

Let’s start with a quick primer:  The teacher’s retirement system of Georgia (TRS)  is a type of retirement plan known as a “pension.”  There are different types of pensions but here’s the way TRS works:  the employee and the employer both contribute funds during an employee's working life.  When they retire, the employee gets a regular payment from an investment fund (or a combination of a lump sum and a regular payout, depending on which plan the employee chooses).

Now, here are the top three things every educator should know about their retirement as we go into a new school year:

1. If you are an employee in TRS, you contribute 6% of your paycheck to TRS.
   
   If you are an employee in the K-12 public school system, 6% of your paycheck (before taxes) goes straight into your retirement. The percentage can change year over year as the Georgia legislature votes each year on the employer and employee contribution rates (here’s a link to the TRS website if you want to see historical contribution rates). 
   
   Also - if you would like to see the balance of your contributions, visit www.trsga.com and create or log into your account!
   
2. The vesting period in Georgia for TRS is 10 years.
   
   A vesting period is the period of time before an employee receives benefits in a retirement plan.  The vesting period for the state of Georgia is 10 years.  This means you must have ten years of creditable service over the course of your career in the state of Georgia to receive retirement benefits through TRS.  If you have less than ten years of service, then you can receive your contributions (plus some interest), but you are not entitled to any of the funds the employer has contributed on your behalf OR the lifetime income benefit.
   
3. The current formula to determine your benefit from TRS is based on the following factors: 
   
   (2%) x (Years of Service) x (Average Highest Two Year’s Salary)

Let’s break this down into real dollars. As a note, these examples are purely illustrative and make the following assumptions: the salary is based on the 2018-2019 salary scale from Atlanta Public Schools and assumes a 25% tax bracket for the teacher. TRS has a pension calculator you can use to more accurately predict your own scenario AND see different options for retirement payout.

Scenario 1: Anna is a teacher in Atlanta Public Schools.  She has a master’s degree and teaches for ten years, then moves to a different state and does not continue teaching. In year 9, she made $59,012 and in year 10, she made $60,045 for an average of $59,529.

It's back to school season!

The Math: 2% x 10 years x $59,529= $992 per month or $11,905 per year under the Maximum Benefit Plan.

Don’t’ forget taxes!  $992 a month becomes $744 or $8,928 per year.

Scenario 2: Jamal worked for 30 years in Atlanta Public Schools...and then retired to Florida. In years 29 and 30, he made $79,830.

The Math: 2% x 30 years x $79,830 = $3,992 per month or $47,898 per year under the Maximum Benefit Plan.

Don’t’ forget taxes!  $3,992 a month becomes $2,994 or $35,924 per year.

While most people really enjoy receiving a pension, this example should show you that you still might need a supplement to live at the same quality of life during retirement as you do during teaching. This is especially true if you were closer to 10 years in the system rather than 30.  As a good friend (who is an educator here in Georgia) said, “If you thought things were tight now, they are about to get really tight if you don’t have another honeypot!” 

As an educator here in Georgia, the bottom line is to make sure you are saving alongside the TRS benefit if you want to live your best life after serving the children of our state for your career. 

If you are a school or school system and want to know more about our revolutionary 403(b) retirement plan, visit us here.

If you are a teacher, schedule a consultation to discuss your best options and “Drop Us A Line” here.