The elephant in the room is “pension”.

Half of new teachers will leave the profession before they ever qualify for a pension. A third of them will qualify for a small pension, one that is worth less than what they will ever pay into. And the remaining twenty per cent will earn a full career benefit. Those numbers are probably surprising to many readers, especially since teaching is the most common occupation for working women in America – 3.2 million full time public school teachers – yet the pension system serves fewer than half of them. (Teacher Pension Plans: How They Work, and How They Affect Recruitment, Retention, and Equity. Chad Aldeman and Andrew J. Rotherham. June 2019.)

Nevermind that most will not earn a substantial wage or pension, the golden handcuffs grab hold onto many working in the profession, making them immobile to try a new career or to move to a different geographic location, choices that might improve their quality of life, income level and happiness.

Teaching is an immensely rewarding career and many teachers would not want to do anything else. Those that find it their calling are also the ones who want to stay grounded and tied to one location throughout their 30-40 year career. It is a sure way to make deep connections in the community and contribute meaningfully in ways few occupations can.

But the numbers are a stark reminder that even those that are sticking it out for the magical combination of numbers – years of service, age and final average salary – are locked into a system that won’t serve the vast majority of them in ways they envisioned when they started out.

Don’t think for a minute that I do not value and appreciate the pension that is offered.

I recognize that for most people, living paycheck to paycheck is their normal and without having a pension to fall back on, they’ll either work well into their….well, for a long, long time OR they’ll rely on family or another entity to help pay for their necessities in the golden years. A pension is a fall-back plan, a get-out-of-jail free card. A you-have-permission to overspend plan, for better or for worse. And it has worked well for lots of people over the decades, who dedicate their working lives to one employer.

Until it doesn’t work well anymore. When something happens, like when the governor changes the state constitution or when the terms of employment are altered or when one’s health changes or families want or need to relocate, then the coveted pension doesn’t work as intended. It happens 80 per cent of the time.

The trouble begins when you start believing your pension will replace your income in retirement. Freedom begins when you believe your pension will supplement your retirement.

For those employees who are working on a golden pension, you’ve earned it. Years of dedication and public service are rewarded in the end. For me, the end came unexpectedly and sooner than I thought. Make no mistake, it would not have been “the end” had I lived through my 16.3 years of teaching as if I had a great pension. I was building my own financial independence though focused decisions, particularly with my 403(b) and 457 retirement accounts, and learning from my mistakes. Lots of them.

How I broke free of the Golden Handcuffs

If you’ve read this far, you’re going to learn how my school district’s need to demonstrate a budget reduction in the wake of a lost multi-million dollar lawsuit, coinciding with a significant dwindling enrollment, led to my full time employment being reduced to half time. Puff. Just like that.

So while you might say I was nudged out of the golden handcuffs, I have come to look at it as being handed the key.

You want details? Suffice to say I could not get only half way dressed and then drive only half way to work and half way home. Or go every other day to work. No, it would be full time commuting, full time dressing, and half time pay for half time teaching. And half a year service credit, 0.5, spread out over one year. That’s the part that effects the pension the most. Service credit.

On one hand, it could have been awesome. Half a day of committed time doing what I loved, coupled with lots of free time. Yes, indeed, it could have been awesome. I was almost excited about it. After all, I maxed out and front-loaded my annual contributions into my 403(b) and 457 plans and learned to “live” on the rest – cash-flowing 16 years of college tuition, btw – and paying our mortgage. I didn’t need the full pay check anymore. Heck, our fourth child was about to start her senior year of college and that money was set aside already, so I didn’t even need to pay tuition anymore!

Yes, it would have been a nice way to ease my way out of teaching. If I didn’t commute nearly two hours a day or have dreams of helping teachers out of bad 403(b) plans and bouncing around the world with my husband, cycling our way through Europe and the US. No, I wanted full-time play not half-time pay for us in this season of our lives.

And so just like that, after two months of wrangling with my decision, I did what my husband told me I would end up doing the instant he found out about my job reduction, I quit. I resigned. I retired.

The nitty gritty. The numbers

It always comes down to the numbers. The pension system I was in placed “penalties” for being underage and for working fewer than 30 years. One caveat was those 30 years had to be in one system. Hopping to another district would mean starting over on the salary scale yet still being in the same pension system. And underage could mean being younger than 55 or 62 or both.

If you’re really interested you can keep reading. Otherwise, stop here. It gets dry and mundane right about now, if it’s not already dry and mundane.

Having turned 55 years old, one penalty was removed. Not teaching for 20 years, I received a penalty. Not reaching age 62, I received another penalty. In the end, I had 16.3 years of service credit. Instead of earning the maximum of 2% per year, it was reduced twice, landing at 1.3%. This meant I was to receive 1.3% for each year of service – 21.2% when everything was said and done – of my final average salary (FAS). For the rest of my life.

Contrast that with working another 3.7 full time years for a total of 20 years (or as was to be my case, nearly 8 half time years) and I’d have only one penalty imposed on me (not reaching age 62). I estimate that would have been 20 X 1.65% or 33% of my FAS. Pushing ahead, had I worked until I turned the magical age of 62, I would have 21 years of service at 2% per year, yielding me a 42% of my FAS pension, or about double what I forever receive for working about 5 fewer years. Double.

To that I say, lucky me. I loved my job, I loved my kids, I loved the learning and the challenge. And I get rewarded every month with a pension that pays my mortgage. Lucky me.

Still here?

Curious where my decision has taken me? It is a wonderful story and one that I will post shortly. I am truly living the dream now.