Your CalsSTRS retirement benefit is just about the best deal going. However, it will not likely provide you with 100% of your income in retirement unless you work a very long time. According to the CalSTRS Member Guide the average career educator will likely have 60% of their salary paid to them in retirement. That is truly a fantastic benefit!
But what about the other 20-30% that you will likely need to fill the gap to get you to the recommended 80-90% of your salary after retirement that is recommended by most economists? Well that is up to you and whether you are willing to save additional funds toward a personal retirement plan.
There are many types of personal retirement accounts available to you as an educator such as the 403b and 457, as well as IRA’s, Roth IRA’s and Tax Sheltered Annuities. Once you decide which type of accounts suit you best you will then need to be invested in a portfolio of securities that meet your risk tolerance and time horizon. Your concerns about the effects of taxes will also be relevant to your choices of account type.
All of these different types of accounts can help you save money toward filling the retirement income gap. According to the chart titled The Power of Tax-Deferred Compounding if a person saved $50.00 per month every month for 20 years in a pre-tax account such as a 403b or IRA and was able to earn 8% per year on average, that person would have over $190,000 accumulated. Those funds could then be liquidated over several years to provide the additional income needed to fill the gap should one exist.
Please do some research or seek professional advice to determine what is best for you. Do not let someone tell you what you should do without having a serious discussion about your personal goals and expectations. Many accounts that are offered to teachers and other school employees may not necessarily be the best fit for you and what your are trying to accomplish. Remember, investing is more of a marathon than a sprint!
The bottom line is that it is up to you to find a way to bridge the gap in your retirement income should you need to do so. There are many ways to accomplish your goals for retirement and some homework needs to be done to determine what accounts and investments are bet suited to your individual situation.
Michael G. Zeiger
Senior Financial Advisor
Infinity Financial Services, Inc.
Phone: (858) 522-9497
Michael Zeiger has been Financial Advisor since 2003 when he joined Sentra Securities. He spent 5 years as an advisor with the County Schools Deferred Compensation Program and has helped hundreds of educators, school employees and their families manage their retirement and investment accounts. Michael is currently an independent financial advisor with Infinity Financial Services, Inc. and specializes in working with school employees in San Diego, Imperial, and Riverside Counties.