Wes Moss: A lesson for Georgia’s teachers

Certified financial planner Wes Moss provides personal finance advice and accessible investment strategies. His guest post appears here weekly.

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

Wes Moss hosts 'Money Matters' Sunday mornings on AM750 and 95.5FM News/Talk WSB

Georgia teachers are among the state’s richest citizens. If you’re an educator, you may chuckle at that notion, but it’s true. First, teachers derive great emotional wealth from their work, which shapes our young people and, as a result, our future.

Second, they have a killer dual-engine retirement program.

Georgia’s Teacher Retirement System (TRS) requires educators to contribute approximately 5.5 percent of their annual salary and provides a match of nearly 10 percent, meaning teachers are socking away 15 percent of their pay toward retirement without even noticing. TRS then gives teachers the opportunity to participate in their school system’s 403(b) program, which is like a 401(k). While participation in the 403(b) is not mandatory, teachers generally contribute to them pretty aggressively. No surprise there. In my extensive professional interaction with teachers, I’ve found them to be financially astute and responsible.

As the school year comes to an end, allow me to thank our local teachers by offering them a lesson regarding an upcoming change to this wonderful retirement system.

Earlier this year TRS decided to repeal a 3 percent tax offset adjustment to teacher pensions that has been in place since 1990. In short, this means educators who retire after 2012 will see their pensions reduced by 3 percent on the first $37,500 of benefits. So a teacher who has earned a $3,500 per month pension will lose $93.75 per month if she retires after Dec. 31, 2012.

This new policy has many teachers considering an earlier-than-planned retirement. But is that prudent? A close examination shows that teachers who work for just one more year will earn enough additional pension benefit to just barely overcome the loss of the tax offset. And, by working just two more years an educator can accrue enough pension benefit to far outstrip that 3 percent loss.

Bottom line: Don’t let a few seemingly scary numbers still your life’s passion. If you love teaching, stick with it. You will absolutely come out ahead — both emotionally and financially.

I’d like to thank my 11th grade math and physics teachers Mrs. Dibiase and Mr. Zamitees. They deserve a lot of credit for helping me get to where I am today.

– By Wes Moss, for Atlanta Bargain Hunter

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9 comments Add your comment

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John

May 28th, 2012
1:26 pm

The current employee contribution rate for TRS is 5.53%, not 5.00%. The employee contribution rate will increase to 6.00% on July 1, 2012.

Wes Moss

May 29th, 2012
9:39 am

John – thanks for the update and heads up on the contribution rate and change for July…

Ronin

May 29th, 2012
10:47 am

Wes, the 3% reduction is just the tip of the iceberg. The current 5.53% contribution which will increase to 6%, in my opinion, is a gradual movement to replace the defined benefit plan (DBP) with a complete 403(b) program. Simply put, the TRS with it’s near 10% match is not sustainable in the long term.

With the introduction of more Charter schools, fewer state employees will be participating in the TRS system.

a_mom

May 29th, 2012
1:36 pm

Am I misinterpreting the part about earning “$3,500 per month pension”? Are you saying a retired teacher receives $42,000 per year? If so, that’s more than my husband will receive and he works 50 weeks a year (2 weeks vacation) as a computer programmer. I think it’s time to stop feeling sorry for teachers who complain about their salary! Especially when you consider the number of weeks off they get.

If I’m all wrong, then I’ll apologize in advance & would love for someone to clarify the retirement pay.
Thank you.

Ricky Bobby

May 29th, 2012
9:02 pm

a_mom, darlin’, your computer programmer husband needs a better paying job.

jim watson

May 29th, 2012
9:48 pm

Can you please compare Ga’s ERS to TRS?

wolfman

May 30th, 2012
10:41 am

Mary

June 2nd, 2012
9:05 am

Teachers are to be commended for their efforts to educate our children. It is no doubt a difficult job given some of the challenges they face in the classroom that have nothing to do with actual teaching. My concern is that many teachers do not recognize how good they have it in comparison to those who work longer hours/day, more days/year for lower annual salaries and less benefits working in the private sector. Some teachers with advanced degrees still believe they are under paid and hate their jobs yet remain to collect this great retirement, complaining every day about kids in the classroom, furlough days and decreases/changes in their benefits. They are bitter and resentful that health insurance used to be free but now they have to pay for it, or they have worked nearly 30 years and will only get 62% of their salary in retirement. Wake up, and look around in the private sector to appreciate what you have earned as a classroom teacher. Oh by the way, traditional defined benefit retirement plans began being phased out in the private sector about 20-25 years ago in favor of 401k’s so employees could bear more of their retirement costs.