Many Struggle with Financial Preparedness

It’s true that every teacher has a pension, but that doesn’t necessarily mean retirement planning for them is a breeze.

“I believe the primary barrier to retirement security for teachers is a combination of pension issues and personal finance behaviors informed by low salaries,” says Kate Mielitz, Ph.D., executive director of Powercat Financial and finance professor at Kansas State University. She sees teachers wrestling with long vesting periods, pensions that don’t travel well across state lines, and paychecks that feel too tight to squeeze out extra retirement contributions.

Those challenges show up in the data. A nationally representative survey found that while most teachers say they’re doing something to prepare for retirement, many struggle to answer basic questions about their plan type, contribution levels, or when they can retire. At the same time, state governments provide very different levels of support for teacher pensions, so a good pension in one state may look very different from one in another.

How Teachers Are Actually Saving

Most public school teachers participate in a defined-benefit pension that promises a monthly benefit based on service and salary. However, employer support behind these pensions is uneven. The Center for Retirement Research at Boston College reports that 35 states explicitly help fund teacher pension benefits, yet only 15 states currently pay virtually all of the pension costs on behalf of school districts. In other states, districts shoulder more of the cost, which can leave less room in local budgets for salaries or additional benefits.

On top of pensions, many teachers have access to 403(b) plans, which function as tax-advantaged, defined-contribution plans similar to 401(k)s.  

A large analysis of ERISA 403(b) plans found that total plan costs for large 403(b)s averaged about 0.48% of assets in 2021, down from 0.68% in 2009. This shows that fees are trending lower, but they still vary widely by plan.

Vanguard’s policy research team similarly notes that teachers’ plans often have higher investment costs than large 401(k) plans, which can significantly erode long-term balances.

Many teachers also make real sacrifices, trying to make do with the resources that are available and buying school supplies for their classrooms out of pocket. Most would rather spend extra cash on their students rather than themselves, Mielitz says. “If the money isn’t there to save, you can’t save it,” Mielitz adds.

Who Feels On Track, and Who’s Struggling

The national survey on teachers’ retirement preparedness paints a messy picture. Many teachers report they have some kind of personal retirement savings account and, in dual‑income households, a partner with access to an employer plan. At the same time, a significant share cannot say whether they are in a defined-benefit or defined-contribution plan. Others don’t know how much they’re contributing. Many are unsure about Social Security coverage.

Mielitz sees the structural and behavioral issues feeding off each other. Long vesting periods and limited portability mean that when teachers move across states, they may lose access to part of the pension they expected, which can discourage them from adding more to retirement accounts they might not fully keep. At the same time, low pay and second jobs make it tough to start or increase 403(b) and IRA contributions.

What Teachers Can Do Next

When asked what a 25‑year‑old new teacher or a 55‑year‑old mid‑career switcher should do first, Mielitz suggests getting advice. “Consult with a fee-only Certified Financial Planner to understand the ins and outs of your plan, your options, and to ensure your values and goals are aligned with your contributions and your employer contributions,” she says, noting that some CFP professionals specialize in working with teachers.

From there, the moves are practical. A younger teacher can learn their state’s vesting rules, check whether their district offers a low-cost 403(b) lineup, and commit to a small automatic contribution that can grow over time. A late-career teacher can gather pension estimates from each state where they’ve taught, review Social Security eligibility, and look closely at fees in any existing 403(b) accounts.

For both, Mielitz comes back to one theme: “Prioritize yourself. I absolutely understand wanting to ensure that your classroom has everything it needs…but as they say on the airplane, you have to put on your oxygen mask before you can help anyone else.”