You consult friends and family before making big decisions. You work with a CPA before filing your taxes. You consult your doctor before you make health decisions. Why wouldn’t you do the same to prepare for life after teaching? If you want dreams to come true, it's best to roll up your sleeves and team with the experts to help you reach your goals.
A wealth management expert will construct a complete picture of your current financial situation and help you pursue your goals now and into the future. As we all know, there will be bumps along the way, such as higher prices and less money to go around. A wealth manager will help you navigate life's hurdles and detours by adjusting your finances and investments, keeping you on track, and routing you back on track to meet your goals so you have the money you want when you need it.
"But I'm a teacher, and CalSTRS should take care of my income needs in retirement. Why should I pay someone else to help me with retirement planning?" Shoulda, woulda, coulda, right! If you want to go into retirement with no guesswork, you can benefit from the help of a wealth management expert.
That said, there are some things you can start working on before you find someone to help you plan for retirement. Then, once you've started these five things, it's time to find an expert to help you meet your retirement goals.
5, 4, 3, 2, 1… Go! Success!!
Here are your five steps to set yourself on the path to retirement. We recommend setting aside some time when you won't be interrupted. Then make a list and tackle these action items as soon as possible. Don't put them off…life moves fast. The sooner you get started, the better you and your retirement savings will be.
- Start saving for retirement early. According to a recent article in EdSource, pensions aren't doing well. They recorded their first negative return last year for the first time since the Great Recession. The report states a negative 1.3% return on its portfolio.
So, what does this mean for you? Most teachers don't have a 401k to fall back on unless they had one at a previous job. Even then, if you weren’t there for more than a few years, it probably doesn't have much in it. This means you need to have another savings plan for retirement. As a teacher with CalSTRS, you have the same savings option as a 401k, but it’s called a 403b or Pension 2 plan. - Know what you own and what it’s worth. Do you own your house? Your car? A boat? What else do you own? Make a list of all the assets you own; give them a resale value minus what you might still owe on them. You could sell or rent some of these assets creating additional cash or an income stream to supplement your pension.
- Know how much you owe and how much it is costing you. If you still owe money for your house, car, student loans, credit cards, or anything else, make a list and total it. It is important to know how much you owe and what it's costing you every month. Now, how much are you paying for that debt in interest each year? Should you pay more toward the principal to pay down the debt sooner?
- Know what’s coming in and what’s going out. Now we're talking about your bills and those things you can't live without - Your needs! What are you paying for electricity, gas, groceries, internet, cell phone, etc.? Then compare that to how much money is coming in. These are the expenses you will still have once you retire. You want to know what they are so you can be sure to retire with enough money to cover these needs plus extra for saving and spending.
- Rainy day funds. An emergency fund is so important. Once you retire, you still need to save money for those unexpected expenses that will pop up. You may need a new car, or it's time to replace the roof of your house. You want to have money set aside to cover those unexpected scenarios you couldn't have planned for. Most financial experts recommend having a savings account that can cover at least six months of expenses.
How A Financial Retirement Specialist Can Help
One of the best ways to set yourself up for success is to pay off your debts before retiring. There are many strategies for doing this. For example, Dave Ramsey recommends paying off your smallest loan first. Then you can take the money that you were paying for that loan and put it all towards the next smallest loan. It’s called the Snowball Effect.
Work with a wealth management expert who can look over your situation and identify a plan of attack that's right for you and your situation. They've helped many other teachers in similar situations to yours. They know what works.
When you combine early retirement planning with Vector Wealth Management’s expertise, you’re on track to create a robust financial future. Check out our Teacher's Guide to Early Retirement and give us a call today.