Can you explain the basics regarding an educator’s retirement and pension?
Retirement may be decades away but you are now a member of the Massachusetts Teachers’ Retirement System (MTRS), and you have some understanding about where your money is going and how you will benefit from being a member.
Here are some commonly asked questions and answers regarding retirement/pensions.
Q: How much is taken from my pay for retirement?
A: 11% of your pay is deducted for retirement.
Q: Where does my money go?
A: Your money goes into the Massachusetts Teacher Retirement System. It is a huge fund (approximately $24 billion) that is invested in a variety of places–stocks, funds, real estate, etc. Although the fund grows with the economy, your account is usually credited at a rate of between 1% and 3% each year.
Q: One to three percent? What’s that all about?
A: This might seem a paltry amount, but the pension system is not a savings account. The MTRS is a defined benefit plan. This means that regardless of how the fund has done over the years, your benefit will not be affected. Your benefit will be determined by three factors: 1.) your three highest consecutive years of salary 2.) your age at retirement 3.) your years of service (referred to as creditable service).
The bottom line–the maximum retirement benefit is 80% of your three highest consecutive years. You can calculate your benefit at the Massachusetts Teachers’ Retirement Board (MTRB) website.
Q: What happens if I leave Quincy for a teaching job in another community?
A: The MTRS is a statewide plan. Moving from community to community does not affect your membership.
Q: What if I take a teaching job in another state?
A: If you move out of state send resume teaching there, you should contact the retirement board in the new location about the best way to have your funds and time credited in the new system. It will differ from state to state.
Q: What if I leave teaching altogether?
A: If you leave teaching before the age of 55, you may withdraw our contributions plus interest. Before you take that step, we urge you to think long and hard about the following:
- Is it possible that I may return to teaching or other state or municipal employment in the future?
- Where will this money best work for me?
Contact the Massachusetts Teachers’ Retirement Board to get up-to-date information on withdrawing your funds and consult a financial advisor.
Q: So, am I all set for retirement?
A: Not necessarily. Obviously the answer to this question depends on your lifestyle and financial needs. Consider enhancing your MTRS plan with one of the many tax-sheltered investment plans for which you are eligible. These are referred to as 403(B) and 457 plans (which is the public service employee version of a 401K).
*Please note: These are just a few names of companies that offer tax-sheltered plans. There are many, many others; some are even local people. Be sure to research before investing and ask other teachers.