Oh no! What if I have already left?
Just breathe and keep reading, if you have already left the teaching profession, it will be ok! If you haven’t left yet and are still planning lessons, maybe you have considered calling it quits a time or ten. My departure was intentional, well partially. I had been teaching in Virginia Beach. I was recently divorced, had two small children, and alone, we were hardly making ends meet. There was always more “month than money,” and I missed Northern Michigan dearly.
This was back in 2009 when the recession was in full swing, especially in Michigan. Estimates say that over 850,000 jobs had vanished, and there was a mass exodus of folks moving out of the state, not folks moving in. I felt like a salmon swimming upstream as I made my decision to return. Deep down, I knew that I most likely was not going to be teaching in the Fall. There were few positions available and moving back to Bellaire made that pool of possibilities fewer. Yet, I made the move having faith that in the end everything would turn out ok. And it has! Fast forward over ten years and I am now twelve years into a new career, and I love it!
No matter what has caused you to make or consider making this decision, changing life in such a way causes deliberation. There are a lot of questions to be asked and answered, but this article focuses on just one of those decisions…what do I do with the defined contribution portion of my benefits? You have three options, each with their own pitfalls!
Leaving The Teaching Profession Option #1:
Stay right where you are:
If you keep your retirement investments right where they are, like a lot of folks do when I meet with them at first, you may not be aware of the possible downsides of this decision. First of all, depending on how you are invested, you could be paying higher fees than need be. Some accounts I have seen have fees upwards of 2.5%. On $100,000, over a ten-year period, that is $25,000! That’s a lot of money where I come from! Secondly, your investment options are usually very limited.
You know how it is: “the investment guy” comes around every so often and you may have adjusted your investments to be more or less conservative. That’s about the extent of your investment decisions. Wow! There is a big wide world of options out there, just waiting to be discovered! It is simple: if you stay in your 401k plan, you most likely will not get individualized, constant comprehensive planning for an appropriate cost.
Leaving The Teaching Profession Option #2:
Cash it out:
Danger, Will Robinson! If this is an option, many consider cashing out their retirement account to take a lump sum distribution. This choice, on initial thought, could be quite tempting! You could, at age 50, start that super creative tutoring business you always dreamed of having. However, depending on the amount in your retirement account, there could be serious, and I mean serious, tax consequences. You could end up handing “Uncle Sam” a large portion of your account by not being aware of how taxes will affect this distribution. Most don’t want to be penalized by paying unnecessary taxes, and why should you? Also, once the money is spent, it is gone. You could be robbing your future self of the money needed years from now!
Leaving The Teaching Profession Option #3
Roll it over:
Everyone’s situation is different, but this option is by far the most common for folks who leave the teaching profession. Why? Well, it solves the pitfalls associated with the previous two options. Life is constantly changing, and your investments should reflect those changes when necessary. If your investment choices are limited, you most likely are not leveraging your money to work for you as you want and need it to. Also, remember those fees I was talking about? Fees are not inherently bad, but if I were paying $25,000 over a ten year period, you can bet your bottom dollar that I would want to know exactly what I am getting in return for that hard earned money. Finally, by rolling the money over into an IRA, it is still going to grow tax deferred and be there for you when you finally stop working entirely.
So, is there life outside of the classroom?
Definitely! There is whole big wide world out there just waiting for you to discover it. You may have a lot of working years left in you, and you are just wondering what might be in your future. Maybe you’d just like to substitute teach a bit. You might not know it, but subbing could mess up your pension! True story!
Interestingly enough, the last few people I have talked to indicated, “I really don’t know what skills I have,” or “I really don’t know what else I would be qualified to do.” My goodness! Being in the classroom has given you so many skills: patience, creativity, organization, communication, interpersonal intelligence, empathy, critical thinking, public speaking, multitasking, teamwork…the list goes on and on! Don’t sell yourself short. Many employers would die to have you.
So, think about it.
Maybe it is time for you to reinvent yourself. If so, good for you! Just remember to weigh your options (stay where you are, cash it out, or roll it over) with your retirement account so that when you are ready to “really retire,” you will have made the most from the money you invested while teaching.
This important decision is only one of many you should consider when leaving the teaching profession. You should check out: “The Ultimate Retirement Guide for Teachers” to REALLY explore your retirement options.
Included you will find:
- “10 top tips for taking Social Security!”
- “4 questions to ask to determine your Risk Score!”
- “What Every Teacher Needs to Know about Planning for Long Term Care!”
- “4 ways you can Delegate your accounts to best leverage the money you have saved for retirement! ”
- “5 Critical Steps in Reducing Taxes in your Retirement!”
- “12 Costly Mistakes Michiganders make with Medicare!”
And remember, you may be a retired teacher, but you will always “still have class!”
Marc Hudson, Tim Alfieri, and Sara Hornick, investment advisor representatives of, and securities and advisory services are offered through, USA Financial Securities Corp., Member FINRA/SIPC. A Registered Investment Advisor located at 6020 E. Fulton St., Ada, MI 49301. Hudson Wealth Management is not affiliated with USA Financial Securities.