If you’re a teacher, odds are you spend quite a lot of time planning for the upcoming school year, but how much time do you spend planning for retirement?
In Arielle O’Shea’s article on nerdwallet
, she explains teachers’ unique retirement savings situation and why a retirement account could be critical.
According to the article, roughly 40 percent of public school teachers (and majority public-sector employees for that matter) do not receive Social Security benefits since they already receive benefits from their state-run pension plans.
The reason some teachers don’t receive both is because of a rule called the Windfall Elimination Provision (WEP).
In 1983, the WEP was a legislative change that took effect during the Social Security Amendments. According to O’Shea’s article, the WEP “is designed to block state and local public employees from collecting a pension alongside Social Security benefits. It does that by reducing Social Security retirement benefits.” (nerdwallet
If you never have been covered by Social Security in the first place, i.e. you have always been a public-sector employee, this legislation does not directly affect you. However, if you previously received Social Security benefits and moved to the public-sector, the WEP affects you.
This means many teachers solely rely on their pension plans or defined contribution plans for their retirement savings. Unfortunately, pension plans have their fair share of pitfalls. A lot of times pension plans require a certain number of years of participation until you are able to receive your full benefit you have been promised. If you have a career change and switch out of the public sector, you may also give up a handful of potential benefits.
Teachers may want to consider having another strategy to back up your pension plan. Equity Trust has solutions to help with your retirement saving needs.
Opening up a self-directed account with Equity Trust allows you to invest in a wide-range of assets, such as real estate and small businesses, beyond traditional stocks, bonds and mutual funds. While investing in traditional assets can help build wealth for retirement, utilizing alternative choices further diversifies your portfolio and allows you to take control and invest in assets you are comfortable and familiar with.
To learn more about investing in alternatives and what you can do with a self-directed IRA, schedule a free consultation
with one of our Senior Account Executives today.
to read Arielle O’Shea’s article on nerdwallet