A Teacher’s Guide to Retirement Savings

As an educator, you’re dedicated to shaping the future for others, but what about your own? Planning for your financial future is just as important as the lessons you teach. Whether you’re in a public or private school, there are powerful savings strategies tailored to your path. The key is knowing which options are typically offered in each setting—and how to make the most of them.

Public Schools

Teachers’ Retirement System or State Pension Plan:

Known as a defined benefit plan, this public pension is specifically designed for public school and state teachers. Employees will contribute a fixed percentage of their salary to the plan, which is automatically deducted from each paycheck on a pre-tax basis. This amount varies from state to state but is usually 6%-14% of the teacher’s salary. The school district or state will make matching contributions to fund the plan. The teacher’s retirement benefit is then based on several factors, including total years of service and the highest earning years. Public school teachers are often required to opt into this plan.

457(b) Plans:

This retirement savings plan is offered by state and local government employers, including public school districts. This savings vehicle operates similarly to the 403(b) account mentioned below, which is also available to most public school teachers. Teachers can elect to save a small percentage of their salary into this account each paycheck. These contributions are often made on a pre-tax basis, which reduces your taxable income in the year the contributions are made. Your investments will grow tax-free, but your withdrawals in retirement will be taxed as ordinary income.

Private and public Schools

403(b) Plans:

Both private and public school teachers will likely have access to a 403(b) plan, which is similar to the 401(k) account you might be familiar with. In this defined contribution plan, you decide what percentage of your salary you want to save. These savings are generally pre-tax, which decreases your taxable income and ultimately the amount of tax you pay in the years that you make contributions. Your employer or school district may match part of what you save. For example, a 3% employer match means that if you save 3% of your salary or more, your employer will match that with a dollar-for-dollar contribution to your account up to 3% of your salary. This is essentially free money, so don’t leave it on the table. Your savings will be invested and grow tax-free, but withdrawals from this account in retirement will be treated as taxable income.

Your 403(b) plan might also have a Roth option. If elected, your contribution will be made with money you have already paid tax on. Like the pre-tax 403(b) savings, the growth in this account is tax deferred. Since you have already paid tax on this money, withdrawals in retirement are not taxed.

Other savings options

The employer-sponsored retirement plans listed above may not generate enough income to meet your needs in retirement. Saving to additional retirement accounts like an Individual Retirement Account , Roth IRA, or a Health Savings Account (HSA) can help supplement your pension and workplace plans.

Traditional IRA:

This retirement account allows you to save up to an additional $7,000 in 2025 towards retirement. Contributions to this account are tax-deductible in the year they are made and are not taxed as the investments grow. However, you will pay ordinary income tax on withdrawals in retirement.

Roth IRA:

Like a traditional IRA, the annual contribution limit in 2025 is $7,000. Roth contributions are made with money you have already paid tax on. Your investment will grow tax-free, and withdrawals from the account will not be taxed in retirement.

Health Savings Accounts:

An HSA is a retirement account for those enrolled in a high-deductible health care plan. The minimum annual deductible to be eligible in 2025 for individuals is $1,650 and $3,300 for families. This account is special due to its triple-tax advantage. You contribute pre-tax money to lower your taxable income, the money grows tax-free, and it can be withdrawn tax-free if used for qualified medical expenses.

Understanding the options available to you is the first step to developing the appropriate savings strategy. By taking advantage of these savings vehicles, employer matches, and tax-advantaged accounts, you can create a solid foundation for your future.

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