OPINION | SAVE YOURSELF: Teachers: Don't ignore building blocks of solid retirement

Gov. Asa Hutchinson signed a law last week raising the median teacher salary by $2,000. While this will be a gradual rollout over two years, could there be a better time to talk about how teachers and staff can maximize their benefits with the Department of Education and their local districts?

But first, imagine this. You work for 30 years and one day a letter arrives that says you can retire if you want -- getting paid a similar salary to the one you are getting right now. Literally, a check will show up each month while you go visit and spoil the grandbabies, or spend the morning in your garden or curl up in a chair with a cup of tea reading that pile of books that you hadn't gotten around to. And someone will pay you to do it.

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I still do a double take sometimes when I see an Arkansas Teachers Retirement System pension estimate. We recently calculated the "present value" of a teacher's pension at $1 million. And, folks, that doesn't even factor in Social Security.

I recently interviewed Clint Rhoden, head of the retirement system, who saw his mom retire into just this system. He saw the manifestation of such a promise when she was able to stop working on her own terms, with dignity.

Teachers and staff might wonder what private-sector life might have been like if they made more money, but I believe no amount of spending or luxury or vacations would outweigh the pain of the uncertainty and challenges of being forced to retire for health or other reasons when there isn't enough money.

Knowing the pure magic of such a system, we have to reach the 20% of employees who are not contributing to their pension fund. Hold up! Does that mean that one in five people has declined this deal? We must intervene.

The only reason someone might reject this deal is pure inertia. They haven't had the chance to think about it. So here are the four benefits that I highly recommend public education employees view with fresh eyes and consideration.

First, the teachers retirement pension system. You contribute nearly 7% of your pay (It's 6.75%, going to 7% by next year), and that's called being contributory. If you don't put anything in, you still participate and still get a payout, but it is significantly less at retirement. In many cases, 40% less.

By law, teachers have to be contributory, but staff does not. There's a lot of misinformation because there was a time that staff could contribute. That's why we have to get the word out. We have to make sure everyone gets a chance to rethink their decision. Some people may not even know if they are contributory or not! I asked Rhoden the easiest way to find out, and he said call the retirement system office. The counselors can tell you if you are contributory and can also estimate your benefits.

Let's just make sure we use the right language: They will tell you how much they will be paying you to not work one day.

A couple of details to note: First, you are fully vested in the retirement system after you work for five years, then at age 60 you can draw a lifetime benefit. Second, everything YOU put in over those five years (or more) is yours.

For folks who leave the system, the best recommendation is to leave your money in it. Your path may return to public education.

But wait, there's more. If you go to work for the state, your years in the teacher retirement system will count toward the Arkansas Public Employee Retirement System. Mind. Blown.

Next, extra retirement savings. Remember, you are putting only 7% into the teacher pension plan. And yes, pensions are phenomenal for all the reasons I just gave. But pensions are not flexible. I like people with pensions to put a little aside into another vehicle if it's available.

For many teachers and staff, there is the 403(b) or 457(b) option. If your district offers one or both, consider contributing 3% of your paycheck (or more), invest in mutual funds that have stocks and bonds, and then when you retire you will have a nice nest egg that's more flexible. Retirement vacation? Yes, please. Kitchen remodel for that new cooking habit? That would be great. Or maybe for you that is a deposit into your kids' and grandkids' futures, the first generation to pass wealth down. For many teachers benefiting from the pay raise, I would try to shuttle much of that raise into this type of account.

State Education Secretary Johnny Key said he is passionately in favor of putting the extra savings into a 403(b) or 457(b) for staff and teachers.

"It's the third leg of the financial stool with the first being Social Security, the second the ATRS [Arkansas Teachers Retirement System] and the third a more flexible savings tool that can be self-directed," Key said. "The 403(b) is such a convenient way to access this tool."

Side accounts can be a little confusing, an they seem odd even to me. Not every district has them available, and the districts that do have a list of several offerings. Employees essentially "pick" which company to work with. If you are struggling with the options and want to narrow them down, my advice would be to avoid those selling annuities in favor of the 403(b)s offering mutual funds.

If you don't have access to one of these accounts through your district, remember you can always set one up with an Individual Retirement Account or a Roth IRA. You can call Vanguard, Fidelity or Schwab and ask them to help you set one up with automatic contributions and automatic investments into mutual funds.

Third, student loans. I am making up a statistic, but my estimation is that 99% of the time that people ignore or put off handling their student loans, they end up in a worse situation. You could be in a repayment plan right now paying nothing (because of covid-related forbearance) and still at the same time get annual credit toward complete forgiveness (tax-free) of all your debt.

If you work for a school district, you are eligible for the Public Service Loan Forgiveness program that allows you to make payments that are affordable, and then whatever is left on your loan is forgiven by the federal government after 10 years of payments. You need only to be working full time for a government or nonprofit and have qualifying loans. This applies to a lot of folks in the public school system.

Please find out if it makes sense to be in the loan forgiveness program, and then when it is time to certify your loans, you can do that at your local human resources or business office.

Finally, teachers and educators should remember that they can get up to $4,000 in loan repayments for the State Teacher Education Program for "teaching in a subject or geographic shortage area in an Arkansas public school" or the Teacher Opportunity Program that gives tuition reimbursement grants of up to $3,000 per year for Arkansas teachers and administrators.

I have so much gratitude for everyone working in public education and the sacrifices made by so many. I thank our beloved teachers and staff at Gibbs Elementary who have loved and taught our kids. It makes me happy that there are these benefits available to the many faces we see working tirelessly in the school, but I worry that maybe "forever decisions" were made not to contribute, to decline a 403(b) or to put student loans on autopilot in the wrong repayment plan.

All those folks deserve another chance to possibly make a better decision for their future.

Sarah Catherine Gutierrez is founder, partner and CEO of Aptus Financial in Little Rock. She is also author of the book "But First, Save 10: The One Simple Money Move That Will Change Your Life," published by Et Alia Press. Contact her at sc@aptusfinancial.com.

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