Plannin​g Ahead

The Classroom Teacher, spring 2013

TCTA gets this question from our members often. While we can’t provide financial advice (we recommend that you talk to a financial advisor for personalized retirement planning), we can offer insights that may help you answer what are really two questions: Can you afford to retire? And will retiring after this school year protect you from any potentially negative changes the current Legislature makes to retirement benefits?

Can I aff​ord retirement?

We suggest you work with a TRS benefits counselor to determine your estimated retirement benefit (your take-home pay can vary depending on the options you choose, including the level of health insurance you select). Remember that TRS retirees do not receive automatic benefit increases, and other than a single bonus in 2008, they have not received a raise in 12 years. Consider your calculated monthly income, and decide if you can live on that amount.

What benefit changes has the Legislature discussed?

One change that has been discussed is increasing the number of years of salary used to calculate benefits from five to seven. This brings in two years of (most likely) lower salaries and would directly reduce benefits. Much more prevalent, though, have been discussions about imposing a minimum age of 62 for normal retirement. If lawmakers go this route, the Rule of 80 would likely remain in place, but a person who met the Rule of 80 and was under age 62 would be subject to a reduction of a certain percentage (possibly 5 percent) for each year under 62.

However, the legislators likely to be at the forefront of such proposals have talked about the need for a “reasonable” grandfather clause that would exempt people who are within at least five years of retirement eligibility. But we’ve also heard of grandfather clauses that run the gamut from “exempt all current employees” to “exempt only those currently eligible for retirement.” We think the latter is least likely but still possible.

[Note: Read TCTA's most recent Capitol Updates; committee substitutes for SB 1458 and HB 1884 were presented after this article in The Classroom Teacher went to press. These bills would change TRS benefits.] 

What should I do right now?

Since no bill to change retirement benefits had been filed as of the March 8, 2013, bill filing deadline, there is no way to know for sure how any changes might affect you. For now, it’s best to sit back and carefully consider your financial situation (and communicate your opposition to any changes to your legislators, of course). If worse comes to worst and benefit changes are made that would affect you, only careful review of your financial situation will help you decide if you should time your retirement to avoid the changes, continue to work or accept a lower benefit.

What is TCTA doing on my behalf?

TCTA adamantly opposes any TRS benefit changes, and we have repeatedly communicated that to legislators. We support increases to the state’s TRS contribution, and if necessary the active member contribution, but do not believe that more benefit reductions are appropriate given the already modest benefits provided by TRS, the benefit reductions made in 2005, the legislative history of underfunding TRS, and the lack of access to Social Security benefits for most school employees.