Retiring after a Career as an Educator
As occupations go, few are more noble than that of an educator. While teachers and professors are certainly paid for their efforts, and in some cases paid well, these educators do spend their lives trying to educate others with an aim toward creating an intelligent and well-informed community.
Financial advisors working with educators need to know how people in this profession perceive their retirement status, whether they have already retired or are looking forward to the day they leave the classroom and settle into the next phase of their lives.
Spectrem’s perspective Get Schooled On Educators looks at the financial background, attitudes and behaviors of teachers. Included in the study are the responses teachers provided in terms of retirement questions.
Educators were queried along with investors in other occupations, and hundreds of teachers were involved in the study after the 12-month period which ended in March of 2017.
One unique aspect to the research on educators and their retirement plans is that many teachers received pensions from their state educational system. For teachers who spent decades in the classroom, these pensions can be sizable.
Among the educators surveyed for the Spectrem research, 52 percent were retired. That was much higher than the 44 percent who were retired among the general population of investors who were also surveyed. The retirement status corresponds to the average age of educator respondents, which was 64.
A significant majority of educators, 70 percent, live or lived in a household in which both spouses worked full-time. This is significantly greater than the average of Millionaire investors with a net worth between $1 million and $5 million, where 63 percent of households are two-income households.
Educators are more likely to have employee-sponsored defined contribution plans. Seventy-five percent of educators have retirement income that comes or will come from a 401(k) or like product. However, the mean value of those products average at $510,000, which is slightly below amounts for investors in other occupations.
Educators are more likely than investors in other occupations to have contributory IRAs or Roth IRAs as well, but again the mean value of those accounts is lower than similar accounts for investors in other occupations, and in the case of contributory IRAs, the mean value difference is sizable. Educators have mean value in contributor IRAs of $221,000, while investors in other occupations with contributory IRAs have an average of $330,000 in that type of account.
While educators may be more likely to have retirement accounts from their work, they are often not as wealthy as investors from other occupations. Fifty-seven percent of educators studied by Spectrem will have or had less than $1 million in household investable assets upon retirement. More than half of investors from other occupations report their investable assets total was or will be over $1 million upon retirement.
However, having the pensions and retirement accounts educators often have upon retirement does provide an emotional safety net for retirees. When asked to place their concern about depleting their retirement accounts too early on a 0-to-100 scale, with the higher number reflecting greater concern, educators place their level of worry at the very low average of 27.72, below the 30.57 of affluent investors in other occupations.
Advisors working with educators need to spend significant time going over the retirement account status of their clients. These investors did not get into their occupation in order to become wealthy, but many are financially secure thanks to their retirement accounts, and that security will play a role in the investment decisions they make.
Top Takeaways for Advisors
Working on retirement with investors with an occupational background in education starts with their pension and defined contribution or IRA accounts. For investors with decades of service, their pensions could be sizable, and they need to understand how that fund can be coordinated with other retirement income sources.
Investors from the education field tend to be more careful and deliberate with investment decisions, and may need some additional coaching on the benefits of taking an investment risk. Keep in mind, however, that investors who are or were teachers are very likely to have done a great deal of research themselves or be well-informed on the subject and still see their conservative investment habits as the wisest course.
©2017 Spectrem Group