Your pension is not enough, it is up to you to make up the shortfall by investing in your 403(b), 457, and Roth IRA.

Plan for a Long Retirement

It’s never too early to start planning for retirement.

With a wide range of options available for educators, it’s important to understand the various retirement saving plans available to you and your family.

Retirement Planning: The Basics

Many envision retirement as time spent doing activities that you enjoy. But it’s not as easy as you might think. More than ever, people live longer, so it has become imperative to save for these additional years in retirement. 

While Social Security can be helpful, it’s often not enough for retirees to live on. Additionally, many companies do not offer pension plans the way they used to. These factors make proper financial planning absolutely crucial. 

It’s not all bad news! National Educational Services offers plenty of tools, resources, and expert advisors to help guide educators in retirement through this complicated process. In the meantime, follow these basic steps as a jumping-off point.

Determine your retirement income needs

The simple way to go about calculating your coveted annual retirement income is to base it on a percentage of your current income. This typically equates to 60%-90% of what you make now. This method, however, does not account for personal circumstances. A more detailed estimation of your required retirement income will be beneficial to you in the long run. 

Although your expenses could change significantly during retirement, it’s helpful to use your current expenses as a starting point. Depending on your age and when you retire, estimating your future expenses might be more difficult. 

Another consideration is inflation. Over the past 20 years, the average annual inflation rate has been 2%. In addition to your debt and health as factors, this number will help calculate a realistic number for your retirement expenses. 

Calculate income gap 

Now that you have considered your necessary income post-retirement, it’s essential to review your future assets and income. These could be in the form of Social Security, your employer’s retirement plan, part-time employment, or any other source of income. If the sum of these assets still doesn’t reach your financial needs, the remainder of these funds will come from your personal savings. 

So, how much will you need to save? Consider these questions before determining your answer. 

  • At what age do you want to retire? If you retire when you’re younger, you’ll have to save more money since your time in retirement will be longer.
  • What is your life expectancy? If you live longer, you’ll have to fund more retirement years. 
  • What is the growth rate of your savings account now and during retirement? Projecting this number conservatively will be beneficial. 
  • Do you plan to pull money from your principal? You don’t want to deplete your savings faster than you can live off of investment earnings. Don’t forget to implement a cushion to reduce this risk. 


Build your retirement fund

The next step is saving. Find a savings fund that is helpful for your financial situation. Assuming a conservative rate of return for your savings plan will be beneficial. For this number, we typically use a 5%-6% rate of return. Using this percentage, you can calculate how much money you’ll need to save annually to meet your retirement goals. 

There’s no such thing as “too early” when it comes to saving for retirement. It’s helpful to have a set amount of money taken from your paycheck to be deposited directly into your retirement account. Having this money taken out of your hands reduces the risk of overspending and increases your savings. 

Understand your investment options

Depending on your personal circumstances, you can either put in the time to understand your investment options or hire a financial professional. This advisor will be able to lay out your options and help you choose investment opportunities that are right for your goals, risk tolerance, and time horizon. As always, investments can involve the risk loss principle.

Use the right savings tools.

Below are a few common retirement savings plans:

401(k), 403(b), SIMPLE, and 457(b) plans: These plans are sponsored by your employer and can be healthy savings plans. When you contribute, it comes out of your paycheck as pre-taxed dollars. This ultimately reduces your taxable income (saving you money), and investment earnings are tax-deferred until you withdraw them. Sometimes, employers match contributions which makes these plans an ideal opportunity for accumulating retirement savings. These plans can also allow Roth contributions. These contributions offer a tax break in the long run when you take distributions from your account instead of when you make contributions.

IRAs: These savings plans also feature tax deferral of earnings. If you are eligible for a traditional IRA, your contributions will be tax-deductible, which keeps your current taxable income low, again saving you money. When you take withdrawals from this type of account, they’re taxable as income. 

Roth IRAs: When making contributions to this type of plan, they’re not tax-deductible. However, you are allowed to take tax-free distributions under certain circumstances. There is a wide range of investment options to fund your IRA. 

Annuities: Insurance companies issue these contracts. One helpful aspect of an annuity is that there are no annual contribution limits. Generally funded with after-tax dollars, the earnings that you receive from this plan will be tax-deferred. This means that you will have to pay taxes on the portion of your distribution that represents earnings). When you have a standard annuity, you will typically receive payments beginning at retirement. These will last for the remainder of your life or a specified number of years. There are additional charges associated with an annuity, like, administrative fees, surrender charges, and mortality charges. 

It’s important to note that if you take a premature withdrawal from almost any of the retirement plans listed above, you could be subject to a 10% early distribution tax.

Common Factors Affecting Retirement Income


Long-Term Care costs can be significant and prolonged since people are now living longer. When physical or mental disabilities inhibit your ability to perform basic tasks, you’ll need Long-Term Care (LTC). 

The costs of LTC can harm your retirement income and savings. Although you might not need LTC, it’s an important consideration because of the potentially high cost, should you end up needing it. LTC insurance can be a beneficial asset. If you purchase this type of insurance, you’ll need to consider the premium cost when considering your retirement income needs.


Taxes can significantly cut into your income and reduce the number of funds that you’ll have available to you in retirement.

Understanding how taxes affect your investments is crucial for a successful retirement plan. Interest, and some other income, are taxed according to regular income tax rates. Others, like long-term capital gains, benefit from lower maximum tax rates. Finally, certain municipal bonds and other investments generate income that is exempt from federal income tax. 

If your savings and/or retirement income comes from pensions, 401(k)s, traditional IRAs, or other tax-qualified accounts, it is subject to income taxes. Don’t forget to calculate taxes into your retirement projections for more accurate estimates.


Many factors affect your retirement income and savings. Although you have undoubtedly dealt with these factors during employment, their presence could be more noticeable since you’ll be depending on savings as a large portion of your income.

Learn how you can make the most out of your money in retirement.

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