5 Financial Considerations When You Marry a Teacher
Not long ago (9/06/2015), I made the decision to marry a school teacher. Why not? Aside from the fact that they are organized to the 10th power, are always thinking about new ways to get their kids’ attention (even during the summer), correct your grammar (mine’s an English teacher), and tell you endless stories about students, parents, co-workers & administrators (which are all entertaining), they’re all smart, funny, nurturing, caring, and personable individuals.
All of the aforementioned characteristics make them experts; experts at teaching our youth and relaying the fundamental basics of education and life. But who teaches them? (ELA teachers do not get upset at me for starting a sentence with a conjunction, I did it purposely). They can’t be experts at everything. When you’re an educator, a different set of rules apply to your personal financial life; especially when you marry one. So if you’re a teacher, are marrying a teacher, or have been married to a teacher, here are 5 Financial Considerations for you to think about:
Student Loan Forgiveness
TRS Pension / Social Security
Student Loan Forgiveness
My generation has them, there’s no hiding from them and they keep growing, student loans. My wife and I both have student debt. They have hindered our ability to do things like buy a home, go on big vacations and even go to some family events. Thankfully, there are federal and state assistance programs that can at least help us out. The most popular of them is the Teacher Loan Forgiveness Program (TLFP). With this loan forgiveness program, a teacher must work for 5 years in a Title 1 School District to receive up to $5,000 forgiveness on their loans tax free. Some educators can even qualify up to $17,500 if they teach certain subjects like Math, Science and Special Education.
But what if I have more than $5,000 of student debt you ask? For those of you that have a bit more debt and are educators, you possibly qualify for the Public Service Loan Forgiveness Program (Possibly because certain criteria must be met). This program forgives any remaining student debt for a teacher after 120 payments, tax-free (USUALLY DEBT FORGIVEN IS TAXABLE!!). You can click here to learn more about these options if you’re interested.
When Valerie first started her career as a teacher I started my career in San Antonio as a financial planner and was excited to put my knowledge to the test. She brought home brochures and pamphlets of the “financial advisers” that visited her campus with what they were offering. I couldn’t believe what they were selling, annuities. Not all annuities are bad, I think some could be used in certain situations but the fees alone on all of these products were HIGH! They were in the upwards of 3-5% with additional fees on top of that. Three to five percent may not seem like a big deal when you start but after you accumulate money after 5,10, 20 years, it’s quite a big deal. For the sake of cost comparison, you can invest your money in target date retirement fund for a fraction of the cost.
When choosing a 403(b) or helping your spouse choose a 403(b), consider investment options. Do not choose an annuity unless you fully understand it. Choose a provider with investment options. If your 403(b) provider does not offer an investment option and only an annuity option, move on. Consider fees. Be cautious of any product you’re buying. There are sales fees, mortality & expense fees, underlying investment fees, administrative fees, ect…Do not be afraid to ask your vendor what fees you will be paying. Also, consider how much you will be saving annually. If you won’t be saving more than $5,500 annually, there is a good possibility that an IRA may be a better investment vehicle for you in lieu of a 403(b). In any case don’t be afraid to ask questions, use this questionnaire provided by 403bwise.com to get to know your advisor.
As professionals, we need disability insurance to protect our incomes. In Texas, teachers must have at least 10 years in TRS to qualify for an unreduced disability benefit and that benefit does not adjust for the cost of living. If you have less than 10 years in TRS, you may qualify for a monthly benefit of $150 for the lesser of the number of months you were covered by TRS, the duration of your disability, or lifetime. Doesn’t seem like a lot if you’re disabled for the rest of your life…
Thinking of having kids? You may want to look at short-term disability. Valerie and I recently started talking about having kids. From speaking to friends that are already parents, it seems hard enough staying on top of the needs of a newborn, the last thing you need to do is worry about money. While school districts offer Family Leave of Absence (FMLA), that only guarantees you’ll have a job when you go back. That does not mean you’ll get paid for your time off. Some school districts offer short-term disability policies that include provisions for pregnancy. This allows the teacher to take full advantage of FMLA and not have to worry about money coming in while they’re not teaching. So whether you’re planning to be pregnant or haven’t protected your income, you should consider both short-term and long-term disability coverage in your next employee benefits enrollment period.
TRS Pension & Social Security
Teachers have their TRS and the rest of us have Social Security. Many teachers don’t know this but these two don’t play nice with each other at all times. For example, my wife will have her TRS pension and I will have Social Security. Did you know that when I die (the older male almost always dies first), she can get my Social Security Benefit… but there’s a catch? You see, if you receive a TRS pension then your spouse’s benefit gets cut by two-thirds of your pension; some pensions zero out a spousal benefit! Not a good deal right?
How do you get around this? Teachers may have to work an extra 5 years or the last 5 years at a school district that participates in both TRS and Social Security to get around the Government Pension Offset (GPO). Some teachers might cringe at this but it could increase your income by thousands of dollars in retirement.
Speaking of retirement, it is often the case that my teacher friends want to retire early because of the long, stressful hours in the classroom or administration building. If there is anything you take away from what I’ve written, take this away, there are a lot of moving parts involved in this decision alone, not just your 403(b) and your TRS pension. Remember there is no cost of living adjustment during retirement for your TRS Pension. Before you retire, talk to an expert, make a plan that involves both you and your spouse’s vision of what retirement should look like, and make an informed decision.
MyLife Financial is a fee-only financial advisory firm providing objective and independent advice virtually. Our clients are busy professionals that face daunting questions of how today's financial decisions will affect their long-term financial success. Everything written is strictly for informational use only. Please seek the advice of your CPA, Attorney, or financial professional before implementing any strategies.
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