How can someone retire on a teacher (or similar) salary?

When should I start thinking about retirement? Am I too young to retire? How do you plan your retirement? How do other people do it? How much money do I need to retire? Most people seem to work until 65, do I have to wait until 65 to retire?

***Disclaimer: If you are not a teacher, simply substitute 403B for 401K, and the same applies.***

All these are questions that teachers ask themselves most of the times when they are about halfway in their careers, few years before retirement age or in those days when we feel we can’t do one more day of dealing with behaviors, parents or administrators.

Unfortunately, the answer to all those questions it is not a one answer fits all scenario; and will depend greatly on your location as well as your expectations. Let me explain:

First of all, teaching salaries will vary greatly according to the state and district you work for. While some states and districts pay decent living wages, some others would make it difficult to live on one income and sustain a family.

Comparisons between public and private school salaries can also be very discrepant. Most public institutions will offer their employees a pension program as well as a 403B plan, whereas private institutions may be more limited in this aspect.

But wherever you are, you need to plan your retirement and make the necessary financial decisions at your reach to make it happen accordingly.

It is never too late to plan your retirement as a teacher ( It’s more like, it’s never too early)

One of the big problems that I see among teachers particularly at the elementary level is that we are so devoted to the profession that we forget to talk about money. It’s all about the kids teachers say.

Well, yes. It is all about the kids, but you should also do what is best for yourself and your family.

If there is one thing I could tell my younger self today is “why didn’t you figure out earlier what your FI number was? If you haven’t heard of the FIRE community, FI stands for Financial independent. RE stands for retire early.

Planning your retirement may seem like a daunting task, deserving of financial advisers, accountants and even maybe a shaman to grant the kind of financial security we feel will set us free as we sail into the sunset. The reality though is that there is nobody that can do more for us than what we can do for ourselves. The good thing is that the math is relatively simple.

The first thing you need to have in place is a budget or a system to track your yearly expenses. This will help you pinpoint easily what your biggest expenses are, what your non-negotiable or non-discretionary expenses are. How much income do you need to live and cover your expenses for a week, a month, a year?  Likewise, I think it is helpful to have your expenses classified as discretionary or non-discretionary expenses.

Discretionary expenses are those things that you may not want to cut out of your life but you know you will still see another dawn even if you part ways with, let’s say,  your cable subscription. Likewise, a gym membership, eating out, cellphone bills, kids activities, any random and impulsive purchase you may have in any particular month are eligible to bulk that list of expenses.

Non-discretionary expenses are your basics, such as groceries, utilities, rent or mortgage, health insurance, or any other expense that is truly indispensable in your life.

I also like to add a miscellaneous section for the financial misfortunes of each month, such as car repairs, birthday presents our kids get invited to, house repairs, donations, etc. You get the idea.

Once you have an idea of what you need yearly to live comfortably and what things you are willing to give up to make your retirement happen, you can start drafting a plan as to where that money will come from.

For teachers, the answer may be fairly simple. If you don’t have investments and you are just counting on your pension you have to figure out how much that pension will be and when you will be able to start collecting it.

All across the country, there is a tremendous push for increasing the retirement age for teachers from 60 to 65 years old. The easiest and fastest way to figure this out is by calling your teacher pension fund and ask. They are usually very helpful and can present different scenarios for you with very accurate calculations. For sure they will also have a minimum years of service.

Then the next question is, will your pension suffice your financial needs according to your current budget and its projection into the future when you are planning to retire?

If it doesn’t, you have to make up the difference with supplement income. Likewise, if you are not entitled to a pension through the school or district you work for you need to worry about funding your future life with the product of your investments.

How do you fund or supplement your retirement?

Well, everything goes here. If you are entrepreneurial and have been planning to start a business, that might be it.

However, the easiest way and, I would say, the no-brainer for every single teacher out there is through index fund investments. If you have the option to enroll in a 403B plan through your district you should definitely take advantage of it. Working diligently towards maximizing your contributions will be invaluable at the time of retirement.

How does 403B plan work?

In a nutshell, you decide how much money you would like to contribute out of each paycheck you receive. The funds will automatically be transferred to the investment company you have selected through your school district or organization, without paying any taxes. Usually, as Fidelity does, these companies have preset portfolios with a decent mix of stocks and bonds according to your retirement age, as a way to make it easy for investors. You also have the option of moving your savings from one fund to another, but if you don’t know much or are intimidated by the market, presets can be life savers; one less decision to make!

As 2019 the maximum contribution per year for 403B contributions is set at $19,000.

You also receive a tremendous tax advantage. By contributing to your gold egg nest you also lower your taxable income. That’s right, Uncle Sam wants you to save, and to encourage you they let you pay less tax; in other words, no tax on the amount you put away, and also your contribution will lower your adjusted gross income. It’s a win-win situation.

How does my 403B plan grow?

Unlike bank accounts, your 403B savings will have tremendous potential for growth. By investing in a 403B plan your savings will be tied to the stock market. In the last decades, the return has been around an average of 7%.

Also, the cool thing about investing in your 403B is that you will reap the benefits of compound interests. Which means that if in the first year you manage to contribute $10,000, the following year that amount at a 7% return will increase to $10,700. Now you have extra $700 that will be ready to work for you right away and earn another 7%. In addition to those yields, hopefully, you will be able to continue with new yearly contributions.

Using my favorite but simple interest compound calculator you can see that starting from $0 and maxing out your 403B contributions it will take 23 years to accumulate over a million dollars.

How long could my investment last?

According to a study by Trinity University if you use a rate of 4% as a safe withdrawal rate your savings will be likely to outlive you; which I am sure your family will also appreciate.

Putting it all together

  1. The most important thing in my humble opinion is to figure out how much money you will need to cover your living expenses at the time you are planning to retire.
  2. Second, you need to determine where you are financially. That is your starting point in your financial journey. Don’t feel bad for what you don’t have or haven’t done. Just the fact that you are thinking about this and planning your future should make you feel good.
  3. Set financial goals every year for yourself and your family. Be it paying off a credit card or student loan. Maybe going after your mortgage. All these things will increase your net worth and get you closer to financial independence.

A journey of a thousand miles starts with one step- Lao Tsu

What do you have so far? Do you have a pension? What is the age requirement to start collecting? Not enough? How much more do you need?Have you invested? If not, how much will you have to invest to secure your golden years?

Last but not least, if you do need to supplement your income the 4% rule is a good rule of thumb to get going. Remember, 4% is the safe withdrawal rate. With that said, for each 40K needed you will need one million dollars invested.

For the purpose of this conversation, let’s say you need about 30K to cover your basic expenses. Let’s also add some spending room to go on vacations and short trips with your significant other or even kids. Let’s generously round up to 45K total that you will need yearly.

If your pension grants you 30K with maybe the minimum requirement of years of service, all you have to make up for is 15K. Which 400K in investments should grant you comfortably.

Contributing 10K yearly, starting from zero should take you there in about 20 years. However, if you increase your contributions, that time can be trimmed back many years.

I know, stashing away 10K or more might sound like a lot, especially if you are spending frivolously in brand new cars, brand-name clothes, happy hours, season tickets and all those things that leave you right at the beginning of the hedonic treadmill. But it’s not impossible!

The most important of all is to start. Do not wait!!! Time is the most valuable resource when investing.

With that said there are also many expenses in your life that can be challenged to increase the gap between what you earn and what you make. You want that gap to widen as far apart as possible to give you more room for increasing your investments.


If you are on your very first year of work you may not be thinking about retirement yet but there is nothing wrong with the thought of finding the shortest path to freedom. A time in your life when you will pick and choose what you want to do. Don’t feel guilty or selfish for leaving your profession. After all, there are many ways in which you can participate as a valuable member of your community. It’s not the job that gives you value as a person. It’s you and who you are that gives value to any job.

Chasing financial independence will help you see the big picture. It will push you towards making a plan to reach goals; your own goals, not somebody else’s. There is more to life than exchanging time for money. But it depends on what we do with our money if we get to see what that something else is.


First trimester went by and we are still plowing through.


7 things you can do to become handy and save thousands of dollars


  1. My wife is a half time teacher and I make right around teacher salary as an accountant. We bring in under $60,000 combined, have two daughters and will both be retiring before we hit 40.
    Of course we live well below our means with expenses coming in around $21,000 and we save every excess penny in index funds. Ou lifestyle would not work for everyone, but it comes naturally for us. Lesson being, retirement is definitely possible at all income levels. It just takes discipline, creativeness and rigid money management 🙂

    • Hey Ninja!
      Wow, that is awesome. 21K!
      I agree with you there are ways to make things work if one is willing to trade what’s not so important.
      Kudos to you hitting your number before 40. I started late but I am glad I did and now just looking forward.
      Thanks for the comment. I have been hanging out on your site lately.

    • I agree. How bad you want it? And what are you willing to give up to get there? Make more or save more? Or both! I am wondering how is your plan going.

  2. financialfitnessfanatic

    Both of my parents are teachers and I wish I could go back in time and teach them about FIRE. My mom is still working, yearning to retire, but feels she has to stick it out another couple of years to get the full pension amount. Growing up in our family, I always felt like things were tight. Thinking back now, I wonder if there are ways my parents could have cut down spending even more so that they wouldn’t still have to be working today. I think the biggest financial suck was them helping to put both me and my brother through college. Other than that, we always lived very frugally.
    Are you a teacher yourself? I’d be curious to learn more about just what the breakdown is for an individual living on a teacher’s salary – how much are they spending on monthly necessities such as housing, food, and child care, in addition to the 403B contributions? I’d love to see a success story!
    Thanks for your insight.

    • Elise, thank you for your comment.
      Yes, I am a teacher. I feel through your message your concern for your parents as they age; being in a classroom is not easy particularly after a certain age and in the midst of all the changes and pressures in the education system.
      I have to say that now that my salary has gone up since the time I started we have been more relieved and we have made some decisions that have helped. When I started my career, my salary was about 34K and I am almost to a 100K now, after 16 years in. I know that is a significant amount of money for some folks making minimum wage, but that has been the result also of taking classes and optimizing my pay. The counterpart of that is that my wife stays home and we have 4 kids.
      I am sure you are very thankful for the sacrifice your parents made putting you through college. I am not through that stage yet and I used to worry about it but not anymore. I am planning on putting my kids through community college for some massive savings. I also want them to work a little to get “some skin in the game.” Later on, they can transfer to a university.

      For teachers, that is very typical to hear. They want to retire with full benefits, which is understandable especially with the increasing cost of medical care in the U.S. I am planning on taking a big hit with my pension. At 55 I am eligible to start collecting but I would have to give up about 30% of my pension, which is 75% of my average last 4 years. I always think that money will do me no good if I am dead. So I prefer to do more with less.
      To supplement that income gap I am trying to buy one or two more rentals( We have one) and snowball pay them in the next ten years. If everything works out, I should be retiring at 55 with an income around 70K, which will cover all my expenses comfortably and I could help my kids through college.
      I am planning on writing about my expenses so people like me can have a better picture of planning retirement on a small budget and how everything breaks down so that we can even save.
      Thanks again for stopping by and much luck to your parents!

      • financialfitnessfanatic

        Thank you so much for your response!

        I am looking forward to see your expense breakdown. Even for people like myself and my fiance who are in other professions, it’s helpful to see how others on similar salaries budget out expenses. And with you supporting a family of six, I am especially curious to see how exactly you manage it. I am incredibly impressed!

        Of course, I am immensely grateful for my parents helping us through college, as I am now way further ahead and in far less debt than I would have been otherwise. But now that I have passed the height of my self-centered college days, I so wish they had kept the money for themselves. I think you are brilliant for encouraging your kids to go to community college. What I’ve found in the job world is no one cares where you spent your first two years, and actually, employers have rarely even cared where I did my undergrad.

        My stepdaughter right now is a junior in high school, and we’ve managed to get her excited about applying for a military academy. If she can get in, that’s a huge cost savings, and will set her up incredibly well for any career path she ends up choosing.

        $70,000 and retiring at 55 sounds like an excellent plan. I’m still only 28, so have some years to plan, but am currently struggling with the cost differential I’ll have between retiring at 55 vs 65. While I’ll have maxed my 401k for years by then, the employer-sponsored pension difference is pretty substantial (a couple hundred per month vs at least $2500 per month). But, I’m pretty much with you – I can’t use this money when I’m dead, and who knows whether I’ll be healthy enough at 65 to truly enjoy that extra income anyway.

        Thanks again and looking forward to reading more about your journey!


        • 28 ! That’s a great age, and just the fact that you are already thinking about all these things puts you in a winning category.
          For me it took me a long time to figure out all these things. I moved to the states when I was 27. No clue. I was just ready to jump on the hamster wheel; and so I did. You are much ahead of the game.
          For me retiring at 55 would be a big hit to the pension; 30% penalty. I am hoping I’ll be able to compensate with rentals. I will have to re-asses when I am there. If I do decide to continue I want to do it because I want to and not because I have to.
          I love what you say about how employers don’t care at all about where you got your undergrad. So true!
          Thank you for your comment!

        • I am wondering if your daughter made it to the military or went to college through a more traditional route?
          You must be about 32 now. I hope your FIRE plans are still on track. That is awesome that you have been able to max out your 401K. I started paying attention and being intentional with my 403B plan rather late. When I embarked on my FIRE journey I decided to focus more on my real estate investments. Now, it’s when I am really trying to go after maxing out my 403 and my 457.
          I will make that post about my expenses breakdown.
          Thank you for the comment here!

    • Hi Elise! This is a super late response to your comment… I totally missed this message.
      Anyhow, first of all kudos to your parents. That is like the ultimate sacrifice… putting your kids through college is not small feat. It is outrageously expensive. I am becoming very acquainted with this situation this year when I am about to send my first daughter to college.
      I think that a lot of our expenses are driven by social pressures. I never thought of college education being also influenced by people around us but I think it is.
      Just to give you an example, my daughter goes to school to a nice school in the Chicago suburbs. There is a lot of money in the area where people pay in property taxes probably what a make in a year as a teacher. At this point of the year most of her friends are committing to universities all over the country, where a college year can range from 20k to 50K. With the same token I know that there are families doing this by taking loans against their homes or taking money out of their pension funds. I really think this is unnecessary. I think there are many ways to avoid graduating with a pile of debt or having to work until you drop.
      In the case of my daughter, she wants to do Biochemistry and potentially continue to Med. School. Well, the best we have gotten in price is 16K a year, including room and board. This is after scholarships. Not bad at all. However, the community college nearby would allow her to get her first two years of Biochemistry for almost 10K. Plus she would be able to keep her current part time job as a pharmacy tech. I could even buy her a nice car and still come out ahead of the game.
      I struggle with the thought of not giving her the experience that she dreams of as a college student. I am trying to guide her so that she is not another adult complaining about a huge student loan on her shoulders and still be able to pursue her dreams. There is a huge difference between going to an out-of-state college and blow at least 60K in the first two years, vs. going to a community college and get the same two basic years for just 10K.
      Please. do not take my comment as a judgement. Our parents did the best they could according to what they knew at the moment. We are lucky to have all this information at our finger tips and all these opportunities to share all this FIRE knowledge.
      I will try to post something about my expenses breakdown and income.
      Again, thank you so much for stopping by. I hope you get to read this and ask me anything you want. I love sharing and helping others.

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