“Dear District, I Quit”: 4 Things Teachers Need to Know When Leaving Teaching
“Dear District, I Quit”
4 Things Teachers Need to Know When Leaving Teaching
It’s unfortunate, but it happens. Teachers leave the profession long before they are ready to retire. Whether the job itself caused them to leave, or they found their passion lies in something else, there are some financial things that they need to be aware of.
Are you vested in your pension?
For most teachers, they need five years of service before they become vested in their teacher pension (check with your state to see your specific rules). If you don’t have the minimum number of years, it is likely that your contributions will be refunded to you. If this happens, be careful. These contributions were made in a tax-deferred way through your paycheck deductions – if you accept a check as a refund, it will be counted as income when you file your taxes. If you don’t want to receive the money as income, be sure to have the money transferred to a Traditional IRA.
If you are vested in the pension plan, you can still receive a refund, but this may not be the best option for you. You should work with the pension program to see how much your pension benefit would be at your retirement, versus cashing it out and investing your contributions. Some of the time, leaving the pension in place provides the biggest benefit.
Your 403(b) should be moved
If you have been saving in addition to your pension by using a 403(b), your termination of employment is somewhat of a blessing for your retirement savings. Many 403(b)s are insurance products in disguise that have bloated fees and long surrender periods (where your money can’t be moved without paying a fee). When you leave your job, these surrender periods are often waived and you can move the account to a Traditional IRA with minimal (or no) fee. A Traditional IRA will allow you to invest using the same tax-deferred nature as a 403(b), but with a drastic reduction in fees and a far wider range in what investments you can use.
Carefully consider letting your teaching license expire
This is something that is rarely thought about, until it’s too late. Many teachers leave teaching (for a variety of reasons) but then decide to return sometime later. They apply for jobs only to find that their teaching certificate has expired. They go to their state licensing institution to renew and find out that they have to take college classes, acquire multiple continuing education credits, and pay lots of fees in order to have it reinstated. Not only does this take additional time to get reinstated, but also it can take time away from finding a job. If this happens too close to the school year, then it can mean not being able to find another job until the following school year.
If you think you will return to teaching during your career, then make sure to keep you teaching license in force.
If you can, don’t leave in the middle of the school year
For most private sector employees, when they want to leave their job they hand in their two weeks and jet out the door. If a teacher does the same thing, it can leave a black mark on a resume and result in sub-standard references in the future.
In teaching, hiring generally happens in the summer and most teachers look to change jobs in the summer. If a teacher leaves in the middle of the school year, it disrupts student learning, and a qualified replacement can be very hard to find. It makes a hard situation even more difficult for the school.
If you want to leave teaching, do so at the end of the school year so the district doesn’t have to get a sub for your absence in the school year. Even if you do not want to go back into teaching, having a glowing reference from your previous administration will make job searching easier in the future (especially if you return to teaching). While leaving in the middle of the school won’t affect you financially right now, it can have knock-on effects in the future.
Dave Grant, CFP® is the founder of Finance for Teachers, a fee-only financial planning company in Cary, IL. Being married to a teacher, he understands the concerns that teachers have with their jobs, and also how teachers can maximize their financial lives.
Eric Simonds is a Portland, Maine Fee-Only Financial Planner located in Brunswick, ME and serving clients across the country. Saltwater Harbor Financial LLC specializes in providing objective financial planning, in accordance with the fiduciary standard, to help clients build, manage, grow, and protect their assets through life transitions. Eric Simonds is a NAPFA-Registered Financial Advisor and a CERTIFIED FINANCIAL PLANNER™ Professional and has been admitted to the Paladin Registry.