This Planning Ahead article appeared in the Spring 2022 issue of The Classroom Teacher
Whether or not you’re nearing retirement, it’s important to understand how your retirement benefits work — an uninformed move can haunt your retirement years. Judging from the calls we get at TCTA Headquarters, there are a few things that many teachers should be paying closer attention to.
Every year, TRS members receive a statement that includes information about the records that TRS has on file, including years of service credit. Even if you’re nowhere near retirement, it is crucial that you look over this statement for accuracy.
We have heard from several members in the last year alone who didn’t discover a discrepancy in their record until they were on the verge of retirement — past the deadlines that TRS has set (and strictly enforces) for correcting such mistakes. Even a simple typo by your district can result in the loss of a year of service credit, which can have a significant impact on your ability to retire when planned and the amount of your monthly check. Take a few minutes to review this statement every year. If you don’t notify TRS of a mistake and get it corrected within five years of the year in question, you have lost your opportunity to rectify the error.
The way Social Security works (or doesn’t work) for school employees is complicated. Most Texas school employees are affected by federal laws that reduce or eliminate Social Security benefits, and too many aren’t aware of these provisions until near or even after retirement.
If you don’t pay into Social Security through your school district but are eligible for benefits because of a spouse who does participate in the system, the general rule of thumb is that your spousal Social Security benefits will be reduced by two-thirds of your TRS pension. For many retirees, this eliminates any entitlement to spousal Social Security benefits.
If you have paid into Social Security at some point in your career, long enough to have earned benefits on your own record, those benefits are likely to be reduced because of your TRS pension. Paying into Social Security for more than 20 years can reduce or eliminate the penalty.
The two federal laws affecting Social Security benefits create thorny issues for Texas educators. Employees should discuss their personal situation with a Social Security representative and, ideally, a financial advisor familiar with the TRS/Social Security interactions, well before making retirement-related decisions.
School employees are fortunate to have access to a stable defined-benefit pension plan — most private sector employees don’t. But retirement under TRS is not a guarantee of financial security, and teachers should plan accordingly. The two factors most affecting retirees are the lack of benefit increases and the cost of health insurance.
The state does not provide regular or frequent increases in retirement benefits. This is a legislative decision, not one made by TRS. If you retire with a monthly benefit of $3,000, it is entirely possible that your benefit will remain at $3,000 twenty years later. Not only do retirees suffer from ongoing erosion in their buying power caused by inflation, but the actual amount of their monthly check is likely to decrease over time due to increased health insurance costs. Pushing for a cost-of-living adjustment (COLA) will be a TCTA priority in the 2023 legislative session.
Those health insurance costs can vary greatly depending on your individual factors at retirement. If you retire before age 65, your insurance premiums under TRS-Care will be much higher than after you turn 65 and become eligible for Medicare. TRS has worked hard to keep premium rates stable (and was even able to provide a premium rebate to TRS-Care participants this year) but general cost trends in health care continue to take larger bites out of retirees’ monthly income.
As teaching gets more exhausting and its rewards harder to come by, retirement becomes more attractive. If you have questions about retirement eligibility or other issues, or are ready to take the plunge, start by talking to a TRS benefits counselor at 1-800-223-8778.
And be sure to check out our April 5 Tuesdays with TCTA webinar featuring TRS Chief Benefit Officer Barbie Pearson, who reviews the retirement process and answers members’ questions.