THE EARLY-CAREER TEACHER
What you need to know now
When life happens during your 20s and early 30s, it’s a good idea to check in with TRA about benefits such as leave purchase, service credit purchase for part-time teaching, and setting up your survivor (beneficiary) arrangements.
What is a TRA pension?
TRA is a defined-benefit pension plan, which differs from a 403(b) or 401(k) because you receive a predictable retirement benefit for your lifetime, not an account balance that you might outlive. With TRA:
Membership is automatic. From your first day of employment with a TRA-covered employer, you are a member of TRA.
Savings are automatic. During your teaching years, a percentage is deducted from every paycheck for your retirement.
It’s easy. Contributions from you and your employer are pooled with all state public pension fund assets. The State Board of Investment manages these assets and the risk so you don’t have to.
Contributions are pretax. This reduces your taxable income.
Job change? No worries. If you stay employed in city, county or state government in Minnesota, you can keep your money at TRA and continue to accrue public-sector service credit toward your eventual pension.
Your TRA contributions are tax-sheltered until you retire or take a refund. Your TRA paycheck deductions are determined by Minnesota law and are subject to change. As of July 1, 2018, your contribution rate is 7.50 percent of your salary. Your employer is contributing 7.71 percent to your pension plan.
You are “vested” in the TRA plan after three years of service. Once you’re vested, you have earned enough service credit to be eligible for TRA benefits.
Service credit affects eligibility for benefits and benefit amount. Paid sick leave, vacation days and all required attendance days and hours (such as workshops) count toward service credit.
TRA allows no more than one year of service during any fiscal year. Service credit for part-time teachers, extracurricular pay, retro pay, and summer pay is prorated.
Benefits AND OPTIONS
LEAVES OF ABSENCE
There are several types, including sabbatical, medical, parental, family, extended, legislative, military. You may purchase service credit for an authorized leave. Read more about leaves of absence.
If you plan to job share or work part-time, you might be eligible to purchase full-time service credit toward your pension for your part-time teaching service. Read more about TRA’s part-time teaching program.
Available to those with at least three years of service who become disabled. Read more about disability benefits.
Certain benefits are available to your survivor(s) if you die before retiring with the TRA pension plan. Read more about pre-retirement survivor benefits.
If you leave teaching, you are entitled to a refund of your employee contributions. However, vested members might consider a deferred annuity because of the potential greater value of a lifetime annuity vs. a refund. Read more about refunds.
To-do list for the early-career teacher
- Make a budget. Know what your income is and learn not to spend more than that. That’s how you’ll start to build wealth.
- Pay down debt and know the interest rates for each of your loans. Focus on paying down high-interest loans first. Paying more than the minimum payment on a lower interest loan like your student loan before paying off a higher interest credit card might not be best for you.
- Sign up for a 403(b) tax-sheltered annuity. Contribute the amount required to get the match. It is free money from your employer.
- Create a MyTRA account. Update your mailing and email addresses. Review your annual statement to see your accumulated service credit, contributions and employer deductions.
- Name/update your beneficiary or beneficiaries so TRA knows who should receive the assets in the event of your death.
- Find a financial planner who will work with you and provide guidance on what you should focus on money-wise.