Long overdue greetings to all my loyal readers. For the record, I missed you too.
In case you missed it, we’re now back in Georgia after our one-year adventure in Merida, Mexico. We have a new house, new jobs, and a new school for our son. We’re living in Statenville, Georgia in beautiful Echols County where we taught from 2009 to 2012. So far, we love being back…this feels like home!
Let me start this post with a simple question:
Is a Teaching Career Really That Bad?
Wow, have you seen the recent media coverage regarding teaching in America these days? This Time article painted a grim picture of life as a public school teacher: low pay, endless bills, shrinking benefits, and declining support. If you keep reading, you eventually come across this article that highlights 13 teachers with severe financial struggles.
Here are the referral links for the credit cards we currently use:
According to Time, this is what teaching in America looks like:
Yikes! Why would anyone ever go into the field of education if it were truly this bad? Sure, most teachers love working with kids, but they have to make a decent living just like everyone else too, right?
Look, I’m not here to belittle teachers with financial difficulties, but at the same time I won’t run from the fact that I think:
Teaching Is a Gold Mine!
Is teaching as bad financially as Time magazine says, or as awesome as I believe? Firmly believing that teaching is an incredible financial opportunity, I began reading on the internet…
The Race to Retirement Revisited
Somewhere in the depths of my foggy old brain, I recalled that way back in 2011 Mr. Money Mustache had written up a case study illustrating how a teaching couple could achieve financial independence in a “mere” thirteen years.
In his example, he said that a teaching couple earning $46k each could live off one salary and save the other one. He estimated that the couple would net $80k after taxes which would leave them with $34k to live on ($80k – $46k).
With an average return of only 5%, they would have over $855k at the end of 13 years. Not bad, huh? Here are the numbers:
I later found another post where he wrote,
“What I want you to do is start thinking of REAL savings. Not putting away $5 or $150 per month, but more like FIVE THOUSAND per month. Not everyone can do that. But a middle-class American family with two teachers making $60k each per year, who are currently saving zero and struggling to get by? THEY SHOULD BE SOCKING AWAY $5000 PER MONTH. Word.”
¡Palabra Pedro! Oh boy, saving $5k a month really gets my hardcore-savings juices flowing. However, after a while, I realized that MMM’s 13-year FIRE plan overlooked or underplayed many financial opportunities unique to a teaching career.
To be fair, he did mention that his numbers didn’t reflect any pay increases, social security, or pension benefits. We can’t expect MMM to know every nook and cranny of every profession, can we?
MMM’s suggestion that two teachers could attain FIRE status in only 13 years, while impressive, seemed to underwhelm me. Why? First, thirteen years is a long time to focus on a goal. In my experience, most people do better with short-term goals.
Second, MMM’s 13-year FIRE plan could become a 7-year plan with a few optimizations. Remember that back in 2011, the FIRE movement was in its infancy with MMM leading the charge. Since that time, the FIRE community has identified and honed a number of wealth-building techniques; this knowledge has grown exponentially.
Here are eleven wealth-building techniques that a teaching couple could use to better optimize their FIRE plan. They could use any, or all, of the following:
1. Maximize Paycheck at Current Job
There are a number of ways teachers can increase their on-the-job pay:
- teach extended day (an extra teaching assignment in lieu of a planning period),
- coach a sport,
- sponsor a club,
- attain a graduate degree (or two). (USM, Lamar, ASU)
MMM’s salary number of $46k seemed low to me. Way back in 2003 I was able to juice my salary to $56k a year by simply taking on an extended-day assignment. Had I coached that year, I would have bumped my paycheck to about $60k.
2. Work Extra Jobs
Another way teachers can increase their income is by working on their days off. Since a teaching contract is usually for 190 days a year, that means teachers have 175 “free” days a year. I’ve know many teachers who work after school, on weekends and holidays, and during summers.
Of course, teachers should accept extra employment opportunities within the limits of their schedules and energy levels. In my opinion, an extra job is always for extra savings and never for extra spending.
3. Live Frugally
In MMM’s example, the teaching couple was living on a salary of $34k. While that’s not a lot of money, a teaching couple might actually be able to live on less.
With a little frugality, two teachers should be able to live on $24-30k a year. Heck, MMM’s family of three lives on a similar budget. (Our living expenses were really low when we taught in Douglas, Georgia.)
4. Move
More specifically, they can move to 1.) lower COL areas with 2.) better employment opportunities. Unfortunately, most teachers are not receptive to this option for a multitude of reasons: “That’s too far from family,” “We can’t just move; it’s scary,” or “I don’t know anyone there.” As always, the reasons not to do something are infinite.
As my readers already know, I’m a big proponent of moving to greener employment pastures. Why should you spin your wheels in a high COL area with limited job prospects when all you have to do is move? Sometimes I lose my mind on Twitter and go into “Come-Claim-Your-Fortune-in-Georgia” mode:
5. House Hack
Taking on housemates and roommates can lower (or eliminate) your housing costs. If you own a home with a reasonable mortgage, house hacking can help you pay off your home fast. Many teachers could use house hacking to accelerate their wealth-building FIRE plan.
If you’d like to learn more about house hacking, Scott Trench and Chad Carson (affiliate links) are great resources.
6. Work Side Hustles
These days the side hustle is in vogue, but back in 2011 the concept was much less common. These days teachers can make side money with: a blog, a podcast, rental properties, credit tradelines, an online business, Teachers Pay Teachers, VIP Kids, Florida Virtual School, etc.
7. Earn More Than 5% on Investments
MMM’s 5% rate of return was obviously a very conservative estimate. Take a look at the end of the post to see how returns of 7% and 10% would accelerate a FIRE plan.
8. Save More Pre-tax Money
Believe it or not, many teachers effectively have two 401k plans: a 403b plan and a 457 plan (aka, deferred compensation). Here are the 403b and 457 contribution limits for 2019:
Individuals over the age of 50 can save even more thanks to catch-up contributions of $6k per account. Here are the potential savings numbers for a 50+ teaching couple:
Sure, $76k and $100k are some horse-choking numbers, but I know for a fact that it is possible to save $100k in a year while working as a teacher. However, the savings opportunities don’t end there…
9. Fund IRA and HSA Accounts
In addition to having a pension, a 403b plan, and a 457 plan, teachers can also save money in IRAs (individual retirement account) and HSAs (health savings account).
- IRAs * In 2019 individuals can contribute $6k each for a total of $12k per teaching couple. A 50+ teaching couple would also be eligible for $2k of IRA catch-up contribution ($1k per individual) resulting in a total contribution limit of $14k.
- HSAs * In 2019 a teaching couple can contribute up to $7k.
When you add IRA and HSA contribution amounts to the 403b and 457 amounts, you get some impressive numbers. A teaching couple (under the age of 50) has a maximum tax-advantage contribution amount of $95k:
$38k in 403b + $38k in 457 + $12k in IRA + $7k in HSA
A teaching couple over the age of 50 has a maximum tax-advantage contribution amount of $121k:
$50k in 403b + $50k in 457 + $14k in IRA + $7k in HSA
Granted, $95k and $121k is a lot of money to most teachers, but all teachers should be aware of these wealth-building options.
10. Vest in Pension Plans in 5-10 Years
Because full pension benefits require 25-30 years of employment, it’s unlikely that teachers with FIRE aspirations plan on earning a full teacher’s pension. However, such teachers should be aware that depending on their pension plan’s vesting schedule, they might be eligible for partial pension benefits in as little as 5 to 10 years of service.
For example, in Georgia a teacher with 10 years of service is eligible to receive 20% of a full pension at age 60. In Nevada, a teacher can vest in a pension in as little as 5 years of service (PDF, see page 4).
Every state has a different pension formula. If you’re a teacher with a pension plan, it is your job to learn the basics of how your plan works. (If you don’t know where to start, ask someone close to retirement at your school…I’m sure they can point you in the right direction!)
11. Take Breaks and Mini Retirements as Needed
A teaching career is an awesome option for people who need to take time off to: rest, travel, explore other interests, or simply live an adventurous life. No, I’m not talking about taking a sabbatical; I’m talking about quitting!
Teaching lends itself to working and saving hard for a few years followed by a year off. All you have to do is quit your job! Since 2009, my wife and I have willingly quit four jobs to either 1.) better our financial position, or 2.) take time off from work.
Because teaching is such a common job, there are always jobs available whenever we seek employment. In Georgia, it has been my experience that when a principal needed us to fill an opening, he needed us yesterday. As a result, we have never had a hard time landing jobs.
A final benefit to frequent job quitting is that it allows teachers to roll their retirement savings to more cost-effective retirement plans. Because termination of employment is a “separation of service” event, teachers are then eligible to move 403b and 457 funds without punitive fees. (After quitting our jobs, my wife and I always rolled our 403b funds into our Vanguard rollover IRA accounts.)
Two Optimized FIRE Plans
Now let’s take a look at a teaching couple that is using some of the FIRE techniques above to 1.) earn enough income to max out all of their tax-advantage accounts (the full $95k) and 2.) live an enjoyable frugal lifestyle. Here is what their savings would look like after seven year with a 5% return:
What do you think? Saving $812k in a mere seven years would be awesome, wouldn’t it? Wow, that sure beats working 13 years to reach the same financial goal. Now, would hitting those aggressive savings goals be easy? Probably not, but you have to admit hardcore savings will get you where you want to go at breakneck speed.
Next, let’s look at an older teaching couple (age 50+) looking to play catch-up with their finances. We’ll assume they 1.) have enough income to fully fund all of their tax-advantage accounts (all $121k) and 2.) have learned to live frugally. Here’s what their bottom line would look like after six years with a 5% return:
Once again, hardcore savings works like a superpower! It’s hard to believe that two people could save over $864k in six years, but the numbers don’t lie.
Final Thoughts
Okay, I admit those FIRE savings plans are really ambitious, but I’m certain those numbers will prod someone to develop their own incredible hardcore-savings FIRE plan. I am also sure the Internet Retirement Police will hate this post because according to them, all things financial are impossible.
The truth is that I don’t write for the woe-is-me, whiny-heine crowd. Nope, I write for a handful of FIRE aficionados who are just crazy enough to make their FIRE plan a reality.
Finally, I just want to say that I’m a big fan of Mr. Money Mustache and that I appreciate his contributions to the FIRE movement. So much so that I made sure to introduce myself to him at FinCon in Orlando this past September. I also thanked him for helping me understand the value of frugal living and why it is a vital component of a successful wealth-building plan.
Okay, that’s a wrap! Let me know what you think about this admittedly extreme FIRE plan. Am I crazy? Do you know anyone who has worked a similar plan? Thanks for reading and a special thanks to all those people (you know who you are) who have encouraged me to keep blogging over the past few months.
Yours in South Georgia Bliss,
Gerry (aka, Ed)
(Lots of affiliate links here!)
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Bonus Tables: FIRE Plans at 7% & 10%
As promised, bonus tables! Here’s what a 7% return would do for our teaching couple:
and $1.4 Million in 10 Years!
Now, here’s their savings numbers with a 10% return:
and $1.6 Million in 10 Years!
Now, our older teaching couple’s savings numbers with a 7% return:
and over $1.7 Million in 10 Years! |
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Finally, our older teaching couple’s savings numbers with a 10% return:
and over $2.1 Million in 10 Years! |
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Great post, as always! Glad to see you are back to blogging.
Thanks Joseph,
I was overdue on a post and that one was rattling around in my head for a while. I’m glad you liked it. I realize it is very ambitious, but it should help someone formulate their FIRE plan. Thanks for reading, G
Great post Ed. Was great to meet you and your wife at FinCon! Loved hearing about your experiences in Mexico and your now in GA. Hope to see you at FinCon19 here in D.C.
Freedom 40,
FinCon 2018 was a blast; the only downer was having to leave a new tribe of like-minded individuals behind. Please let us know if you pass through South Georgia. We’re still not sure about D.C. in 2019. Until the next time, G
Wow! Epic post. Surely Rockstar worthy. I never walked in a teacher’s shoes, so I have little understanding of what obstacles a teacher faces. But it does seem to me that too many teachers willingly embrace the victim mindset. This mindset, in turn, may blind them to all the opportunities they have at their disposal. I hope more teachers become acquainted with this post and your blog. You’re national treasure, my friend. Cheers.
Hola Mr. Groovy,
I’m glad you liked it! I hear you on the mindset problem that many teachers have. Unfortunately, we educators don’t have a monopoly on negative self-fulfilling prophecies. The older I get the more I realize how much I learned from my travels through underdeveloped parts of the world. Why? Simple, my travels made me realize all the opportunity we have in the U.S. After seeing poverty, homelessness, and near perpetual economic stagnation, it got harder and harder to complain about how bad and unfair my life was.
Like I wrote, “Teaching is a Gold Mine” if you know what you’re doing. However, a teaching career will probably never be enough to maintain a “fancy” lifestyle. For that reason, many educators would benefit from a FIRE plan. Thanks for reading brother, and your invitation to visit us in the swamp still stands. un abrazo bien fuerte, G
Welcome back! I’m a fellow teacher and I really enjoyed this post.
I won’t lie – teaching in the US has huge disadvantages when you compare it with Australia… mainly the unpaid summer holidays and the low wages, but I LOVE how you’ve laid out the ways that a teacher can still tweak the system and get to making (and saving) some serious money.
As an older finder of FI, I was especially pleased that you included figures for the (ahem) more mature crowd. I’m a single mother of 4 and I’m well on the way to FIRE on a teacher’s wage. I just recorded a podcast for Millionaires Unveiled where I share my story. Other teachers might be interested?? http://millionairesunveiled.libsyn.com/54-net-worth-of-14m-single-mom-and-teacher-with-four-kids
Hello Frogdancer Jones! I look forward to listening to your interview. I’m clueless as to how U.S. pay compares to Australia, but we have make due with what we have, right? There is always a FIRE path for those who are ready to pursue it.
My wife and I are both over 50, so we planning on filling all of our buckets (about $130k a year) as long we continue working. FYI, I’m supposed to record with Millionaire Unveiled this year…gotta get that scheduled. Thanks for visiting my website and best of luck, G
Agreed!!! So many benefits to teaching. I just found the FIRE movement about 2 years ago. I’m 47 so I do plan to hang in there for the “Golden albatross” as Grumpus Maximus called it. I will qualify for a full pension at 52, although i would take a 9% hit because it will be early. At this point however, i would have full health benefits for life at a really affordable rate.
I’m curious about you “rolling over” your 403b and 457. You are then taxed on that amount, correct? What is your strategy there?
Susan,
It’s great to know there are other crazy teachers out there! The 403b/457 rollover is not taxed, but the money is later taxed when it is taken as an IRA distribution. My plan for that is: 1.) try to convert as much money as possible to my Roth IRA. (However, my tax pain threshold is very low…certainly not above the 12% rate.) and 2.) tax IRA distributions to the end of the 12% tax bracket even if I don’t need the money. I’ll invest excess funds in my taxable mutual fund. (Since I’ll be in the 12% tax rate for a while, my mutual fund return should be taxed at 0%.)
Hang in there and work that plan. Best of luck and thanks for visiting. G
Hey Susan- If you’re smart with your FIRE plan you should have money to bridge the gap between stopping teaching and collecting your pension. No one says you have to collect your pension the year you quit. Usually if you start collecting later, you’ll get the full amount. Obviously this depends on your state’s plan, but it’s worth considering. Also the health care could be worth a lot (but 9% for the rest of your life? I’ll leave that to the math people).
Ed,
Welcome back! Your blogs always inspire me to do more and save more. Currently, maxing out 457 and Roth. Also, feeding my 403 starting in January 2019. I think I can max it out well by the start of next school year which begins my 25th year in education. Should be in good shape to travel in the future. Hope your next blog isn’t too far off.
Hello Michael,
It sounds like you’ve got a great plan underway! Plus, I’m sure a pension isn’t too far off. It’s always good to know that one of my blog posts inspired a reader to save more money…that always puts a spring in my step! I have a few blog posts in the hopper…stay tuned. Thanks for reading. G
I just found the FI community and I am playing catch-up. Your posts are so helpful! I think I can contribute to my 403b and a 457 (have to double check the second) but our retirement account is held in an annuity that carries up to a 1.2% annual fee (not as bad as some). I am wondering if there is a way to move that money out into another investment vehicle before leaving my job or do I have to accept the annual fee until I am ready to quit?
Latebloomer,
Welcome to my website. As for the 1.2%, that’s a deal-breaker for me. I don’t mind market uncertainty, but I HATE market uncertainty coupled with fee certainty. It appears that you have the typical fee-bloated annuity contract so commonly found in the K-12 403b marketplace…it’s truly disgraceful. That said, when faced with such a turd of a platform, I simply park money in the stable value. I NEVER try to invest in such a fee-bloated platform.
Later, when I leave a job, I roll the money over to greener investment pastures (ie, Vanguard). I’m sorry that I can’t give you any useful investment advice, but in my opinion variable annuity products were never designed with the investor in mind. They are wealth extraction devices made to to benefit the insurance companies.
Best of luck working your plan, G
So glad to see a new blog post. As Michael mentioned your blog posts inspire me to save more, too. LOL…This year I am (again!!) maxing out my 401K (limit & catchup) & HSA. I put in enough to get the match for my RHSP. Now, I have one more account to work on: my IRA. I have been falling short on this one goal. I get to put in $6500 but seem to have a hard time following thru. I am determined. (BTW, I am not a teacher…lol).
ElleX,
Way to fill those buckets! I know what you mean about filling that last bucket, the IRA. I remember many a year where we had scrape and penny pinch to get money into those accounts. I don’t anything about the RHSP; I’ll try to read up on that. Good luck working that plan! G
I’m a teacher who finally came to his senses about a year ago (ten years into my career) and with the help of blogs like this I went from saving a paltry 5000/year in a Roth IRA to maxing out 403b, 457b, Roth IRA, and still contributing more to a taxable account. This is literally life-changing information! Thanks Ed for sharing your strategies and enthusiasm. Great to see you posting and FIRED up again 🙂
Eric,
Thanks for joining the FIRE party! I’m so glad to hear that the light bulb went off in your head. It sounds like you’re well on your way to financial independence now. Big time congrats and enjoy the ride! “Ed”
I have learned so much from your posts. Glad you are back to sharing.
Thanks Cali Teacher,
It’s always awesome to know that I helped someone “get it.” See you at the Double Comma Club. G
Hey there. Glad to see an updated post from you. Still working my way through the blog, but curious about the move back to the US. Was the time in Mexico always mean to be just one year? If you’ve already addressed this in another post Im sure I’ll find it. If it’s none of my business, feel free to say that too. lol.
Greetings MIMC,
Our Mexico plans were not set in stone. We were committed to spending the school year there for our son’s 6th grade year. We did that and it was a successful year: we all learned more Spanish, made lots of friends, and my wife and I got to take another year off. That said, our son expressed an interest in returning to school in the U.S. We settled in Statenville, Georgia because we loved the school district when we taught here previously.
Fortunately, we also found a house within walking distance of the school…100 meters! My wife and I identified the home years ago as a “perfect house for us.” We bought it thinking that we’d hang out while our son went to school. Wrong! Within two weeks of buying the house, I was offered a teaching job. Two weeks before school began my wife was offered a job. I guess were not good at this early retirement thing.
I don’t mind working here because it’s a great set-up with great co-workers, polite students, and zero commuting. We figured we’d teach for a few more years, save a bunch of money, and just enjoy living a simple life South Georgia style. So far, so good. Thanks for the question and even more thanks for reading my infrequent ramblings. All the best, G
Thanks for that post!
I know my wife and I struggled as teachers in Florida. In fact, many of my former colleagues are moving up to Georgia to teach. The COL (especially in south Florida) and paying for daycare for our young son was the biggest barrier.
We decided to do the ultimate geo-arbitrage. We moved to Saudi Arabia to teach internationally!
Now we have free housing, free daycare, free healthcare and yearly flights back home!
Kevin,
Nicely done! You guys will be in an enviable financial position before you know it. During our time in KSA, we got out of debt and built up a nest egg. That financial leeway also enabled us to save aggressively when returned Stateside. Save hard, enjoy yourself, and best of luck, Gerry
I love this article! I’m a teacher doing my best to optimize life with my engineer husband. We have been paying for daycare for our four kids for over a decade bow, but still upping our net worth. We are now at over one million dollars. I’d also like to add the incredible opportunities that often come from taking planned sabbaticals from work. I’ll end up making over $440,000 more than most of my colleagues because of the opportunities that came from taking a sabbatical! You can learn more about my FIRE story at http://www.financialindependenceforteachers.com!
Kate, thanks for visiting. It’s great to know that there are other teachers out there pursuing FI. Congrats on your wealth building and increased freedom via sabbaticals. I look forward to checking out your site. Best of luck, Gerry
Hi, I’m a bit late to the party! I came across your excellent blog after listening to your interview on The Mad Fientist podcast recently (and a fantastic interview it was too!)
I’m a teacher in the UK and the FIRE movement is in its infancy over here, so I’m playing catch up!
This is a fascinating post and laying out the numbers like this is really helpful and proves that FIRE-ing on a teacher’s salary is totally possibly. Like you say, the numbers don’t lie!
The wealth-building techniques mostly ring true over here, with a few differences – particularly with pensions – but are essentially the same. I’m learning to leverage these opportunities! Thanks for writing such great content 🙂
Greetings Money Savvy Teacher,
Glad you liked the interview! I love the Mad Fientist’s work; it was an honor to be on his show. I look forward to checking out your website. GB