There are financial advisers who suggest that retirees will need only about 70% of their present income when they retire. But because of the ravages of inflation, the fact that retirees will need money much longer because we all live longer, and because most retirement plans have little or no cost-of-living adjustments, it would seem logical that teachers should error on the side of having too much money when they're retired rather than too little.That is why it is suggested here that all teachers make their own decisions and estimations of how much they expect their life style to change after they retire. Most of the retired people that I know say they want and need about the same amount of income as when they were working.
The chart below shows the shortfall teachers will have if their income is reduced to 90% of their present salary which seems to be reasonable because of inflation and our living longer after retirement. It is shown to help teachers understand how serious it is to not have enough money when they retire.
The chart shows how much money a teacher would be short every year if their ONLY retirement income is their District retirement plan.
The bottom line is that without supplemental income, teachers retirement income alone will not be enough.
The chart below is based on California's state teachers' retirement plan (STRS). The amounts shown are based on a final salary of $90,000 a year, reducing income need by 10% at retirement, and an inflation factor of 4%. It also includes the 2% non-compounding yearly benefit increase. It shows that the yearly shortfall is not critical in the first few years of retirement but during the later years, the shortfall could be devastating. When the retiree reaches age 84, the retirement benefit is only half of what is needed to live on. How does a 90 year old retiree make an extra $150,000 to make up for a shortfall?
Year Age Annual Expenses Retirement Benefit Annual Shortage 1 60 $81,000 $64,800 $16,200 2 61 $84,240 $66,420 $17,820 3 62 $87,610 $68,040 $19,570 4 63 $91,114 $69,660 $21,454 5 64 $94,759 $71,280 $23,479 6 65 $98,549 $72,900 $25,649 7 66 $102,491 $74,520 $27,971 8 67 $106,590 $76,140 $30,450 9 68 $110,854 $77,760 $33,094 10 69 $115,288 $79,380 $35,908 11 70 $119,900 $81,000 $38,900 12 71 $124,696 $82,620 $42,076 13 72 $129,684 $84,240 $45,444 14 73 $134,871 $85,860 $49,011 15 74 $140,266 $87,480 $52,786 16 75 $145,876 $89,100 $56,776 17 76 $151,711 $90,720 $60,991 18 77 $157,780 $92,340 $65,440 19 78 $164,091 $93,960 $70,131 20 79 $170,655 $95,580 $75,075 21 80 $177,481 $97,200 $80,281 22 81 $184,580 $98,820 $85,760 23 82 $191,963 $100,440 $91,523 24 83 $199,642 $102,060 $97,582 25 84 $207,628 $103,680 $103,948 26 85 $215,933 $105,300 $110,633 27 86 $224,570 $106,920 $117,650 28 87 $233,553 $108,540 $125,013 29 88 $242,895 $110,160 $132,735 30 89 $252,611 $111,780 $140,831 31 90 $262,715 $113,400 $149,315 32 91 $273,224 $115,020 $158,204 33 92 $284,153 $116,640 $167,513 34 93 $295,519 $118,260 $177,259 35 94 $307,340 $119,880 $187,460 36 95 $319,633 $121,500 $198,133 37 96 $332,419 $123,120 $209,299 38 97 $345,715 $124,740 $220,975 39 98 $359,544 $126,360 $233,184 40 99 $373,926 $127,980 $245,946 41 100 $388,883 $129,600 $259,283 
In addition, most teachers do not know that, because of two Social Security regulations, it is unlikely that most teachers will receive full Social Security benefits.
1) If the school district does not withhold Social Security taxes, the teacher will usually receive only about 40% of the credits earned when they worked on another job where the taxes were withheld. Click here to see the Social Security publication that explains this situation.
2) The other situation is when a teacher expects to receive any benefits from the spouse's benefit. In most cases, no benefits will be paid. For the publication about this situation click here.
Go on to learn about compound interest
