Retire Early on a Teacher’s Salary – An Outline

The following post outlines how I plan to retire early from teaching. After experiencing burnout, I began to desperately search for alternatives to teaching. Instead, I came up with this plan built on the ideas of others. Here’s what I came up with...

If creative writing falls under your purview in teaching, you know that, when left to their own devices, most students (read: all students) will opt to forego the planning stages and just wing it.

Before long, the bully is being attacked by benevolent aliens who have teamed up with (fill in a powerful foreign country)’s military.

But wait! The aliens are not benevolent after all! It was all a ruse! Also, the foreign country’s military planted spies all over!

Now the main character (usually the kid writing) has to assemble a team of special forces (four kids that also happen to be in our class), to neutralize the aliens, root out the foreign spies, and repel the bully.

How does this team of 5 do all that you ask? On the backs of dragons of course…

You get the idea. Ultimately, the point is that i it helps to make an outline. So here I am practicing what I preach.

Here is my general outline for how I plan to retire early from teaching:

How I Plan to Retire Early From Teaching – An Outline

When I was in the throes of burnout and just trying to survive until the end of the year, my initial thought was this: “I HAVE TO keep my pension at all costs!”

Now, I still want to keep my pension going (I’m only 12 years in) but I don’t feel the need to get to year 30. If I’m thoughtful, and a few things go my way, I think I can cut it down to 5-9 more years.

Between then and now, I have gone down many proverbial rabbit holes and devised a plan. It’s not set in stone however, so feel free to offer ideas!

Nevertheless, here are the steps I plan to take so I can retire early if I feel the need to. I think you’ll find that, even if you are not planning on retiring early, following these steps and having a backup plan, is never a bad idea.

Step 1 – Improve Savings Rate

If the end goal is to have enough money to retire early from teaching, then I need to make sure I’m not frivolously spending the money that will buy me that time.

Increasing my savings rate is a double-edged sword and cuts two ways.

The first benefit is the obvious one. If I spend less money, then I will keep more of it!

The second benefit is only one layer away, but it’s one that I hadn’t thought of on my own. If I spend less money, then I need less money to get by! If I need less money to get by, then I need less money for retirement.

Here’s an extreme example of that second benefit. If I buy a Porsche, hire a full-time chef with living quarters in my mansion, spend my free time buying extravagant stuff online, and go to Las Vegas every weekend, I am going to need A LOT more money to maintain that lifestyle after I retire.

However, if I am perfectly content to live without those “luxuries”, it is going to take MUCH LESS money to maintain my lifestyle. That means I will need far less total money saved to retire.

If time is the most precious commodity for you, like it is for me, then suddenly that impulse buy becomes far less enticing.

This is why, it’s clear to me that I need to improve my savings rate.

Step 2 – Maximize My Retirement Contributions

In the previous post on compounding interest, I briefly discussed how it’s impossible to look at your financials without regrets. Not maximizing my retirement contributions is one of my biggest regrets.

Before last year, I just assumed that I would retire after 30 years of teaching and have steady income for the rest of my days. “I don’t need to contribute even more to retirement,” I thought. I wish I could get that one back.

Then, after burning out, 30 years began looking impossible and I had to reassess.

One of the concepts I rediscovered was this concept of “tax-deferred retirement plans.” For most of us this is a 403b plan (which is essentially a 401k for people performing a public service such as teaching).

Basically, you don’t get taxed on the money until you withdraw it from your retirement account. But by the time you retire, you are in a much lower tax bracket (because you are earning less) and so you get taxed at a much lower rate.

In addition (this has lots of benefits) that money was hopefully invested and has grown.

Also (yup there is more) the money you allocate for your 403b doesn’t get reported as income. This means you pay far less in taxes each year you do it. That’s even more savings!

There are a lot of great resources out there that explain it better than I can. I will do a post on it and connect to those resources as well.

Essentially my plan is to extract $19,500 tax free from my income and contribute it to my 403b retirement plan. This will save me over $4,000 per year in taxes and provide other benefits as well.

And remember, I’m already increasing my savings rate so I don’t need as much now. I’m buying time and my extra savings allows me to max this out. Even if you can’t max yours out, I think all of us should be taking advantage of these tax-deferred retirement plans. That way we don’t leave free hard-earned money on the table.

If you’re convinced, like I am, that this is a good idea, reach out to your HR department and inquire about opening up a 403b plan.

Step 3 – Invest Wisely

We’ve already seen, in previous posts, that if we invest wisely then we can harness the power of compounding interest and double our savings at a much higher clip.

On average, since its conception, the market has returned 8% per year. At that rate my money will double every 9 years and that suits me just fine.

I don’t need any get-rich-quick schemes. Just give me slow and steady. Of course, there are no guarantees in life and there is always the possibility that the market goes down.

But if I don’t invest, my money is just sitting there and losing value to inflation. I won’t go too deep into that now, but Grandpa telling me how gas cost a nickel when he was a kid is a good example. Essentially, just like that nickel, our money buys less with time due to inflation. If I don’t invest, the buying power goes down.

So what will I invest in? Essentially, after all my research I’m on board with what the leaders in the FIRE (Financial Independence Retire Early) movement promote.

My answer is perfect for a teacher. It’s low maintenance. I just set it and forget it. I’m not monitoring the market and trying to buy all these stocks that I know nothing about.

This will be another post as well, but essentially my plan is to put my money into low-fee, total market index funds.

These funds cover all publicly traded stocks at once. That way I don’t have to pick individual stocks (which just feels like gambling to me) I just get them all at once.

It also has very low fees which don’t cut into my savings.

Here’s a post I wrote on the matter if you want to learn more about it. It’s called Investing Basics Made Very Simple.

I’ll direct you to posts that explain this better, but for now, here’s a quote from Warren Buffett as proof of concept.

“By periodically investing in an index fund, the know-nothing investor can actually out-perform most investment professionals…”

If the person who is widely recognized as the greatest investor of all time says that, then it’s good enough for me…

Find A Side-Hustle for Extra Income

This is a key ingredient for my plan. Can I find a side hustle to get me $10,000 per year in extra income?

While I’m teaching, I really doubt it. But if I can come up with a reliable source of income to bolster my retirement income, it can act as a buffer so I don’t spend down my savings too quickly.

So what will I do for this side-hustle? TBD! So far I have built a few outdoor tables and sold them on Craigslist for $250 apiece. I averaged about 1 sold every 6 weeks.

I doubt people want these in the winter. So maybe I could sell 6 per year? That’s $1,500 of the $10,000, but those don’t take up too much time either. And that’s just one example but it’s already 15% of my goal.

Ultimately, I don’t think it will be too difficult. Whether it’s teaching English online, tutoring, freelance writing, woodworking, or something else that comes up between then and now, I am confident that I will find a reliable source of extra income by the time I retire.

If I average $20 per hour for 10 hours per week, I can get to $10,000. That’s very doable!

And don’t forget, I plan to be earning interest from investments!

The Numbers Behind My Plan to Retire Early

I haven’t chosen my FI (Financial Independence) number yet. Your FI (often pronounce like “hi” with an “f”) number is the amount of money you need saved so you can quit working and live off your savings.

The letters FI are also the first too letters in the acronym of FIRE (Financial Independence Retire Early).

FIRE is the movement for people who have decided they don’t want to follow convention and spend most of their lives at work. So, as part of my backup plan, I’m borrowing from their ideas to come up with my own strategy.

For the sake of argument let’s say my FI number is $400,000 which is probably low. That number does not leave too much room for error.

We’ve already decided my side hustle will make me $10,000 per year.

But I will also make interest off of my investments. Let’s say I make 5% interest per year (hopefully low). 5% of 400,000 is $20,000 per year.

$20,000 + $10,000 = $30,000 per year. And I haven’t even gotten my pension yet!

Teacher Retirement Pension Plans

Teacher Pensions, vary greatly from state to state. If you have a moment, check out this NY Times article on the grade your state’s teacher pension plan received.

If, like me, you are from Massachusetts, then its kind of bleak. Massachusetts gets an “F”. This essentially means, I will never effectively recoup the money I actually put in.

So, if I retire in 5 years, for example, I will get a measly 25% of my income starting at age 55 for the rest of my life.

And you know what? That suits me just fine!

By then my salary will be about 80,000 per year. 25% of that is $20,000 per year for the rest of my life.

I actually think that I only need about $25,000 per year on average to get by.

We’ve already established I’ll get about $30,000 per year from interest and my side hustle until I’m 55. Then I get an additional $20,000 per year for my pension. That puts me well over my target of $25,000 per year.

And that, in essence, is my plan to be able to retire early from teaching. To accomplish it, I’ll need to make some lifestyle changes and even better financial decisions. I’ll keep you in the know all along the way.

But to me, the freedom to choose my next direction and spend more time with my family (and higher quality because I won’t be so rundown) is absolutely worth it.

In Summary

It never hurts to have a backup plan.

You may find yourself 30 years into teaching and yearning for more! To that I say, congratulations!

For me, after experiencing teacher burnout, I felt as though I needed to come up with a better plan for myself.

If you are reading this and unsure which path your future will lead you, I still think the first line holds true. It never hurts to have a backup plan.

Any way you slice it, saving more, increasing retirement contributions, investing wisely and finding a side hustle, isn’t a bad strategy to have.

That’s my plan for now and I’d love to hear your thoughts on it as well. Post a comment or reach out and contact me.

In the meantime, thanks for reading and be well!