10 financial tips for retired teachers
From managing budgets and setting up investments, to healthcare and forging a new identity, life after teaching requires careful planning.
The overall concern of teachers facing retirement is financial, according to Teacher Support Network research which shows that 69.5% of retired teachers who contacted the network were concerned about money matters.
“Although overall, most teachers are better off in retirement than they thought they would be,” says Stuart Gayer, independent financial advisor of BBT Group who has worked with retired teachers for the last 20 years. “But even with a final salary pension, teachers will have to survive on an income that is less than their usual salary, normally two thirds as a maximum.”
Developing a strategy is key to surviving on a reduced income, says Stuart. So, the first thing you need to do is make a plan. Here are Stuart’s tips:
- List essentials
Write down all your essential income and expenditure, but don’t include luxuries and definitely not savings. “Most teachers are financially cautious,” says Stuart. “And they may be habitual savers concerned about the ominous rainy day. But actually, the rainy day is now.”
- Lump sum longevity
Remember the lump sum element of your pension is part of your ‘pension salary’ that will need to last for the rest of your life, so use it wisely. By all means treat yourself to a holiday, but don’t spend it all on unnecessary things.
- Invest wisely
Better healthcare, diets and exercise mean we are all living longer now. Your pension could well be needed for forty or so years of your life, so make your money work for you by investing wisely.
- Defer your state pension
As well as your teacher’s pension, you’ll also be entitled to a state pension (as long as you have paid national contributions for at least 10 years) You don’t necessarily have to draw on your state pension if you can survive happily on your teacher’s pension. Deferring your state pension will mean increased payments when you do use it.
- Is redemption right?
It may not always be a good idea to clear a mortgage loan, and it may help to keep a little outstanding on the mortgage. “I have £1 outstanding on my mortgage,” says one imminent retiree. “And I don’t intend to pay it off because the building society keeps the deeds for the property and I don’t have to pay storage fees.” It also helps your credit rating if you want to apply for loans, adds Stuart.
Furthermore, if you use most of your pension to clear your mortgage, you could end reducing the amount you have left to live on.
- Avoid extortionate interest rates
If you have loans and other debts that charge a high interest rate, it may well be advisable to try to clear these or to consider new loan deals offering better interest rates.
- Asset rich: cash poor
If you really don’t have enough money to live on, consider an equity release scheme if you own your property. These schemes are now well regulated and could provide the right solution, but it is essential to seek independent financial advice.
- Make your money work for you
In the long term, you may need to live off the income from wise investments, so it is vital to make your money work for you. High interest bank savings accounts won’t usually yield the high returns possible from other investments, so consider different options by talking to an independent financial advisor.
- Have a balanced portfolio
Put your money in different places for different purposes so they maximise your chances of a greater return. Seek financial advice and never put all your eggs in one basket, advises Stuart.
- Manage your estate
It’s vital to have a well thought out will, and it’s always essential to seek legal advice. “Simple things like setting up a trust fund can protect children’s inheritance from the tax man,” says Stuart.
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