34 months ago I started this blog to tell the world about my personal finance journey. I hoped that my story of monetary stupidity would help others not make the same mistakes I had made. This blog also became a way of keeping myself accountable with specific goals and the like. But a third reason, which I haven’t talked about a lot, that I decided to start this blog is that I didn’t see a lot personal finance blogs that were like me. In other words, most of the personal finance blogs I read or reviewed have people who have a professional background that is different from mine. Most of the bloggers I read are in the software industry. I am not sure why there is such a plethora of people from technology who write about personal finance, but that is not my profession.
I am a teacher, a professor to be exact. And the sad fact is that a lot of my colleagues and I think teachers in general don’t think about money or at least talk about it like we should. Maybe I am wrong, but this is not a subject of conversation that I have with a lot of my friends who are professors, which is a shame.
People ask me all the time why did I get into teaching. The truth is I kind of just fell into it. The first time I stepped into a classroom almost 20 years ago and gave a lecture I was hooked. I mean I love to talk, discuss, analyze, and do research. What better job than being a teacher? Maybe a political consultant or a consultant in general, but that might happen in time? I have found that I need to be in a profession where I can talk and interact with others. Teaching allows me to do that.
Anyway that is besides the point. Most teachers get into the profession because they want to help people. They totally realize that it is a job that doesn’t pay the greatest in the world, but they do it because they love it. However, a lot of those teachers also leave. They leave because they can’t find full-time work. If you have a Ph.D. and are looking for a permanent position in higher education it can be really difficult. A lot of my friends teach part-time and don’t necessarily make ends meet. Mrs. ROB teaches part-time and has to cobble together enough courses every semester so that she can be full-time.
If you are a teacher at the elementary, middle-school, and/or high school level you have a special place in my heart because you have to deal with a lot more than I do. Over 50% of teachers leave within the first five years for a number of reasons. One of those reasons is financial. They can’t afford to pay their student loans, an apartment, house, etc. They just don’t make a lot of money. Professors are the same way.
Despite what people think I don’t make that much money when you consider my experience and education. Most professors don’t teach only one course a semester. Most teach 3-4 courses, plus research, plus advising, plus committees, etc. I have to do extra things (e.g. teach extra courses) so that I can afford to invest, pay my mortgage, etc. I am not complaining mind you, but when teachers are constantly being portrayed as living high on the hog and making tons of money it gets a little old.
Again, that was another digression so forgive me a bit. No I am writing this post because part of the reason for me starting this blog was to get teachers to talk about money more. I love my job, but it is still a job. I don’t want to do it forever. I want to retire, travel, etc. I don’t want to be working forever. And I think most people feel the same way.
And the thing about teachers is, which some people may not know, is that a good chunk of us have only ONE retirement leg to stand on.
In the 1970s when they re-did the tax laws they included a provision in the tax laws called the 401(k). Originally, the 401(k) plan was meant to supplement pensions and social security. Ideally, retirement would be a THREE-LEGGED STOOL. You would have your pension, social security, and the 401(k) plan would be a supplement so that you could live a great life in retirement.
That is what they were ideally meant to do. In the 1980s, a lot of companies started to get rid of their pension plans and switched retirement plans to 401(k) plans. So the retirement stool became two legs.
However, in 1986, Congress passed a law that allowed some states to exclude state employees from social security taxes. Now only 14 states allow this occur, but I happen to have grown up in one state that does: Minnesota and teach in another state that also does: Massachusetts. Both states exclude their employees from Social Security taxes.
So guess what? My retirement stool is only ONE LEG! That means whatever I save for retirement is essentially what I will have. I don’t have a pension, I don’t have much social security. Whatever, I save is what I will be living on. Now I have worked enough private sector jobs to get a small social security benefit. You have to work 40 quarters (10 years) to get some kind of social security benefit. Most of that work came when I was in high school and college. As a result, my social security benefit is going to be about $250.
WOO HOO–$250 in Social Security. i am so excited. In other words, I have to depend on myself and only myself. That is why I am so adamant about people investing. A good chunk of my teacher friends live in one of those 14 states. We don’t have the luxury of waiting. There is no waiting. They have to be aware that they may have ONE LEG TO STAND ON. And I am determined to make that leg as strong as possible to withstand any storm.
Even my brother and his wife, who are both teachers, live in a state where they are exempt from Social Security. It seems I come from a family of exempt social security people.
I bring this up partly to explain why I spend a lot of my posts talking about investments. Not only do I think it is important in general, but for me it is my lifeline to a good retirement. I don’t have anything else. I have me and that is it. Now Mrs. ROB will have some social security because she worked in the private sector a good chunk of her life. However, she is now in higher education like I am and deals with the same issue. There is a good possibility that I will be at my institution of employment for quite a long time. So I need to continue to save as long as I can because of my one-legged retirement stool.
The Bottom Line: If you live in one of the states mentioned in this link and you are a teacher or government employee or even federal employee DON’T WAIT! You have to start saving now. You may not realize it but you may have a one-legged retirement stool, depending on if your state has done away with pensions. Make that leg as strong as possible.