Your Questions About Retirement

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Michael : In most cases, this is our member's largest asset, so we should spend much more time talking about it. What it is, what it can potentially do for you. There's so many benefits to it. Because sometimes our opponents will use that as a way. Well, if you don't know what you have, you don't deserve it.

Natieka : Hello and welcome to School Me, the National Education Association's podcast dedicated to helping educators thrive [00:00:30] at every stage of their careers. I'm your host, Natieka Samuels. People often say that education is a wonderful career to retire from. But what does that mean and how can educators ensure that they have what they need at the end of their career? To help get answers to these questions, along with some submitted by our audience on social media, our guest today is Michael Hairston, a senior pension specialist here at NEA. Thank you so much for joining me today, Michael.

Michael : It's a pleasure to be here with you.

Natieka : So let's just start with [00:01:00] a quick introduction. Just tell us a little bit about yourself.

Michael : Sure. I'm Michael Hairston. I'm a senior pension specialist for the NEA. Prior to that, I was the career educator. I was a music teacher for over 31 years. I had several assignments throughout my teaching career. Started out in southwestern Virginia and eventually migrated to the DMV. Taught almost five years in Washington DC. Did 24 years in Fairfax County, Virginia.

Natieka : [00:01:30] What is your position now at NEA now that you are in your second career?

Michael : So I work on retirement security. I'm a senior pension specialist and my job entails making sure that teachers have a pension, a defined benefit pension plan, and they have the most secure retirement when they decide to finish a career in teaching. We do a variety of things to make sure that it happens in the way of protection, in the way of enhancement of [00:02:00] that benefit to make sure that they have a strong retirement. We just want to make sure that if you spend a career in education one of the things you can look forward to is a secure retirement.

Natieka : I just wanted to know why did you decide to become an educator and how did it lead you to what you do now?

Michael : Long story short, I was in the fifth grade and the band director came around to the classroom and it started there. And I was a love of music and took every musical class [00:02:30] that I could take throughout my education in public schools in Martinsville, Virginia. And it led me to formally studying music and becoming a teacher. Kind of knew that's what I wanted to do. And I was very close to the educators that taught me, particularly the music teachers. They were just a real source of inspiration for me.

Natieka : So people often talk about how pursuing a career in education is great because it's a great career to retire from, and I know that you [00:03:00] also retired from being a teacher yourself. So why do you think it's the case that people talk about education as such a great career to retire from even though we often talk about how teachers aren't paid enough when they're actively teaching?

Michael : The first thing with teaching itself is the rewards of that is you are impacting a life, many lives. You're shaping how people develop, how they live their lives, your tremendous influence [00:03:30] on them. While the pay is low, there's so many rewards that you can't necessarily put a value on. It's a tough profession now. It's still one of the most rewarding professions that you can embark upon. Then there's the pension piece where if you make a career of it, if you spend 25 to 30 years and you can retire with a reasonable benefit that will last you the rest of your life.

Natieka : And I want to be clear that I think often when people are talking about [00:04:00] a career in education and retiring from a career in education, they are talking about teachers, but we also as a union represent education support professionals. So a lot of different job positions from the bus driver to the people who serve the meals at school and work in the front office and all different kinds of positions. So what about the education support professionals? Are they often getting the same retirement options as teachers are within school districts?

Michael : That's a varied situation [00:04:30] where some states they're in the same retirement plan as teachers to some and they're not. For example, where I taught my longest tenure in Fairfax, they are part of another plan, which was a county plan. So sometimes the benefit structures are a little different and it's all over the place.

Natieka : I wanted to ask you what in your opinion is the number one thing that's hindering educators as they prepare for retirement.

Michael : Well, one of the things I think is understanding your benefit, [00:05:00] understanding the benefit provisions, knowing what those provisions are in terms of okay, joint and survivor benefit. Will your spouse receive a benefit based on what you choose when you're getting ready to retire? Those are decisions that you make when you have to sit down at the table to go through your retirement to figure out what plan you're going to choose. Sometimes there's a choice whether you choose a joint survivor benefit. It's different types of arrangements that different plans have, but knowing the benefit structure is one thing you should really start to do prior to retirement [00:05:30] so that when you actually go through the mechanics of retiring, you have a good sense of what package you would pick.

And just owing the benefit structure, knowing if there's a COLA, and that's a cost of living adjustment. If it's a fixed COLA where it's automatic that you get a COLA every year, no matter what the market conditions are, no matter what the performance of the plan is. Knowing whether or not it's an ad hoc COLA, which means there has to be certain things to happen in order for you to get a COLA. So all of those [00:06:00] things are part of preparation for retirement, at least five years in advance of retirement.

Natieka : Yeah. Because I was going to ask at what age do you think educators should start thinking about retirement and looks like we have a minimum of five years before retirement age? But I would presumably you would say as soon as you start working.

Michael : One thing I think we should do in every situation where I'm at a meeting I always encourage folks to start talking about retirement right [00:06:30] away from the first day that they walk in the door. And I'm generalizing now. In most cases, this is our member's largest asset. So we should spend much more time talking about it, what it is, what it can potentially do for you. There's so many benefits to it. Because sometimes our opponents will use that as a way, well, if you don't know what you have, you don't deserve it.

Natieka : So let's get into defining some terms. We've thrown around a couple of words and terms [00:07:00] already, so I just want to make sure we're all on the same page. So defined benefit versus contribution plan. So what is the distinction between those two terms?

Michael : The basic fact here is the defined benefit pension plan is the benefit is a guaranteed benefit for life. You contribute, the employer contribute, and normally there's a board of trustees that they take those two contribution rates from their employee and the employee and they invest it. [00:07:30] Those three things make up benefit payments when you retire. Contribution from the employer, contribution from the employee, then the investment income that's made, that's what pays benefits. And that benefit is for life. That's something that you don't have to worry about. The defined contribution plan is what you are responsible for making those investment decisions. You contribute and the employers, sometimes they contribute, sometimes they don't. [00:08:00] But what happens is if those assets and those resources are not pooled, so you don't have the benefit of that. Think of it like this. If you work in school districts and they have a DC plan, where the onus is on the employee to make the investment decisions, they work 20 years or 25 years and they're nearing retirement and they make one bad investment decision, it doesn't align and they lose money, how are they going to retire?

[00:08:30] So one vehicle, you're making contributions, the employee is making contributions and you invested in, benefits are paid that way. And the other one, the onus is on you. The onus is on the employer and the DB arrangement and the onus is on the employee and making those investment decisions.

Natieka : So I assume that what we're talking about most of the time or maybe all of the time when we talk about defined benefit plans is that's a pension and then the contribution type [00:09:00] plans are things that many people would be familiar with, like 401 case or 403(b)'s, correct?

Michael : That's correct.

Natieka : And pensions, yes, they do feel for many industries like a thing of the past and very few industries still keep pensions as a part of their plans. But let's start with the good and fun news which is pension. So is there anything else to say about what makes pensions special and why do you feel that pensions are the gold standard of retirement options [00:09:30] for educators or for anyone, frankly?

Michael : We'd like to see everybody be able to retire with some sense of dignity and be able to live and not rely on any type of social service as a result of their service as a public servant for 30 years, and you got to rely on social services for your existence, that's a bad model. Look at the benefit of what pensions do. First is we could look at it as deferred compensation because you make a little less, [00:10:00] you contribute a little bit during your career, you have this pension and you have a salary in retirement. Well look at the other intrinsic benefits that people sometimes don't think about, the recruitment and retention piece. We need to celebrate that more. Celebrate the fact that some of the businesses don't have this. You make a career, this is what you can look forward to. That's one aspect of it.

Think about that recruitment piece. Think about the retention piece. Those educators that come in, they stay in the system for four or five [00:10:30] years and they understand the system, how it works. They're starting to make real inroads in the student achievement. Well, they stay around because they, oh, I'm vested now so I need to really stay in this for a career. And look at the positive impacts on student achievement when Ms. Jones stays in that classroom, in that local school district for 30 years. The families that she's impacted, the kids that she's impacted. She taught me, she taught my kids, [00:11:00] she taught my kids kids. She taught my kids kids kids. You get the idea that longevity in that community has to have positive impacts. Then there's an economic piece to this where Ms. Jones lives in that community. She taught those kids in that community. She has positive impact, good relationships in those communities.

When Ms. Jones retires, she takes those pension dollars and she goes to the hairdresser, she goes to the grocery store, she [00:11:30] goes to get her car repaired. She goes out to a restaurant to have dinner. So those pension dollars have an economic benefit compared to other DC arrangements. Where if you don't have enough, how are you going to be able to afford to do some of those things? And if you make a bad decision at the end of your career, you got to make other choices. The most important point I want to make here, when that runs out, that's it. See, with the pension, it doesn't work that way. That's a benefit for life. A DC plan, [00:12:00] when you run out of money, there's no more benefit unless you have some social security.

Natieka : So for most other industries they feel like the 401(k) or other contribution plans are the standard option. And I know that educators often have another plan called the 403(b) that is available to them. So can you spend a little bit of time talking about the 401(k) and 403(b) and how educators navigate those?

Michael : [00:12:30] Typically, for educators, what's available is the 403(b) plans. Typically, you would see 401(k)'s in businesses, just a bit about the 401(k) plans. Some of those businesses though employees make a little bit more, and you could still see yourself in the situation that I've just referenced where if you don't save enough in your retirement life, you're short. In NEA, we believe that defined benefit pension plan is the main retirement vehicle. [00:13:00] Now 403(b)'s and other savings type plans, it should be supplemental to the defined benefit pension. So if you considering you're looking at the three-legged stool, which would be a pension, social security and personal savings, those 403(b) plans are one way to look at your personal savings to enhance what you will have in retirement life. What I would caution folks to do if they're considering entering into [00:13:30] a relationship with a 403(b) manager or plan, examine every fee bonus, anything that doesn't come to you, fees, the bonuses, carry charges, all of those things. Figure out what they are before you enter into the relationship because those fees you are paying for, you are paying for those.

So oftentimes you can see the fee structures are high and that defeats the purpose when you're trying to save and trying to put aside a little [00:14:00] bit during your career as an educator, you're putting aside a few dollars to go towards a 403(b). Just make sure the fee structures are reasonable. There's some websites that really track what different vendors are doing and what their fee structures are. I would encourage them to look at some of those websites just to make sure that their fee structures are not really absorbent or where you defeat the purpose of having a good benefit when you retire.

I will say one other thing about 403(b)'s and additional [00:14:30] savings plan. Some states have hybrid plans, whereas a combination of a DC and a DB plan, they have the core B plan, but it may be a less of a benefit, and they pair that with a DC plan where the employee contributes separately and there's the opportunity for you to choose what you contribute. There's a floor and then sometimes there's an automatic escalator. Each year you can contribute more based on your salary, what have you. I would encourage [00:15:00] our members if you are in that type of situation, I know Virginia has that type of plan, contribute as much as you possibly can. So you make up the difference compared to just a straight out DB plan.

Natieka : Thanks for listening to School Me. And a quick thank you to all of the NEA members listening. If you're not an NEA member yet, visit nea.org/whyjoin to learn more about member benefits. And we are going to talk a bit about something called GPO WEP a little bit later because [00:15:30] it comes up in our audience questions. But what are the threats to educator retirement? Not on a personal level, but more on a policy and legal level, and how do unions factor in when it comes to protecting the educator's retirement benefit and their futures?

Michael : I could talk all day about this because this entails a lot of what I do every day. When I first started at NEA, there were a lot of attacks [00:16:00] and reforms. There are groups that don't believe in pensions. They think they drain public budgets. They're not effective. They cost the taxpayers too much. And when we know the economic benefits, we know the benefits that I just mentioned about teacher stays in the classroom 30 years. It helps with the recruitment and retention and the economic outflow in the community. That's proven. There are studies after study that show economic benefits [00:16:30] of a pension. But there are some groups that believe that educators should have control of their own resources. They should invest themselves. They should have some type of 401(k) arrangement. That takes the onus off of the employer to not be responsible for any liability in retirement life.

A lot of groups are pushing the idea and they do all kinds of things to attack the pensions. We got to go in, we got to make reforms because it's going to cost us too much money to [00:17:00] solve the pension crisis. They create all of these narratives and we know that the pension works. It's been around for a long time and it works. I won't name specific groups, but they spend their time, they research, they try to paint the picture that with legislators, that pensions are, you want to solve your fiscal woes in this state. Here's one way to do it or don't fund the pension plan, contribute. The actuaries tell you, well, you should put in this amount of money. They say what, just skip a payment. [00:17:30] The market performed well now so you can skip a payment. So we know that those group exists and we do all we can to try to push back on those faulty ideas. We know they don't work. They really do a disservice to public servants, not only teachers, but anybody that works in the public sector.

There's a lot of power in pensions. Pensions invest in a lot of different things, the economic generator that they are. But just be mindful of the political environment and when [00:18:00] you hear things like DEI, ESG, the whole cultural war issues. Just pay attention to what they are. Contact us if you have any questions about anything, we'll try to get answers for you. But just make sure you are aware of what's going on with your plan. I would encourage you to do a periodic check, looking at your benefit structures and that type of thing. It's always good to just know what you're working with and know the political environment as well. [00:18:30] Those are the type of attacks we're seeing now where limits what plans can do. So make sure you are aware of those things and there's some advocacy going on around it, be involved.

Natieka : And if you are interested in our website, we have a couple of resources that would probably be pretty useful for you to keep in mind and I will add them to the show notes.

Michael : Go to our website, look at the characteristic study, look at your state, look at your plan, look at the provisions. That's [00:19:00] a resource that we put together that's utilized by a lot of folks. But the member should utilize it first because it tells you, I'm in North Carolina, here's my benefit. This is what it takes for me to retire. This is how many years it takes. If I retire early it gives you an idea of what involved that. Do I have a fixed COLA, do I not? All those things are in our characteristic study of large education pension plans. So I encourage you to look at that.

Natieka : All right. So on social media, we asked our [00:19:30] followers to send in any questions they had about retiring as an educator. So I wanted to run a couple of them by you. Some of them are exactly questions, but I thought they'd be worth addressing anyway, so I'll put them in the best format that I can. So we have some questions from Facebook. So Deborah said, "I didn't find out that our life policy ended when I retired. I thought it was a whole life policy, not one that ended when you retired. [00:20:00] By the time I found out I couldn't possibly pay for a policy at 62 that I could have gotten at a way more affordable price if I was younger. So what should educators keep in mind about life insurance that is provided from the employer when they think about their retirement and end-of-life plans?"

Michael : I think you should know what your employer offers. Know what that life insurance policy is with your employer, if you have one, [00:20:30] what it is, the amount it is. It is also good to consider a policy outside of your employment in the event something happens. If you terminate your relationship with your employee, you want to be covered. And if you have any current conditions or health ailments or pre-existing conditions, the policies tend to be much higher and they're not affordable sometimes. So the earlier you can get started on that, the better.

Natieka : So Cheryl said, "I didn't understand [00:21:00] the facts about the windfall elimination provision," or WEP as we call it here. She writes, "It's a totally unfair law and penalizes teachers for work they have done either before teaching or in a second job. So lots of comments about WEP, GPO WEP came up when we asked this question on social media. So it seems like it's a pretty big concern for both retirees and people who are looking into their future. [00:21:30] What is GPO WEP? That doesn't mean anything, it's just a collection of letters. What is GPO WEP and how does it affect educators?

Michael : So let me just preface all I'm going to say about this. This is one of the number one issues that come up with our members about these two provisions. So the fundamentals of it, GPO is government pension offset. And GPO applies if you receive a government pension and spousal or survival benefits from [00:22:00] social security and there's a reduction. And WEP reduces regular social security benefit for workers who receive a pension based on earners not covered by social security. So one is like a survival benefit and then one is if you worked in the state and they didn't have social security. And it's a known fact that NEA supports full repeal of GPO and WEP.

So recently, as late as September, we made some significant steps forward on this issue. [00:22:30] It never could come to a vote. We came close a couple of times. But without getting too technical, on September 10, we got enough votes through a discharge petition to force a floor vote, and that was filed on September 10. And it takes 218 votes to be able to execute that. So on September 20th we reached that threshold. I don't think that's been done. Now I understand that fully repeal GPO WEP [00:23:00] and fix this issue so that your benefits are not impacted so that there's not reductions if a spouse is lost. We continue to lobby. We continue to work on the issue to see if we can get it fully repealed because we agree that it's harmful to our members economically. We see this as an opportunity and we're just hopeful that we can have a good strong vote or pass and we can fully repeal it.

Natieka : We were thinking about the legislative terms here. In a layman's terms, how [00:23:30] does GPO WEP affect the average educator right now?

Michael : The windfall elimination provision may apply if you receive both a non-covered pension and social security retirement benefits. The WEP can reduce your benefit payment by as much as half of the amount of your pension. And that's what people really want to know. So if you're getting just say, $2,000 a month and you budget around, this is what it's going to cost me to live, this is how I pay the rent, this is how I meet my monthly expenses. [00:24:00] If you cut that in half, that's significant. The GPO government pension offset applies if you get a government pension plus survival benefits from social security. So if your spouse passes away and you get their benefit, it reduces. And that's why we're lobbying hard to try to make sure that this is fully repealed.

Natieka : Because one of the people who asked, not asked a question but had a comment on our social media post, Jeanette, she mentioned that her pension reduced the amount of social security [00:24:30] she was qualified for. Is that related to GPO WEP or is that something that people should be watching out for?

Michael : Quite honestly, I'm a test case for that. I worked in Washington DC. They have no social security. So the pension is it. I didn't draw a pension from DC public schools. But since I worked there a little less than five years, I get the letters from social security that you may be a subject to WEP and they clearly lay it out for you. These were your earnings, you didn't pay any social security [00:25:00] on these earnings and you may be subject. It's a reality. And there are so many quarters, I think it's 40 quarters, I might not have the quarters right, that you have to work to be able to qualify for social security benefit.

Natieka : And we got some questions about healthcare as well, which I think everybody feels is somewhat related to retirement as many of us have more health needs after we retire and have been relying on our employers for our healthcare in this country unfortunately [00:25:30] for so long. So Holly asked, "How can I get affordable healthcare so that I can retire before 65? I've been teaching for 31 years and I'm 57. I'm so ready to retire, but insurance is keeping me at the job."

Michael : We see that so often. Folks will work longer just to be able to afford healthcare and, I really don't have a good answer for that one. Get on exchange and look and see what's affordable, what works. Just thinking of resources. We have a wonderful healthcare team [00:26:00] that can address some of these things and give you pointers on how to get the most bang for your buck when you're looking for a policy. But a lot of people that work longer, it's a result of them trying to pay for healthcare. I mean, I know that's not really answering the question fully, but that's a reality of having to work longer as a result of the high cost of healthcare.

One further comment on that, I think far as the member engagement piece on this, talk to your legislator and ask your representative, " [00:26:30] Will you vote yes on Social Security Fairness Act when it comes to the floor?" I think that's what it's technically called. "Will you push to make sure it's up or down vote?" These are things that the activist member can do, and there are a lot of members that are working in coalitions to make this happen.

Natieka : Because of course as the union, we are acting in our members' interest, but there's definitely power in the individuals to talk to their own representatives and sway them that way too.

Michael : Absolutely.

Natieka : Okay. So I hear [00:27:00] a lot also about retiring early in our comments. So what about retiring early, especially as an educator? What does someone who just feels like it's time before 65 or whatever the requirements are, what advice would you give them? What cautions would you give them? How should they think about the prospect of retiring early?

Michael : So this goes back to what I started with originally is knowing the provisions [00:27:30] of your plan. Your particular state, and what those plan provisions are. And if you want to know what they are, you can go to our website and look at our characteristic study, which tracks the provisions of every state plan, what they are. It talks about the vesting period. It talks about what it takes to qualify for full retirement. It talks about early retirement. So typically what happens when you retire early and you haven't satisfied the requirements to receive a full-time benefit. There's a huge [00:28:00] drop, a huge cliff. We call it the cliff. Your benefits are reduced significantly. And that's something to be aware of if you considering retiring early. Sometimes a year or so could make a big difference in what the benefit would be if you hang on, if you could hang on.

But if you want to retire early, just know what your benefit is. Contact your state retirement system or your local retirement system. Have them to run the numbers for you. If I retire on July 1st, [00:28:30] 2025, what does my benefit look like? What will my monthly benefit be? And they are able to calculate that. I would do that if they didn't do anything else. Make sure you contact that retirement system to see what your benefit would be based on an early retirement date.

Natieka : So the overall message that I'm hearing here is get more information, ask more questions, and just get clear as soon as you possibly can so that you can design the life that you want after your career in education.

Michael : Absolutely. [00:29:00] Learn as much as you can about your plan and then you can make appropriate plans. I think as early as you possibly can when you sign the line, I'm going to work for school district X. Know what that provision is to the point where you pick where you're going to live, what state you're going to be in, who has good provisions, and just know what the benefit that structure is so you can make clear and good decisions.

Natieka : Well, thank you so much for joining us today, Michael.

Michael : Thank you for having me. I get excited about folks want to talk about retirement.

Natieka : Thanks [00:29:30] for listening. Make sure you subscribe so you don't miss a single episode of School Me. And take a minute to rate the show and leave a review. It really helps us out and it makes it easier for more educators to find us. For more tips to help you bring the best to your students, text POD, that's P-O-D to 48744.