Money FAQs Every Teacher Should Know

Teachers dedicate their lives to shaping the minds of others, but when it comes to managing their own finances, many find themselves with more questions than answers. With constant demands from students, colleagues, parents, administrators, and even family, personal financial matters often take a backseat. To help ease that burden, we’ve compiled the most frequently asked financial questions from teachers—and maybe a few of them will resonate with you too.

• How Should I Prioritize Saving for Retirement on a Teacher’s Salary?

  Teachers have access to multiple retirement options like 403(b) plans, 401(k)s, pensions, and even hybrid plans depending on tenure and school district. These plans can be powerful tools to save for your future while enjoying tax benefits. However, relying solely on a pension or one plan may not be enough. To maximize your financial security, explore other options such as Roth IRAs, 457(b) plans, or even an HSA. Start by contributing what you can and develop a plan to gradually increase your savings. The earlier you begin, the more time your money has to grow.

  Pro Tips:

  • Many districts offer matching contributions—make sure you’re not leaving free money on the table by maximizing your match!

  • Verify that your retirement contributions are actively invested in line with your goals. Simply placing money into a retirement account doesn’t mean it's being invested (I’ve worked with too many teachers who had their 401(k) sitting in cash for years without realizing it wasn’t growing).

• Can Teachers Qualify for Student Loan Forgiveness?

  Yes, many teachers qualify for Public Service Loan Forgiveness (PSLF), especially if you work in a qualifying school or district. After making 120 qualifying monthly payments (over 10 years) while employed full-time, the remainder of your federal student loans can be forgiven. The Teacher Loan Forgiveness program is another great option that may help reduce loan balances. Additionally, depending on your situation and location, other loan forgiveness programs may apply.

  Even if you don’t qualify for loan forgiveness, there are income-driven repayment plans that can reduce your monthly payment. These options are often overlooked, leaving potential savings on the table.

  Key Tip: Ensure you’re enrolled in the right repayment plan and verify that your employer qualifies for loan forgiveness programs.

• How Can I Take Advantage of Health Care Options Such as HSAs?

  If your school district offers a high-deductible health plan (HDHP), you might be eligible for a Health Savings Account (HSA). HSAs allow pre-tax contributions for medical expenses, and unused funds roll over year after year. It’s like having a specialized emergency fund for healthcare costs.

  There’s often confusion about HDHPs. In reality, these plans can result in lower overall medical costs when compared to other plans, especially when paired with HSA contributions.

  Pro Tip: Contributions to an HSA lower your taxable income, and withdrawals for qualified medical expenses are tax-free. It’s one of the most tax-efficient ways to handle healthcare costs. You can also invest your HSA funds, with growth being tax-free as well.

• What Should I Know About Social Security as a Teacher?

  In some states (including Utah), teachers may not contribute to Social Security, relying instead on pensions and personal savings for retirement. If this is your situation, it’s critical to understand how your pension works and how to complement it with other retirement savings.

  For those who do qualify for Social Security, be aware of the Windfall Elimination Provision (WEP) or Government Pension Offset (GPO), which could affect your benefits.

• Should I Pay Off Debt or Save for Retirement First?

  It’s a balancing act. High-interest debt, such as credit cards, should be prioritized for repayment, as it can undermine your financial security. However, if your student loans or mortgage have low interest rates, it may make sense to save for retirement while paying off debt.

  Pro Tip: Develop a plan that strikes a balance between debt repayment and retirement savings, with your long-term goals in mind. It’s possible to manage debt effectively while building your retirement fund with proper planning.

• How Do I Handle Summer Income Gaps?

  If you don’t receive paychecks over the summer, preparation is key. Consider setting up a separate “summer fund” to accumulate extra income during the school year to cover summer expenses. You might also explore part-time work or tutoring opportunities if needed.

  Many districts allow teachers to spread paychecks over 12 months to avoid income gaps during the summer—check if this option is available to you (this is the default for some districts).

• Are Classroom Supplies Tax Deductible?

  Teachers spend an average of $1,000 per year on classroom supplies, but the IRS caps the educator expense deduction at $300 for the 2024 tax year. Unfortunately, expenses beyond that limit won’t be deductible, meaning many teachers cover the additional costs out of pocket.

  Pro Tip: Keep detailed records of your classroom expenses. While the deduction is limited, these records could help with school reimbursements or grant applications.

Planning for your financial future as a teacher comes with unique considerations. By understanding these frequently asked questions, you’ll be better equipped to take control of your financial future. The earlier you begin planning, the more opportunities you have to build long-term security, CLARITY, and peace of mind.

Want help crafting a financial plan tailored to your needs as an educator? Let’s chat about getting you on track today!