Last Updated on November 14, 2023 by Ben
Colorado Teacher Retirement
With Colorado Teacher Retirement, teachers can retire with peace of mind. All Colorado public school teachers and the majority of Colorado independent school teachers are members of this fund.
The CTRA was created by the Colorado Legislature and has been providing retirement security for Colorado educators ever since. Learn more about this important organization on our blog!
Retiring in Colorado
Colorado’s educators are protected by the Public Employee Retirement Association (PERA), which was established in 1931 and served over 480,000 Colorado employees by a defined benefit plan.
The Colorado PERA distributed almost $3 billion in benefits to public employees, indicating that the pension fund needs both employer and employee contributions for it to remain sustainable.
Teachers pay 8% of their monthly salaries to the PERA pension fund, while employers pay an additional 15.65 percent of their total employee payroll.
PERA offers retirement benefits to public employers after they have completed ten years of service. Normal retirement is calculated using a formula that incorporates both age and years of employment:
- At age 58 with at least 30 years of service
- At whatever age with 35 years of service
- At 65, with any amount of service
Upon retirement, teachers receive monthly benefits based on a formula that combines their highest average salaries, years of service, and age. The equation is set by the Colorado legislature but can be changed at any time.
Because the formula takes into account variables that change depending on your personal circumstances, the PERA provides a benefits calculator to estimate your monthly pension.
The average age of retirement is 58.1, and on average, employees have 23.6 years of service. This equals an average monthly benefit of $2,966 for retired employees.
PERA also offers retirees lifetime monthly pensions, as well as survivor and disability benefits, life insurance policies, health insurance plans, and voluntary contribution funds like 401(k) packages.
How Do Teacher Pensions Work in Colorado?
Teachers in Colorado are a part of the largest public retirement system in the state. The Public Employees’ Retirement Association (PERA) was established in 1931 and included not only teachers but all public employees.
Colorado’s teacher-defined benefit (DB) pension follows the same basic structure as other states. Unlike other retirement plans, a teacher’s pay and contributions made on their behalf by the state or school district do not influence the value of their pension at retirement.
Those payments are invested in the market and are frequently controlled by private equity and hedge funds. A teacher’s pension fortune is not created through the profits from those investments. Instead, it is calculated based on a formula that incorporates his or her years of experience as well as his or her final salary.
How Are Teacher Pensions Calculated in Colorado?
Pension wealth is based on a formula. The formula below illustrates how a teacher pension is calculated in Colorado. Nevertheless, it’s important to note that the state assesses an educator’s final salary based on their highest average salaries over four consecutive years.
A teacher who has worked for 25 years and makes an average of $70,000 can get a pension of about 62.5% of their salary per year.
2.5% Multiplier X Highest avg. salary of four 12-month periods X Years of service
Who Qualifies for a Teacher Pension in Colorado?
Most states require teachers to work for a certain number of years before they can get a pension. Colorado has a five year vesting period. While educators qualify for the pension after five years in service, it may not be worth all that much due to its low value compared with other states’ pensions and increased employee contributions required by recent changes in the law.
Finally, teachers won’t be able to collect it until they reach the state’s retirement age. Teachers can’t begin collecting it until they hit the age of retirement and have completed a specified number of years of experience. For novice instructors in Colorado, they can retire with their full benefits when their age and years of service are equal to or exceed 94, with a minimum age of 64.
In addition, Colorado allows early retirement at age 55 after they have accrued 25 years of service or 60 with five years. However, teachers taking that option receive reduced benefits based on their experience and how soon they are retiring.
How Much Does Colorado’s Teacher Pension Plan Cost?
The employers and teachers must contribute to the plan as it operates, in accordance with the law. The state legislature determines these contribution rates every year, which may vary.
Teachers paid 8.38 percent of their salaries into the pension fund in 2018, while the state put in 23.59 percent. Overall, 31.97 percent of a teacher’s compensation is allocated to the state’s teacher pension program in Colorado.
Not all of it, however, goes toward the pension benefit. The individual teacher invests 8.38% of their salary for this, but the state only invests 3.62%. The remaining 19.97% state contribution will be used towards paying off our pension funds’ current debts.
Finally, as is the case in most states, teacher pensions in Colorado are not transferable. This implies that if a teacher leaves the PERA system, their benefits cannot be taken with them, and they must re-enter the teaching profession.
Because of this, individuals who leave teaching or relocate across state lines may have two pensions, but the total value of those pensions is likely to be less than if they had stayed in one system throughout their career. In other words, the lack of portability will harm any educator’s long-term retirement savings who leave teaching entirely or move from one state to another to work.
As is the case with most state pension funds, Colorado’s teacher retirement system offers the greatest benefits to those who stay longest, leaving everyone else with insufficient payments. Teachers in Colorado should consider carefully their future plans and how they will interact with the state’s retirement plan, given this situation.
What are the Highest Paying Cities for Retired Teacher Jobs in Colorado
These cities have an average salary for Retired Teachers that is above the state average in Colorado. Lafayette is at the top of the list, with Denver and Westminster close behind. Westminster beats Colorado’s average by 12.8%, and Lafayette does even better with another $7,617 (20%) above the $37,939.
As various companies are currently hiring for this type of role, Retired Teachers have a very active job market in Lafayette.
These cities pay a lot of money compared to other places in Colorado. There are many opportunities for economic advancement by moving there.
Finally, there is one more thing to think about. The average salary for these cities is very similar. It does not change much between Lafayette and Thornton. But the opportunity for wage advancement can be good in other ways because some places are cheaper to live in.
Colorado Teacher Retirement is a program that offers retirees the opportunity to receive retirement benefits and health insurance that provide stability for teachers during their careers and protection for them after they leave the workforce. This program offers an important safety net for those who dedicate themselves to educating future generations.