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Minnesota Teacher Retirement

Teachers are some of the most important careers in Minnesota. They spend their days educating our children and shaping Minnesota’s future. However, as years pass and teachers grow older, many will retire from teaching. This blog post is for Minnesota residents who want to know about Minnesota Teacher Retirement benefits that they could be eligible for upon retiring from education.

Retiring in Minnesota

There are things to think about when deciding where to work as a teacher. While compensation is typically one of the essential aspects of selecting a profession, employee benefits such as retirement planning and health insurance may be just as important.

A teacher in Minnesota not only earns a retirement to help them with future plans but health insurance benefits as well for more security. By giving its teachers comprehensive benefits, the state of Minnesota retains the current teaching force and attracts even better educators.

Teachers in the state of Minnesota are automatically enrolled in the Teachers Retirement Association of Minnesota (TRA) upon employment. This collaborative benefit program complements a teacher’s Social Security and Medicare payments, providing them with a defined lifetime pension after retirement under normal circumstances.

Educators in Minnesota can reach retirement age when they become entitled to Social Security, though the requirement is not to exceed 66 years old.

To keep the pension fund for educators strong, both teachers and employers put in money. Teachers contribute 7.5% of their salary to the TRA.

Instead, these contributions won’t factor into the pension benefit you receive, calculated through a mixture of salary and service information. You can calculate your estimated benefits with this formula:

Final Average Salary X 1.9% X Years of Service

So, to give you a general idea of what the monthly benefits would be for a worker with 30 years’ employment and a final average salary of $54,000. This person’s benefit is going to total about $2,565 per month.

How Do Teacher Pensions Work in Minnesota?

All teachers of Minnesota are a part of the Minnesota Teachers Retirement Association. The system was created in 1931 and is the largest public retirement system in the state.

The Minnesota teacher-defined benefit pension basics are similar to those in other states. Unlike most retirement funds, teachers’ contributions and those made on their behalf by the state or school district do not determine what they get at retirement.

While those contributions are invested in the market and frequently controlled by private equity and hedge funds, a teacher’s pension wealth is not based on the profits from those investments. Instead, it is calculated using a formula that takes into account their final salary and years of experience.

Finally, many states, including Minnesota, had established a number of benefit levels for teachers depending on when they were hired.

How Are Teacher Pensions Calculated in Minnesota?

The formula for calculating the pension wealth of a teacher is illustrated in this figure. However, it should be noted that Minnesota evaluates an educator’s last salary based on their highest average salary for 60 successive months of service.

For instance, a teacher who works for 25 years with an average salary of $70,000 would be eligible to receive 47.5 percent in annual pension benefits worth the final salary they made.

1.9% Multiplier X Avg. salary for highest-paying consecutive 60 months X Years of service

Who Qualifies for a Teacher Pension in Minnesota?

Like most states, teachers have to serve a number of years before qualifying for retirement benefits such as pensions. Minnesota has a three-year vesting period in which educators qualify, but the pension may not be worth all that much after this time.

Additionally, educators cannot start to collect their benefits until they hit the state’s retirement age. The Minnesota State Retirement System sets specific windows when teachers can retire with full benefits based on years of experience and age. New teachers starting out in Minnesota may be able to claim their full benefits at 66 after accruing three or more years of service time.

Teachers in Minnesota can retire early and receive reduced benefits if they have accrued at least three years of service. Benefits will be lower based on the age when you are retiring as well as how many total years of experience you have gained since becoming a teacher. Teachers who are 62 but only accrued 30 years’ worth of teaching time may face smaller reductions than those teachers that retired before reaching this threshold amount.

How Much Does Minnesota’s Teacher Pension Plan Cost?

Teachers and their employers must give to the plan as it develops. The state legislature determines these contribution rates, which may vary from year to year.

In 2018, teachers contributed 7.5% of their salary to the pension fund, and the state contributed 7.91%. In total, 15.41 percent of a teacher’s salary was paid to Minnesota’s pension fund. However, not all of that money is used to provide benefits.

While each individual teacher contributes 7.5% of their salary for benefits, the state only pays 1.66%. The remaining 6.25% goes towards paying down the pension fund’s debt.

Finally, in Minnesota, as with most states, teacher pensions are not portable. This implies that if a teacher leaves the MTRA system, their benefits cannot be taken with them whether or not they continue working in education.

This means that an individual who leaves their job or moves across state lines might have two pensions, but the total of those two pensions is likely to be worth less than if they remain in one system for their full career. In other words, any educator who leaves teaching entirely or moves across state lines to work in another state may lose out on long-term retirement savings because of the lack of benefit portability.

As is the case with most state pension systems, Minnesota’s teacher retirement program bestows the greatest perks on those who stay the longest while leaving everyone else unsatisfied. Every teacher in Minnesota should think carefully about their future and career prospects, as well as how they connect with the state’s retirement plan.

Conclusion

If you’re a teacher in Minnesota, it may be time to start thinking about your retirement; this is an important topic that needs addressing. The Minnesota Teacher Retirement System (MTRS) is a defined benefit plan that provides retirement benefits to eligible public school educators. These are teachers who have worked for at least five years in the state of Minnesota and meet other eligibility requirements.

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