If you are a Missouri teacher who is considering retirement, there are many things to consider. Missouri is a great place to retire, and Missouri Teacher Retirement is one of the best ways for teachers to enjoy their golden years.
Missouri has some of the most generous pension plans in the United States, which are perfect for Missouri teachers who have served after 2008. Missouri’s public pensions are also based on how long you served as an educator.
Retiring in Missouri
Teachers in Missouri will begin to contribute a portion of their salary to the Public School Retirement System of Missouri (PSRS) once they gain employment. The PSRS is a defined benefit plan that requires teachers to contribute a part of their salaries to fund that later provides them with lifetime pension payments.
Teachers contribute 14.5% of their salaries to the pension while employers match that amount. Although this might seem like a considerable portion of your salary, all the contributions are guaranteed to be returned back to you once you reach the retirement age.
To be eligible for retirement, you need to meet certain requirements.
- At any age with 30 service years
- At 60 years of age with a minimum of five years of service
- When the total of their age and service years equals 80 or more
In a defined benefit plan, your salary contributions don’t affect how big the pension payments you’ll receive are when you retire. Instead, the amount of your pension is calculated by years of service and average salary.
How Do Teacher Pensions Work in Missouri?
Teachers are a part of the PSPS or the Public School and Education Employee Retirement Systems in Missouri. It was established in 1946 specifically for teachers to be a part of it.
Teachers in Missouri have a defined benefit pension system that is similar to 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 will receive at retirement.
A teacher’s pension amount is not derived from the returns on investments in the market and is managed by private equity and hedge funds. But instead, it is determined by a formula based on their years of experience and final salary.
How Are Teacher Pensions Calculated in Missouri?
The Missouri education system displays the formula to calculate pension wealth. Nevertheless, it is essential to consider that the state assesses an educator’s final salary based on their highest average three consecutive years salary.
For example, a teacher with a final average salary of $70,000 and who works for 25 years would be eligible for a yearly pension benefit worth 62.5% of their final salary.
2.5% Multiplier X Years of service X Avg. highest consecutive three years of salary
Who Qualifies for a Teacher Pension in Missouri?
In many states, teachers are required to serve a number of years before becoming eligible for their pension. In Missouri, this is five years — the amount of time during which they must work in order to qualify. However, even if educators do manage to meet these requirements and become vested after five years with an employer, there’s no guarantee that it will be worth much at all by then unless you plan on teaching until retirement age!
The state sets when teachers can retire with benefits based on their age and years of experience. New teachers in Missouri can retire with their full benefits.
- At any age with a minimum of 30 years of service; or,
- At age 65 with at least five years of service;
- When their joined age and years of service equal at least 80.
Missouri additionally allows early retirement at age 55 with five or more years of experience and a 25+ year career length. However, teachers using that option will have their benefits reduced based on the number of experiences they are able to accumulate before retiring as well as how early they retire.
How Much Does Missouri’s Teacher Pension Plan Cost?
The state legislature sets the contribution rates, which can change year to year. Teachers and their employers must contribute to these plans as they work.
In 2018, Missouri teachers paid 14.5% of their salary to the pension fund, while the state government contributed 18.96%. Missouri’s teacher pension fund total contribution was 33.46%.
The state’s contribution is for benefits, but not all of that investment goes toward this. While the full 14.5% of salary contributed by individual teachers is used to pay towards their own retirement fund, only 2.94% actually goes into benefit plans provided by employers, and 16% pays down debt in the pension plan itself.
As with most states, Missouri teachers’ pensions are not portable. If a teacher quit the MPSRS system, they can’t take their benefits with them. They will lose all of their benefits if they continue working in the teaching profession.
As a result, a teacher who leaves their profession or who moves across state lines might have two pensions. However, the sum of the two pensions is likely to be worth less than if they remained in one system for the entirety of their career. In other words, the absence of benefit portability will hurt the retirement savings of teachers who leave teaching or work in another state.
The state pension system provides benefits to teachers who stay the longest and leaves everyone else with inadequate coverage. New and current teachers in Missouri should consider carefully about their careers. They should think about how they interact with the state’s retirement plan.
Is Missouri’s Teacher Retirement Plan Good?
Recently, there have been more teachers who are retiring. They get better benefits than the next generation of teachers will. In Missouri, the state had to change the pension formulas for people several times in the 1990s and then raise employee and employer contribution rates later to have enough money for those pensions.
The PSRS actuaries estimate that teachers’ benefits are worth an average of 17.4% compared to other employees who get 29% from their salaries, while both employers and employees contribute 14.5%. This means we need money for liabilities which is 7.4 billion dollars more than what’s contributed towards the pension plan each year. That’s 10.6% of each teacher’s salary that will be going toward paying off pension debts.
Suppose Missouri legislators in the past had been more responsible. In that case, they could have used that money to raise teacher salaries, buy new textbooks, expand the art or foreign language programs, and so much else.
A retirement system that was genuinely the “best in the country” wouldn’t force these hard decisions. It would provide real retirement security to all of its members, not just 25-year veterans, and it ensures educational dollars are being spent on teachers today instead of past debts.
You can’t afford to miss out on the opportunity for a secure retirement. If you are a new or current teacher in Missouri, it is important to think carefully about your career plans and how they interact with the state’s retirement plan. Missouri Teacher Retirement is here to help you plan for retirement and provide resources for teachers.