Missouri’s teacher pension system, PSRS, is arguably one of the best pension plans in the
country, but is it THE best? Here’s what you need to know about PSRS.
Every paycheck you contribute 14.5% of your pay to the pension system. There is technically a school district match of another 14.5% but that never really belongs to you. 14.5% of each paycheck HURTS when you are a new teacher trying to survive on a beginning teacher salary. It continues to hurt when you are in the middle of your career trying to figure out
how to take vacations, have children in daycare, and pay the bills. But when you hit the rule of 80 (your age plus years of service added together equal 80) then
you will be grateful for the way the system is designed!
The formula for “normal retirement” is .025 * years of service * your highest average
consecutive 3 years salary (including insurance paid by the school district). This means that if you have taught for 30 years within the PSRS system, you will replace 75% of your pre-retirement salary with pension. Even better, there is a cost of living adjustment (COLA) within the PSRS system. This is based on the inflation rate from the previous year and can change year-to-year, but just know that your monthly benefit will continue to go up over time. So many states don’t have this feature in their pension plan!
Do you want to make more money, guaranteed, for the rest of your life?! Then all you have to do is continue to work past the rule of 80. Each year gives you an additional 2.5% of your highest 3 year average. One thing to note is that many people around the state, especially some of the sleazy financial professionals, will make a big deal about the “rule of 86”. The rule of 86 allows you to take partial lump-sum option (PLSO). There are different amounts that you can take out of your pension in this lump-sum option, but what you are really doing is robbing your future pension to take money now. This can seem like a good idea, especially when these financial professionals talk about how much money you can make in the stock market compared to the guaranteed pension. However, I’d like to pose a question for you.
What would have happened if you would have retired in 2008 and taken the lump-sum option?! The answer is that you would have had to wait over 5 years (assuming you took $0 from that lump-sum) to get back to the original amount.
At the time of writing this, 2024, teachers are allowed to retire, collect PSRS, and continue to
work within the state for up to 4 additional years. This can be another option to make incredible money as a teacher, but it is worth evaluating if it would be more beneficial to get those years added to your pension or get the double pay with PSRS and the teaching salary.
There are so many things to be mindful of and to plan for. No matter if retirement is just around the corner or many years away, it is important to have a plan. Request a consultation if you and your family would like to talk through retirement (one of many things included in financial planning)!
So, to address the initial question… Is PSRS the best pension plan in the country? I won’t say
that it is THE best, but it is certainly up there based on benefits in retirement!!!
Comments