New Teachers Getting Started – Frequently Asked Questions
Q1: My pay checks are already small, how can I afford to do retirement investing?
A: Unfortunately that is true, but there is usually a little cushion in our discretionary
income.
For the cost of a few coffees, cocktails, or fast-food meals each month, a person can
have thousands of discretionary dollars in the future.
Q2: I'm already putting a few dollars away in a savings account, why should I do more?
A: It's the difference between saving and long-term investing. using a tax-deferred
retirement account gives you far more benefits. First, your savings account is paid
from after-tax money. Second, a retirement account can be paid for with before-tax
money; thus costing you less. Even in today's financial climate, long-term
investments can earn higher interest rates, too.
Q3: What difference does it make if I start investing now or wait a while?
A: Waiting a single year to start a retirement account has a major effect, because of
lost time. For a small savings of $50 per month, waiting from your first year of
teaching until the second year will mean a difference of about $20,000 at
retirement time.
Q4: Why is Black Hills Retired School Personnel doing this information campaign?
A: Many of our members didn't get interested in retirement planning until our
thirties. We have since found that for very little money, but more time, we
could have had a better retirement nest-egg. We, simply want you to benefit
from what we learned. We are NOT selling a product; we are just sharing our
experience.
Q5: When I was hired, I had to sign papers for a retirement plan; isn't this duplication?
A: When you signed your teaching contract, you joined the South Dakota Retirement
System (SDRS). It is an excellent defined-benefit pension plan! Think of it as a
fund for living expenses during retirement. Additional retirement accounts can
be used for those extra, fun things that you look forward to doing during retirement.
Q6: How do I start?
A: Contact the school district's business office for information about retirement
annuities and plans available to you. Approved plans can be set up on payroll
deposit so the investment is withdrawn from your pay check each month.
Q7: What does “tax-deferred” mean?
A: Typically, employers withhold the income tax amount from our earnings each pay
period. The taxes are then already on deposit when we file our tax return each year.
The tax return is simply paperwork that determines the correct amount of income
tax we need to pay; if there is more money on deposit than we need for our taxes, we
get a return of the excess. If the return shows that we need to pay more tax than is
already on deposit, we pay in to the IRS. This pay-as-we-go process is somewhat
easier to manage than just getting a full tax bill at the end of the year.
To encourage people to save for retirement, the Federal Government has allowed
tax-deferred accounts. With those, our retirement investment is not taxed as we
earn the money. Instead, we are able to postpone paying income tax until we
actually withdraw the money from the account. Tax-deferred accounts require
more formal record-keeping than a simple savings account so special types of
accounts are used.
Q1: My pay checks are already small, how can I afford to do retirement investing?
A: Unfortunately that is true, but there is usually a little cushion in our discretionary
income.
For the cost of a few coffees, cocktails, or fast-food meals each month, a person can
have thousands of discretionary dollars in the future.
Q2: I'm already putting a few dollars away in a savings account, why should I do more?
A: It's the difference between saving and long-term investing. using a tax-deferred
retirement account gives you far more benefits. First, your savings account is paid
from after-tax money. Second, a retirement account can be paid for with before-tax
money; thus costing you less. Even in today's financial climate, long-term
investments can earn higher interest rates, too.
Q3: What difference does it make if I start investing now or wait a while?
A: Waiting a single year to start a retirement account has a major effect, because of
lost time. For a small savings of $50 per month, waiting from your first year of
teaching until the second year will mean a difference of about $20,000 at
retirement time.
Q4: Why is Black Hills Retired School Personnel doing this information campaign?
A: Many of our members didn't get interested in retirement planning until our
thirties. We have since found that for very little money, but more time, we
could have had a better retirement nest-egg. We, simply want you to benefit
from what we learned. We are NOT selling a product; we are just sharing our
experience.
Q5: When I was hired, I had to sign papers for a retirement plan; isn't this duplication?
A: When you signed your teaching contract, you joined the South Dakota Retirement
System (SDRS). It is an excellent defined-benefit pension plan! Think of it as a
fund for living expenses during retirement. Additional retirement accounts can
be used for those extra, fun things that you look forward to doing during retirement.
Q6: How do I start?
A: Contact the school district's business office for information about retirement
annuities and plans available to you. Approved plans can be set up on payroll
deposit so the investment is withdrawn from your pay check each month.
Q7: What does “tax-deferred” mean?
A: Typically, employers withhold the income tax amount from our earnings each pay
period. The taxes are then already on deposit when we file our tax return each year.
The tax return is simply paperwork that determines the correct amount of income
tax we need to pay; if there is more money on deposit than we need for our taxes, we
get a return of the excess. If the return shows that we need to pay more tax than is
already on deposit, we pay in to the IRS. This pay-as-we-go process is somewhat
easier to manage than just getting a full tax bill at the end of the year.
To encourage people to save for retirement, the Federal Government has allowed
tax-deferred accounts. With those, our retirement investment is not taxed as we
earn the money. Instead, we are able to postpone paying income tax until we
actually withdraw the money from the account. Tax-deferred accounts require
more formal record-keeping than a simple savings account so special types of
accounts are used.