What Will Actually Hit Your Bank Account in Retirement?

I’ve probably checked my pension estimate more times than I need to. My retirement date, May 26, 2027, keeps getting closer (I know I keep mentioning that date, but man, am I excited!). There’s something reassuring about seeing that pension number and knowing what all those years in education have been building toward.

But I’ve also learned that the number on my retirement statement doesn’t tell the whole story. There are taxes to consider, health insurance decisions to make, and expenses that may look different once I’m no longer working in a school. At the same time, there are deductions from my current paycheck that won’t follow me into retirement.

And the closer I get, the more I find myself wondering: How much money will I actually have available to live on?

Most educators with traditional pension plans can access an estimate of their future retirement benefit, generally based on years of service, salary history, retirement age, and the payment option selected.

But retirement looks different for every educator. Some states have traditional pension systems, others offer different plans, and some teachers contribute to Social Security throughout their careers. Rules can vary from state to state, and even within the same state.

I’ve worked with plenty of educators over the years, and I know our financial situations aren’t all the same. Some have taught longer, earned different degrees, or worked under different retirement systems. That’s why I’ve never been sure how helpful it is to compare one teacher’s pension to another’s.

Someone receiving $2,000 a month might also qualify for Social Security or have retirement savings. Another educator might receive a larger pension but have fewer additional income sources. What matters is whether your own retirement income can support your expenses.

Federal income taxes are one of the first things to consider. Depending on how your retirement plan works and how contributions were made, some or all of your pension may be taxable. Your state may also tax retirement income, although exemptions vary.

Health insurance is another major consideration, especially if you’re retiring before Medicare eligibility. Some districts allow retirees to remain on their group insurance plans. Others have different options, and some educators must find coverage elsewhere.

I’ve been looking carefully at my own options. I can continue coverage through my district, but I’ll be responsible for the premiums. That’s an expense I need to account for in my monthly budget.

And don’t overlook the deadlines. Some plans only give you a certain amount of time to enroll after retirement, and missing that window could mean losing an option you won’t get back. That’s one decision I definitely want figured out before my last day at school.

As a Missouri educator, I currently contribute part of my salary to the Public School Retirement System. Once I’m retired and receiving my pension, those regular contributions from my teaching paycheck will stop.

Then there are the smaller expenses we probably don’t think much about. Gas getting back and forth to school, professional dues, classroom purchases, and all those little things that add up over a school year. Some of those expenses won’t follow us into retirement.

Of course, retirement can introduce different expenses. You might spend more on travel, hobbies, healthcare, or activities you didn’t have time for while teaching.

I don’t necessarily expect retirement to be cheaper. But I do expect my expenses to change, and I’d rather have a good idea of what those changes might look like before I get there.

For some educators, Social Security will be an important part of retirement income. For others, it’s more complicated.

My Missouri teaching position doesn’t contribute to Social Security. I’ve earned credits through other work, and part of my plan is to continue working after retirement to earn the remaining credits I’ll need to qualify for a benefit.

Other educators may receive both a pension and Social Security. The Social Security Fairness Act, signed in January 2025, eliminated provisions that previously reduced benefits for certain public employees receiving pensions from jobs not covered by Social Security. However, qualifying for Social Security still requires meeting its eligibility requirements.

If your pension begins years before your Social Security benefits, your income may look different at various stages of retirement. Knowing which benefits you qualify for and when they’ll begin is important.

Let’s use a hypothetical educator expecting a gross pension of $3,000 per month. This isn’t intended to represent a national average. It’s simply an example.

Looking at those numbers, you can see how quickly a $3,000 pension becomes something different once taxes and health insurance are accounted for. In this example, $2,700 reaches the bank account, but only $2,300 remains after paying health insurance.

That doesn’t necessarily mean there’s a problem. We haven’t looked at other income, savings, or expenses that might disappear. For some teachers, that amount could work just fine. Others might need to make a few adjustments.

That’s why I think it’s worth working through these numbers before retirement rather than waiting until that first check arrives.

Some public retirement systems provide cost-of-living adjustments, commonly called COLAs, to help benefits keep pace with rising prices.

In some retirement systems, those increases happen automatically. In others, they may only happen occasionally, or not at all. Check your own retirement system’s website to understand what applies to you.

Social Security has its own COLA process, separate from teacher pensions. And because retirement can last decades, knowing whether your income may increase over time matters.

I’ve spent plenty of time thinking about what my pension might be, but what’s become increasingly important is understanding what that money will actually need to cover.

I’m looking at the bills I’ll continue paying, the expenses that might disappear, and how working after retirement could help me accomplish some financial goals without relying on that additional income forever.

Your situation may look different. You might be counting on a pension and Social Security, drawing from retirement savings, or planning to work part-time.

I think this is where sitting down with a piece of paper, or even a simple spreadsheet, can be helpful. Write down what you expect to have coming in each month, what you’ll still be paying, and what might change once you’re no longer working.

You don’t have to have every answer right now. I certainly don’t. But having a realistic picture of those numbers gives you something to work with.

I don’t expect to have every financial question answered before I retire. But I’d certainly like to have a pretty good idea of what my monthly budget will look like. I think knowing what to expect financially would make that first month of retirement a little easier to enjoy.

1. Check your retirement system. Review your benefit statement, payment options, and deductions. Your district can help you identify the correct plan.

2. Estimate taxes and health insurance costs. Use the IRS pension tax guide and HealthCare.gov’s retiree coverage information. Ask your district about premiums and enrollment deadlines.

3. Review your Social Security benefits. Check your earnings record, credits, and benefit estimates through my Social Security.

4. Plan for future changes. Review your pension’s COLA rules and the NASRA COLA overview. Consider expenses that may increase or disappear.

The more I work through my own retirement plans, the more I realize that the biggest number on the page isn’t always the most important one. Knowing what you’ll actually have available each month, and what you need that money to do, can make the decision to retire feel a lot more manageable.