Higher Ed Story: A Professor Teaches and Retires Rich
by Jonathan, Retired Professor and Elementary School Teacher
Note: This website and the book Teach and Retire Rich defines "teaching and retiring rich" as a financially comfortable retirement after a satisfying teaching career influencing the lives and development of hundreds — perhaps thousands — of students and adults. Jonathan, who asked that his last name and picture not be used, is a living example of this definition. He wisely saved money over a long teaching career that included both the elementary and college level. Today, he's healthy, happy and spends his days doing exactly what he wants to do. This often involves biking, cooking, and traveling.
My elementary school teaching career started in California in 1977 after I graduated with a BS in Biology and completed my preservice teacher training as a grad student. The post-graduate credits moved me over to the third column on the salary scale so I earned $11,500 instead of $9,000 per year! Housing values in California were exploding at the time, so within a week of signing my contract, I bought a house after borrowing the down payment from my parents. I knew if I waited prices would rapidly climb beyond what I could afford. That was my first meaningful financial move. The mortgage payment absorbed over 30% of my take home pay but despite that, I lived frugally and paid my parents back over the next couple of years.
Living frugally was something I had grown up with. My parents, New Englanders who had lived through the depression, modeled that. So when I got a “student” VISA card while in college with a $100 limit, I knew enough to pay off the balance at the end of every month. If something was going to be more than I could pay off, I waited and saved up rather than pay the exorbitant interest rates charged by banks. To establish a good credit history beyond the credit card, I had financed a new 1973 VW Super Beetle. After a few months I called the bank to ask if I’d made sufficient payments to establish good credit, and when they said yes, I immediately paid off the remaining balance to avoid paying any more interest. I drove the car for 14 years, then replaced it with a Honda Accord which I drove for 23. A new car every few years would violate the tenants of my frugal mindset despite the bouts of envy I sometimes felt for friends who always seemed to have nicer cars than I! Meanwhile, the positive credit history I’d created paid off when my application for a home loan was approved.
The next step in my financial education was learning about the tax deductions available to teachers. By pure luck, I found a booklet describing such things as how a portion of magazine and newspaper subscriptions could be deducted based on the idea that some of the information in them would be used in my classroom. I realized all I needed to do was save receipts to be able to document what I’d spent. To this day, I throw all receipts into a file to be sure I have what I need at tax time.
The other thing I learned from the pamphlet was about something called a 403(b). After reading about this as a savings option, I set a goal of investing $10,000 by the time I turned 30. But such was not to be.
Southern California in 1980 was extremely smoggy and growth was happening so fast that houses were replacing orange groves and filling any open space at an alarming rate. It was no longer a place I wanted to live, so I moved to California’s Central Coast, 75 miles north of Santa Barbara. Housing was significantly more expensive while benefits and salaries were lower, but quality of life was more important to me and I was glad to make the move. But the 403(b) had to wait. Then I got divorced, and it had to wait some more.
Finally, I was ready to open a 403(b). My father happened to subscribe to a financial newsletter that tracked no load mutual funds, but when I looked at the options offered by my district, none of the highly rated funds were listed. In fact, the choices were terrible, with many coming from insurance companies with high fees and poor returns. So I approached the district and asked if they would consider adding other options. They were willing if I set up the initial contacts as my district had limited personnel to deal with such things. So I did, which resulted in 20th Century and Fidelity being added as providers. I opened my 403(b) and started saving for retirement through automatic contributions each month from my paycheck.
By this time, I’d earned my master’s degree to allow me to move into administration and the additional graduate units had moved me to the district’s highest salary column. It had seemed a good investment. I paid a year’s tuition, then got a raise the following year as I moved to a new column which paid back the tuition cost. I earned an MA in two years then reaped the reward of my increased salary every year from then on. But after working briefly as an administrator, I realized that wasn’t the path for me. So, a few years later, I decided it was time to move on.
In the mid 90’s, I quit K-12 teaching and pursued an English teaching position in Japan through the TESOL program at the University of California in Riverside. Those plans were scuttled by an implosion of the Japanese economy, so instead I began a PhD program at Arizona State University. As I was no longer working, I couldn’t continue making contributions to my 403(b), so, using rental income from my California house, I opened an IRA and dumped in as much as I could afford during my time as a PhD student.
After completing my PhD, I took a job at the University of New Mexico. I pulled some money out of the California house for a down payment on a home and resumed contributing to a 403(b). Sometime later I remarried. Moving in with my wonderful, and equally frugal, wife allowed me to sell my New Mexico house and use the proceeds to pay off the mortgage on the California house. That meant the rental income could supplement the beginning professor’s salary I was earning which was significantly lower than what I’d have earned if I’d stayed in California as an elementary school teacher.
I had left my money in the defined benefit retirement program in California but I knew that quitting teaching there would result in significantly reduced payments when I retired which I needed to make up for. Accordingly, I raised my 403(b) contribution to the maximum allowed. I also contributed the max to a Roth IRA. My wife, who had never heard of a 403(b), recognized the benefits, opened her own, and maxed both it and a Roth IRA out as well. While we could have saved more in additional non-sheltered accounts, we decided that life is about more than saving every possible penny for a future retirement and opted to spend those funds. Thus a Porsche Cayman S and 1947 MG TC appeared in the garage among other indulgences.
In May of 2015, we both retired, I at 63, my wife at 60. By piecing together my retirement check from California, two retirement checks from the University of New Mexico, and the rental income from the California house, we cover our expenses. We’re waiting to begin Social Security until age 70 1/2 to maximize those payments. So far, we’ve been traveling quite a bit and don’t miss working at all. Adding to our enjoyment is the 403B and IRA nest egg of $1.5 million that affords us peace of mind and the knowledge that, within reason, we can do anything our hearts desire during this stage of our lives.
This level of emotional and financial comfort is a result of a lifestyle that focused first on consistent, automatic savings started as soon as possible. And then on spending money thoughtfully on meaningful experiences such as travel or objects that lasted such as camera and stereo gear, or custom guitars and bikes, rather than having money dribble out of my hands on things I couldn’t even recall at the end of the month. In this way, my story is a real-world example of just what can be accomplished by following the life choices 403(b)wise promotes!
Like this story? Check out the book Teach and Retire Rich
Author is a retired professor and elementary school teacher.