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Monday, March 27, 2017

Why Would a Teacher Want to Retire Early?

Posted by Tim Stobbs on September 16, 2010

This is a guest post by Clinton, a 37 year old teacher from Ontario, who also wants to retire at 45.

My spouse and I have been school teacher’s in Ontario for about a decade and earn a good income.  We have two children and live in a nice home in the suburbs.  You will find us at swimming, baseball, soccer or another sporting event, two or three times a week.  And I also want to retire at 45.

To date I’ve just about always have had a job.  I had a couple of different paper routes when I was 11 and started working as a dishwasher in a local restaurant when I was 13.  I was always employed throughout high school and university.

When I was in my late teens I felt like I had to make an employment decision for the future.  With two generations of school teachers in my family, it was the obvious way for me to go.  But I felt that I took the safe path when I became an elementary school teacher.  I believed I could be a great entrepreneur and hold a number of small businesses, but the safety and security of the teaching profession drew me in.

By the time I had turned 29 years old, I knew that I wanted to have the choice to retire at 45, although it took me four years to actual take any successful actions towards this goal.  Now at age 37, I know what I need to do and how to get there.  So what is my plan?  The major elements are:

1.   Reduce Bad Debt – Credit cards, LOC used for personal purchases.

I’m  focusing on paying for larger consumer goods, vacations and renovations outright.  We used to purchase large items on credit cards and lines of credit.  Then we spent a year to pay them back.  Instead we now save up for these purchases in our TFSA.

2.   Aggressively pay down the mortgage on our principal residence and reuse the equity to invest.

For example, on Dec. 31 2009 our principal residence has a readvancable mortgage of about $340,000.  As you pay down the principal, amounts below 80% LTV becomes available as a secured line of credit.  Now the mortgage part of that account currently sits at about $280,000.  Ninety percent of the principal payment came from a real estate investment transaction.  The other 10% comes from holding a prime-.9 variable mortgage while making payments as if we had a 5 year fixed rate mortgage at 4.5%.

3.   Create alternate streams of income that act to replace our current income.

In particular, I am working to create income streams that are not co-related to an hourly wage as much as I possible.  I really found it easy to pick up projects, contracts and various extra positions that paid me between $30-50 hour.   I used to do a lot of this type of work between the age of 29-33, but I found that I was not leveraging my time effectively enough to achieve a balance of the goal of retirement at 45 with a healthy family life.  Now, I am now trying to use my time more efficiently to create many little streams of income that will add up to something much bigger.

But don’t teachers have a great pension plan? Why retire early?

I would say that 99.9% of teachers in the profession are working towards a full pension and retirement in their 50’s and 60’s.  You just do what you’re supposed to do – day in and day out and one day you reach the magic number of 85, then you retire.  In Ontario, a full pension means the 85 factor, which basically is the age of the teacher + the number of years in teaching = 85.  At this point you can retire with a full pension.    I would also estimate that close to 20% net of every pay cheque goes towards that pension plan.  For me to retire at 45, I would see my pension drop 2/3rd from $58,000 a year to $18,000 a year.  In addition to the lowered pension amount, I would not be able to access those funds until I was 50.  You can see why most people would want to work towards that full pension.

For me early retirement has a number of meanings.  I really want to have the lifestyle that our family is living right now, without the obligations of our current employment.  I want to be able to develop many of the business ideas that I have, write a few books, and do much more traveling as a family. To me that is worth giving up a full pension.  You could say I’m not your average teacher.

Comments

6 Responses to “Why Would a Teacher Want to Retire Early?”
  1. Chris L. says:

    What are some examples of work that is done to earn $50+ an hour? My wife is a teacher.

  2. Robert says:

    So, you’re saying that teaching isn’t your calling in life? Where do you feel your passion lies? Are you working to “retire” so that you have the financial security to be able to take risks in starting up business ventures?

  3. ldk says:

    Very interesting post….I have a number of friends who are teachers and we often discuss the various trade-offs that come with our professions (my husband and I are entrepreneurs and have run a variety of businesses)…the primary one being the trade-off between flexibility (business ownership) and job security (tenure, pensions,E.I., benefits,etc.).

    Congrats on trying to work towards a bit of both!!

  4. JMK says:

    My family has produced 5 Ontario teachers so far. Both my parents, my aunt, and 2 cousins (plus a cousin in law). In addition to having the patience of a saint and a love of children and learning, they all love the job because it will ultimately provide an excellent pension when they retire at 53 (start at age 21 + 32 yrs service). In the meantime they all take full advantage of the summers off schedule teachers enjoy. Some travel extensively, others continue their education and earn extra degrees, some tale ESL and tutoring positions, some choose to become master gardeners or study art. My father loved construction but didn’t want to make a career of it. For many years he bought a lot every year and acted as general contractor all summer and sold the house in the fall. He like to be able to produced something concrete, saying educating a mind wasn’t tangible and often your efforts weren’t evident for many years.

    In each case these teachers loved their “real job”, the one that would provide a very comfortable retirement, but used the long summer break to indulge in other interests. Yes retiring at 45 would mean a reduced pension, but based on my own family of teachers, they all get enough diversity and the chance to enjoy other activities and therefore aren’t as desperate to retire at 45 as some of us in 9-5 careers are. If I could travel for 8 weeks every year I’d be a happy camper. Part of wanting to retire early for me is having the ability to take a lengthy trip each year. Slipping away for a week at a time because that’s all I feel I can manage with my work schedule stinks.

  5. Clinton says:

    @Chris L Some of the jobs have had in that range are subject specialty home tutoring(math/science), online tutoring, curriculum consulting for publishers, project work for educational companies, web site development and content creation.

    @Robert I’m not saying that teaching is not my calling because I really do enjoy what I am doing. I love teaching students, working with teachers and other staff. But why do we only have to have one calling in life? I guess your last question hits home to me and would answer “yes” to.

    @ldk I especially wanted to thank you – your comment was much appreciated

    @JMK Thanks for the comment. Somehow my psychic powers were tingling when I decided to give the blog a try and I knew that this comment around summers would come up. I’m going to try to address this comment and refer people back to this post in the future because I will bet you it will keep coming up.

    I’m really not saying that I don’t love what I am doing and your right about different opportunities that teachers can have during a summer. I’m not comparing myself to what you do or what you would like to have or if you had a similar schedule what you could accomplish or again what 99.9% of other teachers decide to do with their summer. I think that’s the point that makes me different and hopefully offer another perspective than what you might be used to from the other teachers in your family.

    I’m not complaining about summers or vacation time or anything like that, but they do act as a crutch to maintain the status quo.

  6. JDC says:

    A very interesting perspective … and hat’s off to you Clinton for looking around at the big picture … it’s very rare that I hear of someone looking to leave the teaching profession early given the benefits and vacation & holiday time given.

    I guess the saying that the grass is always greener on the other side is true!

    Having grown up with a family business, and having worked in the manufacturing sector (not family business) for the last 20 years, I often look back at the teaching profession and kick myself for not considering it more seriously than I did … things like job security, benefits, pension, and vacation time rate much higher on my list now than they did then given some of the “life’s happenings” that have occurred, but hindsight is 20/20 …

    Thanks for being open and honest!

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