Financial planning for
teachers and government employees.
Pensions, 403(b)s, PSLFPublic Service Loan Forgiveness (PSLF)A federal program that forgives remaining student loan balances after 10 years of qualifying payments while working for a government or nonprofit., and the unique financial situation of public-sector workers. The pension vs lump sum decision. When the government retirement system is better than you think, and when it is not.
This page covers US-specific accounts and tax law. Outside the US? The priority order is the same, the account names differ (ISAIndividual Savings Account (ISA)A UK tax-advantaged account where contributions are post-tax but all growth and withdrawals are tax-free.Full definition in the UK, TFSATax-Free Savings Account (TFSA)A Canadian tax-advantaged account where contributions are post-tax but all growth and withdrawals are tax-free.Full definition/RRSPRegistered Retirement Savings Plan (RRSP)A Canadian tax-deferred retirement account; contributions reduce taxable income and growth is tax-deferred until withdrawal.Full definition in Canada, Super in Australia, etc.).
This page is the overview for all public-sector workers: pension value, PSLF, and the 403(b) in brief. For teacher-specific 403(b) vendor shopping, stacking a 457(b), and the Social Security coverage gap, see Teachers.
Public-sector compensation looks lower on paper than private-sector and often is not, once you count the pension. A defined-benefit pension with a COLACost-of-Living Adjustment (COLA)An automatic raise to Social Security or pension payments each year, sized to match how much prices have gone up. is a massive financial asset most people undervalue. 403(b)s are similar to 401(k)s but watch out for high-cost annuity products. PSLF forgives remaining federal student debt after 120 qualifying payments. The catch: all three pieces have details that change outcomes dramatically.
The pension
A defined-benefit pension pays a monthly amount in retirement calculated as: years of service × a multiplier × final average salary. Example: 30 years × 2% × $65,000 = $39,000/year.
Pensions favor: people who reach full vestingvestingThe schedule by which you earn the right to keep employer contributions or stock grants. You usually need to stay at the company for a set period before the money is fully yours.Full definition (5 to 10 years typical), long lives (a pension is annuity-like and cannot be outlived), states with strong pension systems, and plans with a cost-of-living adjustment (COLA).
Pensions disfavor: people who leave before vesting (unvested = nothing, or reduced benefit), employees of states with underfunded systems verify×DON'T TRUST, VERIFYClaim: Pension funding ratios vary widely by state; some state plans are well below full funding.Verify at: Pew Charitable Trusts state fiscal health ↗ Source 1 in the list belowPew publishes annual pension funding ratio reports by state., and people who would otherwise invest aggressively on their own.
The 403(b)
Similar to a 401(k) but for public schools, nonprofits, and some government entities. 2026 contribution limits are the same as 401(k): $24,500. verify×DON'T TRUST, VERIFYClaim: 2026 403(b) employee deferral limit projected at $24,500.Verify at: IRS 403(b) limits ↗ Source 2 in the list belowIndexed annually. Check IRS when 2026 figures finalize.
A persistent problem in K-12 education: high-cost annuity products sold inside 403(b) plans through in-school representatives. Ask HR for the full list of providers. Look for a low-cost index fund option. If your plan only has high-cost annuity options, contribute just enough to get any employer matchemployer matchAn employer contribution linked to qualifying employee contributions under a plan formula. Eligibility, vesting and plan terms determine what you receive and keep. The match ratio is not an annual investment return, and the invested balance can fall.Full definition, then max a Roth IRAIndividual Retirement Account (IRA)A retirement account with tax advantages and eligibility rules. Traditional IRA contributions may be deductible; taxable withdrawals generally enter income. Roth contributions use after-tax money, and qualified Roth withdrawals are tax-free.Full definition, then return to the 403(b) only if nothing better is available.
Public Service Loan Forgiveness (PSLF)
For government and nonprofit employees with federal student loans. Work full-time for a qualifying public-service employer, make 120 on-time payments on an income-driven repayment plan, and the remaining balance is forgiven tax-free verify×DON'T TRUST, VERIFYClaim: PSLF forgives remaining federal student loan balance tax-free after 120 qualifying payments while working full-time for qualifying public service employer.Verify at: Federal Student Aid PSLF ↗ Source 3 in the list belowPSLF has been subject to significant regulatory changes. Verify current rules before relying..
Helps most: high student debt plus lower government salary means IDRIncome-Driven Repayment (IDR)A federal student loan repayment plan that caps monthly payments at a percentage of your income. payments sit well below what would be paid on a 10-year standard plan. The difference gets forgiven.
Does not help: people with low debt relative to income (they would pay off anyway) or those likely to leave public service before 10 years.
Where to go from here
Sources
Verify badges in the text link to these sources. Figures, rates and rules change: check each source’s date before acting on it.
Last updated . Not financial advice. Pension rules vary by state and plan. Disclosures · How pages are reviewed