Solving the Pension Puzzle for PA Teachers

PA teachers - let us help you solve your pension puzzle.

By Martin A. Federici, Jr., CEO of both

MF Advisers, Inc. and MF Tax & Accounting, Inc.

As Pennsylvania teachers head back to the classroom to prepare for a new school year, veteran educators are often also preparing for their next chapter: retirement. One of the most significant decisions you’ll ever make for your financial future is choosing between a monthly pension benefit or a lump sum payout.

Depending on your specific financial situation, either option could be the right move. However, as the landscape of retirement changes, there are three critical factors every educator must consider before "solving" this part of their financial equation.

1. Who Has Control?

When you roll a pension lump sum into your own traditional IRA, you typically gain significantly more investment choices and flexibility compared to a standard pension plan. This control is particularly important because many pensions have faced underfunding issues over the years.

If a pension plan struggles to meet its obligations due to poor investment decisions or a high number of retirees to pay out, members may be forced to accept decreased monthly benefits. By choosing the lump sum rollover, you remove the "roll of the dice" associated with a pension's long-term solvency and put the control of those assets back in your hands.

(NOTE: For PA teachers, your pension-specific options are heavily influenced by your PSERS tier, such as T-E, T-F, T-G, or T-H, which dictates how your benefits are calculated. Contact us to find out which option you have & what would be best for your situation.)

2. The Inflation "Pill"

A fixed monthly pension check might look sufficient – even great – today, but most pensions do not offer a way to increase that benefit over time to keep up with rising costs. Over a retirement lasting 20 years or more, the loss of purchasing power can be a "difficult pill to swallow" as healthcare and living expenses rise.

By rolling your funds into a traditional IRA, you can work with a professional to formulate an investment strategy designed to give yourself a "raise" over time. This allows you to combine investments & types of accounts in a way that makes the most sense for your specific needs, helping to protect your standard of living against inflation.

3. Leaving a Legacy

If your goal is to leave money to someone special—whether that’s a spouse, children, or a favorite institution—the lump sum rollover is often the superior choice. While some pensions offer survivor benefits for a spouse, these options must be selected before you begin taking your benefits and are typically limited.

With an IRA, you have the power to specify exact beneficiaries and the exact percentages they will receive, and you can change those beneficiaries at any time.

(NOTE: It is important to note that federal laws like the SECURE Act have changed how non-spouse beneficiaries inherit IRAs, often requiring funds to be withdrawn within 10 years. This makes professional legacy planning more vital than ever.)

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Find an Advisor with a "Teacher’s Heart"

When navigating these choices, avoid the sales pitch. Look for an experienced financial advisor who always operates as a fiduciary, works for a fee-only Registered Investment Advisory (RIA) firm, and—most importantly—has the heart and demeanor of a teacher, not a salesman.

At MF Advisers, Inc., we are a PA-based fiduciary firm specializing in wealth management, investment advice, and financial planning. With 30+ years of experience and a commitment to improving your ongoing financial situation, MF Advisers, Inc. is the advisory firm to best serve you for your retirement planning and pension decision-making needs.

For more information, please email marty@mfadvisers.com (PA), matt@mfadvisers.com (FL), or call (570) 760-6524 (PA) or (561) 329-1296 (FL).