If you’re a teacher in New Jersey, your pension may be one of the most valuable benefits you have- but do you really understand how it works?
The New Jersey Teachers’ Pension and Annuity Fund, also known as (TPAF) provides eligible educators with a lifetime retirement income based primarily on factors such as your years of service and highest average salary.
There are two different types of retirement plans. The first is defined CONTRIBUTION. This is a 403(b), 457, 401(k), etc. The benefit of these plans is based on how much you save and how your investment grows over time.
The second is defined BENEFIT. These are guaranteed incomes like a pension or Social Security. The biggest difference between a pension and other retirement accounts, such as a 401(k)or 403(b), is that your TPAF retirement benefit is not simply based on how much money you personally contribute to the plan. Instead, your benefit is determined by a pension formula. Employees contribute a percentage of their salary toward the pension fund, with contributions automatically deducted from their paychecks. The current employee contribution rate for TPAF is 7.5% of salary.
Who qualifies for TPAF?
Generally, eligible members include full-time, certified educators such as:
- Teachers
- Guidance counselors
- Certified school nurses
- Child study team members
Your retirement income depends on factors such as what tier you are enrolled in, your years of service, age at retirement, highest average salary and the specific retirement provisions that apply to you. It’s important for NJ educators to look at their pension as just one piece of the retirement puzzle. Your TPAF benefit may provide a foundation for retirement, but having other assets such as a 403(b), 457, IRA, or other investments can help fill the gaps and provide more opportunities for retirement.
If you have questions regarding your NJ Teachers’ Pension or other retirement accounts, we’re here to help.