Coast FIRE for Teachers: How a Pension Changes the Math

A teacher with a pension needs much less saved to reach Coast FIRE, sometimes less than half of what the standard formula says, because the pension covers a large part of retirement spending. The catch is that the pension only pays off if you stay long enough, so for most teachers coasting means stopping 403(b) or 457(b) contributions while still teaching, not leaving the classroom early.

Pension rules are set state by state, and sometimes district by district. The examples below use California and Texas because their rules are public and easy to check. Yours may differ, so read your own system’s handbook before you plug anything in.

How does a teacher pension work?

Most teacher pensions use the same basic formula: a multiplier, times your years of service, times your final average salary. What changes from state to state is the size of the multiplier, how “final salary” is averaged, and how old you have to be to collect.

In California, CalSTRS calls the multiplier an age factor, and it depends on when you retire. For teachers hired on or after January 1, 2013 (the 2% at 62 structure), it’s 2% at 62, falling to 1.16% at 55 and rising to a maximum of 2.4% at 65. Final compensation is your highest average pay over 36 consecutive months. You need five years of service credit and must be at least 55 to collect. Take a teacher with 30 years of service and a final compensation of $96,000:

Same career, same salary. Retiring at 55 instead of 62 cuts the pension by more than 40%.

The Teacher Retirement System of Texas uses a flat 2.3% multiplier and the average of your five highest-paid years, according to Texas Government Code §824.203. For members who joined after August 2014 (or had less than five years of service by then), the unreduced pension starts at 65 with five years of service, or at 62 if your age plus years of service add up to at least 80 (§824.202). Retire before that and you can start as early as 55 with a reduced benefit. If you haven’t met the rule of 80, it’s 47% of the full amount at 55.

How do you count a pension in Coast FIRE?

Treat it as income that starts at a certain age, the same way you’d treat Social Security. Subtract it from your retirement spending, and if you’ll stop working before the pension starts, have your portfolio cover the full amount for the gap years.

Take Derek, a 35-year-old Texas teacher who joined TRS at 25. He earns $62,000, has $60,000 in his 403(b) and adds $1,000 a month. His district doesn’t pay into Social Security. He wants to leave teaching at 60 and spend $48,000 a year in today’s dollars.

Assume his raises only keep pace with inflation. After 35 years, 2.3% × 35 gives him 80.5% of his salary, or $49,910 a year. He’ll be 60, too young for the unreduced pension, so he waits until 62. The benefit is fixed when he retires, and two years of inflation bring it down to $47,045 in today’s dollars by the first check.

Then there’s the cost-of-living problem. TRS has no automatic COLA. Retirees get an increase only when the state grants one. The most recent was approved in 2023, and the 2025 legislative session didn’t pass another. At 3% inflation, a flat pension’s average buying power over a 30-year retirement is about two-thirds of its face value, so I’d count $31,659 rather than the full amount.

Now run the numbers. The portfolio covers $48,000 minus the counted pension forever, plus the full counted pension for the two years before it starts.

Without the pension, $1,000 a month never gets Derek to Coast FIRE before 60, and neither does $2,000. Counting the pension, he can stop contributing at 47 and let the 403(b) grow on its own.

Our Coast FIRE calculator with Social Security has a pension field and a pension start age, so you can enter the pension directly instead of adjusting spending by hand.

A COLA changes the discount. CalSTRS pays a 2% annual benefit adjustment on the original benefit, not compounded, and tries to keep purchasing power at 85% of the initial benefit through extra payments when funds allow. With 3% inflation, the 2% adjustment alone keeps average buying power at roughly 84% over 30 years. I’d count about that much of a CalSTRS pension.

Why leaving early costs so much

Pensions are back-loaded. Each extra year adds to your service, usually raises the salary the formula uses, and in systems like CalSTRS lifts the multiplier too. Leave early and you lose all three, and the benefit you’ve earned is frozen at your current salary while inflation eats it until you can collect.

Here’s what Derek’s pension is worth at 62, in today’s dollars, depending on when he stops teaching:

Twenty years is 57% of his career, and it buys 37% of the pension. The last five years are worth more than the first ten.

It’s worse if you leave before you’re vested. In CalSTRS and TRS that takes five years of service. Before then, you can generally get only a refund of your own contributions plus interest. The employer and state contributions stay with the system.

This is why coasting as a teacher looks different. In a regular Coast FIRE plan, hitting your number frees you to take any job you like. Derek’s number assumed he’d keep teaching until 60 and keep earning service credit. If he hits it at 47 and quits the next year, his pension shrinks and the number he hit is no longer the right one. What he actually gains at 47 is freedom from saving: he can drop the $1,000 a month and spend it or give himself breathing room, while the pension keeps building.

If you really want out of the classroom early, run the calculator twice, once with the pension you’d get if you stayed and once with the frozen pension you’d get if you left. The gap between the two numbers is the price of leaving. And if leaving before 65 means losing health coverage, add that too; our post on health insurance before 65 covers how.

Do teachers get Social Security?

About 40% of public school teachers don’t pay into Social Security through their teaching jobs, according to NASRA. California teachers in CalSTRS don’t, and the vast majority of Texas school districts don’t participate either. In other states, teachers get a pension and Social Security.

If your teaching job isn’t covered, you can still earn a benefit through other work. You need 40 credits, and in 2026 each $1,890 of covered earnings is one credit, up to four a year.

For years, two rules shrank those benefits for anyone with a non-covered pension. The Windfall Elimination Provision reduced your own benefit, and the Government Pension Offset reduced or wiped out spousal and survivor benefits. The Social Security Fairness Act, signed January 5, 2025, ended both for benefits payable from January 2024 on. A Social Security benefit from a first career, summer jobs or a spouse’s record now stacks on top of your pension without that cut.

It’s still based on your 35 highest years of covered earnings, so a few summers of covered work won’t produce much. Check your estimate at ssa.gov, count it the way our Social Security post describes, and don’t count on anything you haven’t earned yet.

403(b), 457(b) or both?

Many districts offer both, and they have separate limits. The IRS says 403(b) deferrals are combined with other plans “other than 457 plans,” so in 2026 you can put $24,500 into a 403(b) and another $24,500 into a 457(b). Few teachers can save $49,000 a year, but a two-income household sometimes can, and the extra room helps even if you only use part of it.

The 457(b) has a second advantage. Withdrawals from a governmental 457(b) aren’t subject to the 10% additional tax on early distributions, apart from money rolled in from another plan. Once you leave that employer, you can take money out at any age and owe only income tax. A 403(b) withdrawal before 59½ usually carries the 10% additional tax unless you left the job in or after the year you turned 55. For a teacher who wants to stop at 52 and let the pension start at 62, a 457(b) is the account that pays for the gap.

Fees are the other issue. Most K-12 403(b) plans aren’t covered by ERISA, and the GAO found that administrative fees in some could top 2% a year, on top of investment fees that could also exceed 2%. At that cost, a big share of your return goes to the vendor. Look up what each vendor in your plan charges before you pick one. California school employees can compare vendors’ fees on 403bCompare, which CalSTRS runs under state law. If every 403(b) option is expensive, I’d use a low-cost 457(b) or an IRA first.

Summer jobs and part-time work

Summers are the one stretch of the year a teacher can earn extra money without cutting back on teaching. Summer work that pays into Social Security builds credits, and in 2026 earning $7,560 gets you all four for the year. Summer money is also a clean way to fund an IRA, where the 2026 limit is $7,500.

Part-time teaching is trickier. In CalSTRS, you earn service credit in proportion to the share of a full-time contract you work, so half-time for a year earns half a year of credit. How part-time years affect your final salary figure varies by system, and it can cost you more than you’d expect. Before you cut hours near the end of a career, ask your pension system how it would change your benefit. If you’re weighing part-time work in general, our Barista FIRE calculator shows how much less you need when a job still covers part of your spending.