The nation's teachers are getting older, and Oklahoma is no exception. According to the National Center for Education Statistics, the average age of public school teachers in the United States was 42.8 years old in the 2021-2022 school year, the most recent data available. In the same report, 28.9% of public school teachers nationally were aged 55 and older.

The average age of public school teachers in Oklahoma was 43.4 years old, slightly higher than the national average. In Oklahoma, 29.9% of public school teachers were 55 and older, slightly above the national average.

Even though many of these teachers have defined pensions, the impact of longevity and the cost of long-term care services can dramatically impact a couple's lifestyle and drain their savings. Now that many states are looking at changing how teacher’s retirements are funded, planning for the consequences of aging and future long-term care is more important than ever.

States Explore Alternatives to Defined Pensions for Teachers 

The traditional defined-benefit pension model, long a cornerstone of teacher retirement security, faces scrutiny across the United States. Concerns over rising costs, unfunded liabilities, and demographic shifts are prompting some states to explore alternative funding models for teacher retirement.

Shifting Tides in Pension Landscape

A 2023 report by the National Conference of State Legislatures (NCSL) found that 29 states currently offer defined-benefit pensions to new teachers, while 21 states use hybrid plans or defined-contribution plans like 401(k)s. This shift reflects concerns about the long-term sustainability of defined-benefit plans, which guarantee a fixed monthly payout based on salary and years of service.

This change also impacts long-term care planning as well and increases the need to include LTC Insurance in a comprehensive retirement plan.

Motivations for Change

Several factors drive states to consider alternatives:

• Financial Strain: Many state pension systems face unfunded liabilities, meaning they lack sufficient assets to cover future payouts. This burden strains state budgets and raises concerns about long-term solvency.
• Demographic Shifts: An aging population and declining birth rates contribute to fewer taxpayers supporting a growing retiree population, further stressing pension systems.
• Attracting and Retaining Talent: Some argue that traditional defined-benefit plans may be less attractive to younger teachers seeking more portability and control over their retirement savings.

Alternative Models Emerge

States exploring alternatives are implementing various approaches:

• Hybrid Plans: These plans combine elements of defined-benefit and defined-contribution models, offering a guaranteed pension alongside individual investment accounts.
• Increased Employee Contributions: Some states require teachers to contribute a larger share of their salaries toward retirement, reducing the financial burden on taxpayers.
• Individual Investment Accounts: States like Arizona and Missouri have transitioned to 401(k)-style plans, giving teachers more control over their retirement savings but also placing greater responsibility on individuals for investment decisions.

Planning for Long-Term Care: A Dual Challenge Impacting Finances and Families

Retirement planning specialists emphasize that long-term care encompasses challenges that extend to both financial stability and family dynamics. Neglecting the future need for long-term health care can lead to significant consequences. 

Matt McCann, a renowned expert in long-term care planning, emphasized to a group of educators in Oklahoma the importance of integrating the financial and caregiving aspects of aging into their retirement strategies.

Teacher's defined pensions are under microscopes in Oklahoma and across the country. While I won't debate the merits of defined pensions as opposed to a defined contribution program (like a 401k), the bottom line will be continued pressure by states and school districts throughout the country on how best to provide retirement for our teachers.

Longevity Means Higher Risk of Extended Care

McCann said that no matter which retirement method a teacher may have, long-term care is still the biggest involuntary risk teachers face in enjoying their future retirements.

The U.S. Department of Health and Human Services says that if you reach the age of 65, you will have a 50% chance of needing some form of long-term care service. A majority of care is custodial in nature. This means help with activities of daily living or supervision due to a memory issue of some type. This is not paid for by any health insurance plan or by Medicare or Medicare Supplements. Since the cost of care is high, teachers, just like the rest of us, need to plan.

Preparing Family and Finances is Essential to Retirement Planning

McCann noted that Long-Term Care Insurance is an affordable way to plan for the physical, emotional, and financial burdens long-term health care has on loved ones. 

One in three seniors will have some type of cognitive issue, according to the Alzheimer's Association. People require long-term care because of accidents, illnesses, and frailty due to aging. Dementia and memory issues are just one of many reasons people require care. The advances in medical science make us more likely to need care at some point, and this cost is high. With questions on how teachers' retirements will be funded in the future, planning on long-term care is an easy and affordable way for teachers to help themselves and their families now.

Beyond Financial Strain

The implications of such long-term care events extend beyond mere financial strain. They can drastically alter an educator's lifestyle, shifting the envisioned tranquil retirement into a scenario fraught with challenges. 

Moreover, the lack of substantial savings or additional financial planning can inadvertently place an emotional and caregiving burden on family members, compounding the stress during what should be a golden era of retirement. 

Taking Action

As teachers approach retirement, the need for a comprehensive understanding of their pension's scope and the gaps in long-term care coverage becomes increasingly crucial. Acknowledging this vulnerability is the first step in devising a strategy that safeguards their financial future and ensures their retirement years are spent with dignity, comfort, and peace of mind.

Long-Term Care Insurance offers a reliable, tax-free solution to cover the costs of long-term care services, such as in-home care. This ensures that lifestyles remain unchanged, assets are preserved, and the emotional and financial burden on loved ones is significantly reduced.

• How Does Long-Term Care Insurance Differ From Other Types Of Insurance?

McCann highlighted the affordability of Long-Term Care Insurance, particularly when secured during one's 40s or 50s. He pointed out that medical advancements have significantly increased our chances of surviving health events and accidents. Yet, this often results in a subsequent need for assistance with daily living activities.

Financial Landscape of Teacher Retirement

For many educators, retirements often hinge heavily on their pension benefits, constituting the bulk of their post-retirement income. While this provides a base level of financial security, the National Center for Education Statistics says that teachers typically have lower average savings rates than other professions.

This creates a scenario where the predictable income stream of pensions may not fully cover unforeseen expenses like those associated with long-term care. Pensions, designed to offer a stable income post-retirement, will not account for the unpredictable nature and potentially high costs of long-term care. A chronic health event or the impact of aging necessitating extended care can swiftly transform a teacher's retirement from a period of deserved rest and stability into a time of financial uncertainty and hardship.

Long-Term Care Costs and Pension Limitations

According to the LTC NEWS Cost of Care Calculator, the average cost of care is over $100,000 annually in the United States. Pension plans aren't designed to address the rising costs of long-term care. The need for long-term care can quickly strain cash flow, deplete retirement savings, and significantly impact a teacher's financial stability and overall well-being.

LTC Insurance will address the cash flow issue, ensuring access to quality care, including care at home. 

Remember: Consulting with a qualified, independent Long-Term Care Insurance specialist with experience with planning for educators can provide personalized guidance and help develop a comprehensive long-term care strategy.