As a public school employee in Texas, you must participate in the Teachers Retirement System, a defined benefit pension plan.

You contribute 7.7% of your salary. Your contribution is tax deferred, which means it is subtracted from your gross income before it is reported to the IRS. So your taxable income, and the federal income tax you owe, is less than it would be if you didn't participate.

The State of Texas contributes 6.8% of your salary each year to the retirement system.

If you've been part of TRS long enough, you qualify for a fixed annuity payout for life when you retire. This means you'll get the same amount every month for as long as you live, which is a big help when you're budgeting for retirement expenses. In addition, TRS can make a bonus payment if the pension fund is "actuarially sound." These additional payments are rare, however.

Sources of Retirement Income

For Texas teachers, there are potentially four primary sources of retirement income:

  • A pension from the Teacher Retirement System (TRS)
  • Income from ax-sheltered retirement accounts such as a 403(b) or IRA account, such as a 403(b) or individual retirement account (IRA)
  • Income from taxable investment accounts
  • Income from a post-retirement job, either full-time or part-time

If you're concerned that you've gotten off to a late start in building your retirement assets, you might want to consider ways to catch up by making extra contributions as you near retirement.