Retirement planning

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I am 50 years old, as is my wife. We both are public school teachers, and have 27 years of service. In Alabama, you “can” retire after 25.

We have 529 plans for both kids (freshman in college and current 11th grader in high school).

What are some things we should be doing now to prepare for retirement one day? We are both in good health, but want to plan to be done and be as comfortable as possible one day!

Not A Product Question

M-MTax

Level 15

1. Optimize Your TRS Pension Multiplier

Your Tier 1 pension is calculated using a defined formula: Average Final Salary (highest 3 years) × Years of Service × 2.0125%. Working even a few more years heavily compounds your lifetime monthly benefit.

Current baseline (27 Years): Replaces 54.34% of your average final salary.
The 30-Year milestone: Bumps your baseline replacement to 60.38%.
The 35-Year stretch: Escalates your baseline replacement to 70.44%.
Salary growth: Working longer increases your top 3 highest-earning years.
Sick leave conversion: Unused sick leave can count toward additional service credit.

2. Formulate a PEEHIP Healthcare Bridge

Retiring at age 50 means you have a 15-year gap before becoming eligible for Medicare at age 65. You will rely on PEEHIP retiree health insurance, which features unique statutory pricing mechanics.

Sliding scale benefit: Having over 25 years of service grants a premium discount.
The discount rate: You receive a 2% premium subsidy discount for every year worked over 25.
Current status: With 27 years, you already qualify for a 4% discount.
Age penalty: Retiring before age 62 introduces early-retirement premium penalties.
Double premiums: As a married teaching couple, factor in costs for two individual or family plans.
Calculators: Run an official projection using the PEEHIP Retiree Premium Calculator.

3. Maximize Catch-Up Savings via RSA-1

Because you cannot make extra voluntary contributions directly into your core TRS account, utilizing supplemental accounts is vital.

RSA-1 Deferred Compensation: This 457(b) plan lets you save additional tax-deferred money.
Catch-up contributions: At age 50, you qualify for enhanced annual contribution limits.
Flexibility: You can increase, decrease, or pause contributions at any time.
No early withdrawal penalty: Unlike a 401(k), 457(b) plans have no 10% penalty for withdrawals before age 59½ upon separation from service.
Bridge fund: Use RSA-1 to fund your lifestyle if you retire before collecting Social Security.

4. Reallocate 529 Plan Contributions

With one child already a freshman in college and another in the 11th grade, your heavy 529 funding years are drawing to a close.

Stop overfunding: Transition remaining college funding from savings mode to distribution mode.
Shift target: Redirect money previously budgeted for 529s straight into your RSA-1 accounts.
Secure the floor: Ensure your children's college assets are moved to conservative options to avoid market volatility.