Every year around this time, new teachers start reaching out with the same questions. Which pension plan should I pick? What’s the smartest way to get set up? Am I already behind? If you just started teaching in Washington, or you’re about to, this post walks through exactly how I’d set myself up if I were in your shoes today, including the three mistakes I see new teachers make most often.
This isn’t official advice for your specific situation. It’s my honest opinion, built from watching hundreds of teachers make these same decisions. If you want more detail on Plan 2 versus Plan 3, I have other videos on my channel that go deeper into each one.
The Big Choice: TRS Plan 2 or TRS Plan 3
The first decision every new teacher in Washington faces is choosing between TRS Plan 2 and TRS Plan 3. Think of this choice like picking between two different vehicles for the same trip. One is simpler and more predictable. The other has more moving parts, and more of the driving is up to you.
What Plan 2 Gives You
Plan 2 is now the default option for new hires, and it’s the one I’d personally choose. You earn a 2% benefit for every year you work. That benefit is a guaranteed monthly paycheck for life once you retire, based on your years of service and your highest average salary. There’s no investment account attached to it, which means no market ups and downs to worry about.
What Plan 3 Gives You
Plan 3 splits things into two pieces. You earn a smaller 1% guaranteed benefit, plus you’re required to contribute at least 5% of your paycheck into a separate investment account. That account is pre-tax only, and you only get about 13 investment options to choose from. Whatever contribution rate you pick at the start of your career gets locked in until you switch employers, which is a restriction a lot of teachers don’t realize until later.
I lean toward Plan 2 because I like having a bigger guaranteed benefit, and I’d rather keep control over how I save on my own instead of being boxed into a pre-tax-only account with limited choices. Here’s a simple side-by-side to make the differences easier to see.
| Feature | TRS Plan 2 | TRS Plan 3 |
|---|---|---|
| Guaranteed benefit earned per year | 2% | 1% |
| Required investment contribution | None | At least 5% of pay |
| Investment account tax treatment | N/A | Pre-tax only |
| Number of investment options | N/A | About 13 |
| Contribution rate flexibility | N/A | Locked in until you change employers |
One honest downside of Plan 2 is that it doesn’t come with that extra savings account built in. That means it’s up to you to build a cushion on the side for the things that come up in retirement, like a new car, home repairs, or a family vacation. If you pick Plan 2 and never save anything beyond it, you can end up living almost as tight in retirement as you did during your working years, just at a higher income level.
Mistake #1: Skipping a Roth Account Early in Your Career
Since Plan 2 doesn’t include its own side investment account, I’d personally open a Deferred Compensation Program, or DCP, account to fill that gap. But DCP works a lot like Plan 3’s investment account. It’s pre-tax only, and the investment lineup is basically the same limited menu.
Here’s the mistake I see most often: new teachers default to pre-tax savings without ever considering a Roth account. Right now, we’re sitting at some of the lowest federal tax rates we’ve seen in decades, and current tax law is scheduled to expire in 2025 and reset higher. Add in the debt from recent stimulus spending, and there’s real pressure pushing future tax rates up, not down.
A Roth account flips the order of when you pay taxes. You pay the tax today, while you’re young and likely in a lower tax bracket than you’ll be in later. After that, every dollar of growth in the account is yours, completely tax-free. Think of it like paying cash for something up front instead of buying it on credit. With a pre-tax account like DCP or the Plan 3 investment account, you’re borrowing against your future paycheck. The government lets you skip taxes now, but it collects on your full balance, contributions and decades of growth, whenever you eventually withdraw it.
For a brand-new teacher, that difference compounds over 30 or 40 years of saving. That’s a long runway for growth, and a long runway for taxes to eat into a pre-tax balance later. Paying tax on a small contribution now is a much better trade than paying tax on a huge, grown balance decades from now.
Roth IRA or Roth 403(b)?
If I were starting out today, I’d go with Plan 2 and pair it with either a Roth IRA or, if my school district offers it, a Roth 403(b). They work in a similar way, but there are a couple of real differences worth knowing.
| Feature | Roth IRA | Roth 403(b) |
|---|---|---|
| Set up through | You, on your own | Your school district’s payroll system |
| Roughly 2026 annual contribution limit | About $7,000 | About $19,000+ |
| Income limits | Yes, phases out at higher incomes | None |
A Roth 403(b) lets you save roughly three times more per year than a Roth IRA, and it has no income limit at all. Roth IRAs currently phase out around $198,000 for married couples and $124,000 for single filers. Almost no brand-new teacher needs to worry about hitting that ceiling right away, but it’s worth knowing it exists, because a lot of people wait too long to open a Roth IRA, and by the time they think about it, their income has already climbed past the limit.
Either account gets you the same core benefit: tax-free growth and tax-free withdrawals in retirement. If you ever pass the account to a spouse or child, they inherit it tax-free too. That’s a powerful, simple outcome for a small amount of extra paperwork today.
Mistake #2: Not Saving Enough Outside Your Pension
Anything is better than nothing. I would much rather see a new teacher put away $25 a month than wait until “things calm down” to start. Early in your career, there’s always something competing for that money: student loans, a down payment, a wedding. Life doesn’t get simpler later. It just gets different. Maybe you buy a house, have kids, or go through a divorce. The honest fix is to treat retirement savings like a bill you owe yourself every month, not an optional leftover.
Most financial experts recommend saving around 15% of your income toward retirement if you’re in your 20s or 30s. If you’re starting later, in your 40s or 50s, you’ll likely need to push that higher, sometimes to 20% or more, to catch up. In over a decade of doing this work, I’ve never had someone tell me they saved too much for retirement. It’s almost always the opposite problem.
Here’s the part a lot of teachers miss: your Plan 2 pension contribution counts toward that 15% goal. You’re already having roughly 7-8% of your pay withheld to fund your pension, and that money is absolutely going toward your retirement. So if 8% is already being set aside automatically, you only need to find about 7% more on your own, through a Roth IRA or Roth 403(b), to hit the full 15% target.
For Plan 3 teachers, the math shifts slightly since you’re only required to contribute 5% into your investment account. That means you’d want to find roughly 10% more on your own to reach the same 15% overall target.
Let’s put real numbers on this. Say a new teacher earns $50,000 a year.
| Savings source | Percent of pay | Dollar amount per year |
|---|---|---|
| Plan 2 pension contribution (already withheld) | 8% | $4,000 |
| Roth IRA or Roth 403(b), saved on your own | 7% | $3,500 |
| Total toward retirement | 15% | $7,500 |
That $3,500 a year works out to about $292 a month. That’s a real, specific number you can actually plan around, instead of a vague goal to “save more someday.”
Mistake #3: Only Counting One Spouse’s Savings
This one trips up a lot of married teachers. The 15% target isn’t 15% of your individual salary. It’s 15% of your total household income. If you and your spouse each earn $50,000, and you’re saving 15% but your spouse is saving nothing, your household is really only saving 7.5% overall, even though it might feel like you’re “covered” because one of you hit the number.
I also see couples make the opposite mistake: adding percentages together instead of averaging them properly against the full household income. If one spouse saves 7% and the other saves 8%, that isn’t automatically “15% covered.” You have to run the actual math against combined income, not just add two numbers that happen to add up to 15.
The fix is simple: sit down together, look at your combined household income, and figure out your combined savings rate as one number. That’s the only way to know if you’re actually on track.
If you’d like help walking through your own numbers, plan choice, or savings targets, you can schedule a personal meeting here and we’ll go through it together.
Putting It All Together
If I were starting my teaching career in Washington today, here’s exactly what I’d do. I’d choose Plan 2 for the higher guaranteed benefit and the flexibility to save on my own terms. I’d open a Roth IRA, or a Roth 403(b) through my district if one is offered, and aim to save around 7% of my pay into it, on top of the roughly 8% already going toward my pension. That gets me to the 15% target most experts recommend for someone in their 20s or 30s.
Fast forward 30 years, and that combination puts a teacher in a strong spot: around 60% of their final average paycheck for life from the pension, plus a separate, sizable bucket of money that’s completely tax-free to spend however they want, and just as tax-free to pass on to a spouse or child.
Life will still throw curveballs along the way, and your plan won’t play out exactly on paper. That’s normal. The goal isn’t a perfect plan. It’s a plan flexible enough to bend without breaking, built around a clear starting point and an end goal in mind.
This is my honest opinion, not a one-size-fits-all answer. Your own situation, goals, and comfort level might point you somewhere slightly different, and that’s okay. What matters most is that you make an intentional choice instead of letting default settings decide for you.
Frequently Asked Questions
Should new Washington teachers choose Plan 2 or Plan 3?
Plan 2 is the default, and it’s the choice I’d personally make for its higher guaranteed 2% benefit and the freedom to invest on your own terms. Plan 3 can still make sense for teachers who specifically want more control over investment choices and are comfortable with a smaller guaranteed benefit, but that’s a smaller group.
What’s the difference between a Roth account and a pre-tax account?
With a Roth account, you pay taxes on your contribution today, then all future growth and withdrawals are tax-free. With a pre-tax account like DCP or a Plan 3 investment account, you skip taxes now, but you owe taxes later on both your contributions and everything they’ve grown into.
How much should a new teacher save for retirement?
A common target is 15% of your total household income if you’re in your 20s or 30s. If you’re starting later, aim higher, often 20% or more. Your Plan 2 pension contribution counts toward that goal, so most Plan 2 teachers only need to find around 7% more on their own.
Is a Roth 403(b) better than a Roth IRA?
Neither is universally better. A Roth 403(b) lets you contribute roughly three times more per year and has no income limit, but it’s only available if your school district offers one. A Roth IRA is available to almost anyone but has lower contribution limits and phases out at higher incomes.
P.S. If you’re a new teacher trying to sort out Plan 2 versus Plan 3, or you just want a second set of eyes on your savings plan, you don’t have to figure it out alone. Come join other Washington public employees who are asking the same questions and working through the same decisions.
